<PAGE>
As filed with the Securities and Exchange Commission on October 28, 1998
Registration No.333-___________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
R.A.B. HOLDINGS, INC.
(Exact name of co-registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5122 13-3893246
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
R.A.B. ENTERPRISES, INC.
(Exact name of co-registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5122 13-3988873
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
444 Madison Avenue, Suite 601
New York, New York 10022
(212) 688-4500
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(Address, including zip code, and
telephone number, Including area code, of each
co-registrant's principal executive offices)
James A. Cohen, Esq.
Senior Vice President-Legal Affairs and Secretary
444 Madison Avenue, Suite 601
New York, New York 10022
(212) 688-4500
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(Name, address, including zip code, and
telephone number, Including area code, of
each co-registrant's agent for service)
Copy to:
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
(212) 704-6000
-----------------------
[See also table of additional co-registrants below]
-----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
<PAGE>
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of each class of securities Amount to Offering Price Aggregate registration
to be registered be registered Per Unit Offering Price (1) fee
<S> <C> <C> <C> <C>
13% Senior Notes due 2008 of $48,000,000 $1,000 $48,000,000 $13,344
R.A.B. Holdings, Inc.(2)
10-1/2% Senior Notes due $120,000,000 $1,000 $120,000,000 $33,360
2005 of R.A.B. Enterprises,
Inc.(3)
Guarantees (4) $120,000,000 -- $120,000,000 --
</TABLE>
(1) Based on the value of each security being registered.
(2) Consists of the notes issuable upon the exchange of $48,000,000
principal amount of 13% Senior Notes due 2008.
(3) Consists of the notes issuable upon the exchange of $120,000,000
principal amount of 10-1/2% Senior Notes due 2005.
(4) Pursuant to Rule 457(n) of the Securities Act of 1933, as amended
(the "Securities Act"), no additional consideration will be
received for the guarantees by each of The B. Manischewitz Company,
LLC and Millbrook Distribution Services Inc. of the 10-1/2% Senior
Notes due 2005 of R.A.B. Enterprises, Inc. registered hereby.
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
TABLE OF ADDITIONAL REGISTRANTS
(Each of the following subsidiaries of R.A.B. Enterprises,
Inc., and each other subsidiary that is or becomes a guarantor of
certain of the securities registered hereby, is hereby deemed to
be a registrant)
<TABLE>
<CAPTION>
Primary
State or Standard
Other Industrial I.R.S. Employer
Jurisdiction of Classification Identification
Name Incorporation Number Number
<S> <C> <C> <C>
The B. Manischewitz Company, LLC Delaware 5149 51-0374244
Millbrook Distribution Services Inc. Delaware 5122 41-0754020
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED__________________, 1998
PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT ISSUE THE NOTES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THE NOTES AND IS NOT SOLICITING AN OFFER TO BUY THE NOTES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
R.A.B. HOLDINGS, INC. R.A.B. ENTERPRISES, INC.
Offer to Exchange Offer to Exchange
its 13% Senior Notes due 2008 its 10-1/2% Senior Notes due 2005
for any and all of its outstanding for any and all of its outstanding
13% Senior Notes due 2008 10-1/2% Senior Notes due 2005
This Prospectus and the accompanying letters of transmittal set forth
the terms and conditions by which (i) R.A.B. Holdings, Inc. ("Holdings")
hereby offers to exchange up to an aggregate of $48,000,000 in principal
amount of new 13% Senior Notes due 2008 (the "New Holdings Notes"), for an
equal principal amount of outstanding 13% Senior Notes due 2008 (the "Old
Holdings Notes"), of which an aggregate of $48,000,000 in principal amount is
currently outstanding, and (ii) R.A.B. Enterprises, Inc. (the "Company"), a
wholly-owned subsidiary of Holdings, hereby offers to exchange up to an
aggregate of $120,000,000 in principal amount of new 10-1/2% Senior Notes due
2005 (the "New Company Notes" and, together with the New Holdings Notes, the
"New Notes"), for an equal principal amount of its 10-1/2% outstanding Senior
Notes due 2005 (the "Old Company Notes" and, together with the Old Holdings
Notes, the "Old Notes"), of which an aggregate of $120,000,000 in principal
amount is currently outstanding. The offers to exchange the Old Notes for the
New Notes are referred to in this Prospectus as the "Exchange Offers". The Old
Notes and the New Notes are also called the "Notes".
The terms of the New Notes are substantially identical (including
principal amount, interest rate, maturity and, solely with respect to the New
Company Notes, guarantees by the Company's subsidiaries) to the terms of the
Old Notes for which they may be exchanged under the Exchange Offers, except
that the New Notes are being registered under the Securities Act of 1933, as
amended (the "Securities Act"), and after registration shall be freely
transferable by the holders thereof. The New Holdings Notes will evidence the
same debt as the Old Holdings Notes and will be issued under and be entitled
to the benefit of the indenture governing the Old Holdings Notes (the
"Holdings Notes Indenture"). The New Company Notes will evidence the same debt
as the Old Company Notes and will be issued under and be entitled to the
benefit of the indenture governing the Old Company Notes (the "Company Notes
Indenture"). There will be no cash proceeds to Holdings or the Company as a
result of the Exchange Offers.
The New Notes will be unsecured senior obligations of Holdings or the
Company, as the case may be. Each of Holdings and the Company are holding
companies and will derive substantially all of their cash flow from their
subsidiaries. The New Company Notes will be unconditionally guaranteed (the
"Guarantees") by the existing and certain future subsidiaries of the Company
(collectively, the "Guarantors"). The New Holdings Notes will not have the
benefit of any guarantees (including, without limitation, the Guarantees). The
New Company Notes and Guarantees will rank on an equal basis in right of
payment with all existing and future unsecured senior indebtedness of the
Company and the Guarantors. The New Company Notes and the Guarantees will be
effectively subordinated in right of payment to all secured indebtedness of
the Company and the Guarantors, respectively, including indebtedness of the
Guarantors under their existing bank credit facility. The New Holdings Notes
will be effectively subordinated in right of payment to all indebtedness of
the Company, including the New Company Notes and the Guarantees.
The Exchange Offers are being made in order to satisfy certain
contractual obligations of the Company. See "The Exchange Offers," "Description
of the New Holdings Notes" and "Description of the New Company Notes."
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<PAGE>
Holdings and the Company will accept for exchange any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on _____, 1998, unless extended (as so extended, the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date.
The Exchange Offers contain certain customary conditions. See "The Exchange
Offers."
Each broker-dealer that receives New Notes for its own account in
either of the Exchange Offers must acknowledge that it will deliver a
prospectus in connection with any resale of those New Notes. The letters of
transmittal accompanying this Prospectus state that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus
may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Holdings and the Company have agreed that, for a period of 180
days after the Expiration Date, they will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
No public market exists for the Old Notes. Holdings and the Company
currently do not intend to list the New Notes on any securities exchange or to
seek approval for quotation on the National Association of Securities Dealers
Automated Quotation or any other automated quotation system, and no active
public market for the New Notes is currently anticipated. Holdings and the
Company shall pay all expenses incident to the Exchange Offers.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON
PAGE 25 WHICH DESCRIBES SPECIFIC RISKS ASSOCIATED WITH THE NEW NOTES BEFORE
YOU MAKE YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE NEW NOTES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ______________, 1998.
The net proceeds from the sale of the Old Notes were used to effect
the acquisition (the "Acquisition") by the Company of all of the outstanding
membership interests of The B. Manischewitz Company, LLC, a Delaware limited
liability company ("Manischewitz"). See "The Transactions".
If a holder of Old Notes wishes to participate in an Exchange Offer,
such holder must represent to the Company or Holdings that (i) the New Notes
acquired in the Exchange Offer are being obtained in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the holder of the Old Notes, (ii) neither the holder nor any such other person
is engaging or intends to engage in a distribution of such New Notes, (iii)
neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes within the meaning of the Securities Act, (iv) neither the holder nor
any such other person is an "affiliate", as defined under Rule 405 promulgated
under the Securities Act, of, in the case of the Old Company Notes, the
Company or any Guarantor, and, in the case of the Old Holdings Notes,
Holdings, (v) if such holder or other person is a broker-dealer, that it will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities.
Based on certain interpretive letters issued by the staff of the
Securities and Exchange Commission (the "Commission") to third parties,
Holdings and the Company believe that a holder of New Notes (other than (i) a
broker-dealer who purchases such New Notes directly from Holdings or the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person who is an affiliate of the Issuers within
the meaning of Rule 405 under the Securities Act) who exchanges Old Notes for
New Notes in the ordinary course of business and who is not participating,
does not intend to participate, and has no arrangement or understanding with
any person to participate, in the distribution of the New Notes, will be
allowed to resell the New Notes to the public without further registration
under the Securities Act and without delivering to the
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<PAGE>
purchasers of the New Notes a prospectus that satisfies the requirements of
the Securities Act. See "The Exchange Offer -- Purpose and Effect." However, a
broker-dealer who holds New Notes that were acquired for its own account as a
result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act. If any
other holder is deemed to be an "underwriter" within the meaning of the
Securities Act or acquires New Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the New Notes, such holder
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction, unless an
exemption from registration is otherwise available. For a period of 180 days
from the Expiration Date, Holdings and the Company shall make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
AVAILABLE INFORMATION
Holdings and the Company (collectively, the "Issuers") and the
Guarantors have filed with the Commission a registration statement relating to
the New Notes offered hereby (together with all amendments and exhibits, the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other documents referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to such exhibit for a more complete description thereof, and each such
statement shall be deemed qualified in its entirety by such reference. The
Registration Statement and the exhibits and schedules thereto may be inspected
without charge and copied at prescribed rates at the Public Reference Section
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices at 7 World Trade Center, Suite 1300,
New York, New York 10048, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Commission maintains a
website that contains reports, proxy and information statements and other
information filed electronically with the Commission at http://www.sec.gov. In
addition, the Issuers have agreed to furnish to holders of the Old Notes and
prospective purchasers and securities analysts, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
As a result of this offering, the Issuers must comply with the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and will furnish all
reports and other required information to the Commission. Under the indentures
governing the New Notes (the "Indentures"), the Issuers will furnish copies of
such reports and other information to the Trustee (as defined in each of the
Indentures). If the Issuers are not subject to the periodic reporting and
informational requirements of the Exchange Act, the Indentures require it to
provide the Trustee and the holders of Notes all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuers were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, an independent auditors' report.
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<PAGE>
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE
ISSUERS, INCLUDING STATEMENTS UNDER THE CAPTIONS "PROSPECTUS SUMMARY,"
"UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS." ALL OF THESE FORWARD LOOKING STATEMENTS ARE BASED
ON ESTIMATES AND ASSUMPTIONS MADE BY THE MANAGEMENT OF THE ISSUERS FROM
INFORMATION AVAILABLE TO THE ISSUERS AS OF THE DATE HEREOF. ALTHOUGH SUCH
ESTIMATES AND ASSUMPTIONS ARE BELIEVED TO BE REASONABLE, THEY ARE INHERENTLY
UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES
AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES OR
STATEMENTS WILL BE REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS
THAT MAY CAUSE SUCH DIFFERENCES INCLUDE: (1) INCREASED COMPETITION; (2)
INCREASED COSTS; (3) RISKS ASSOCIATED WITH THE INTRODUCTION OF NEW PRODUCTS;
(4) LOSS OR RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (5) INCREASES IN THE
ISSUERS' COST OF BORROWINGS OR INABILITY OR UNAVAILABILITY OF ADDITIONAL DEBT
OR EQUITY CAPITAL; (6) CHANGES IN GENERAL ECONOMIC CONDITIONS IN THE MARKETS
IN WHICH THE ISSUERS MAY, FROM TIME TO TIME, COMPETE; AND (7) INABILITY OF
THE ISSUERS TO SUCCESSFULLY REALIZE ANTICIPATED REVENUE AND COST SAVINGS
OPPORTUNITIES. MANY OF SUCH FACTORS WILL BE BEYOND THE CONTROL OF THE ISSUERS
AND THEIR MANAGEMENT. THE ISSUERS UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE
THE RESULT OF ANY REVISIONS TO THESE FORWARD LOOKING STATEMENTS WHICH MAY BE
MADE TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING, OR OF WHICH EITHER OF THE
ISSUERS BECOMES AWARE, AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS. FOR FURTHER INFORMATION OR OTHER FACTORS WHICH COULD
AFFECT THE FINANCIAL RESULTS OF THE ISSUERS AND SUCH FORWARD LOOKING STATEMENTS,
SEE "RISK FACTORS."
MARKET DATA
MARKET AND COMPETITIVE POSITION DATA USED THROUGHOUT THIS PROSPECTUS
WAS OBTAINED THROUGH RESEARCH BY THE ISSUERS, SURVEYS OR STUDIES CONDUCTED BY
THIRD PARTIES AND INDUSTRY OR GENERAL PUBLICATIONS. INDUSTRY PUBLICATIONS
GENERALLY STATE THAT THE INFORMATION CONTAINED THEREIN HAS BEEN OBTAINED FROM
SOURCES BELIEVED TO BE RELIABLE, BUT THAT THE ACCURACY AND COMPLETENESS OF
SUCH INFORMATION IS NOT GUARANTEED. THE ISSUERS HAVE NOT INDEPENDENTLY
VERIFIED MARKET AND COMPETITIVE POSITION DATA PROVIDED BY THE THIRD PARTIES OR
INDUSTRY OR GENERAL PUBLICATIONS. ALTHOUGH SUCH MARKET AND COMPETITIVE
POSITION DATA ARE INHERENTLY IMPRECISE, BASED ON THEIR UNDERSTANDING OF THE
MARKETS IN WHICH THE ISSUERS COMPETE, MANAGEMENT BELIEVES THAT SUCH DATA ARE
GENERALLY INDICATIVE OF THE ISSUERS' RELATIVE MARKET SHARE AND COMPETITIVE
POSITION. SIMILARLY, INTERNAL ISSUER SURVEYS, WHILE BELIEVED BY THE ISSUERS TO
BE RELIABLE, HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT SOURCES.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR
A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES ANNOTATED, 1955, AS AMENDED, WITH THE STATE OF NEW HAMPSHIRE NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE
STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT
ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE
FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED
IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR
CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information, risk factors and
historical and unaudited pro forma condensed consolidated statements of
operations, including the related notes, appearing elsewhere in this
Prospectus.
As used in this Prospectus, unless the context requires otherwise,
(i) "Millbrook" means Millbrook Distribution Services Inc., a Delaware
corporation and wholly-owned subsidiary of the Company, (ii) "Manischewitz"
means The B. Manischewitz Company, LLC, a Delaware limited liability company
and a wholly-owned subsidiary of the Company, (iii) the "Company" means R.A.B.
Enterprises, Inc., a Delaware corporation and wholly-owned subsidiary of
Holdings and its consolidated subsidiaries, Millbrook and Manischewitz, (iv)
"Holdings" means R.A.B. Holdings, Inc., a Delaware corporation, (v) "MANO"
means MANO Holdings Corporation, a Delaware corporation, and (vi) "KBMC" means
KBMC Acquisition Company, L.P., a Delaware limited partnership. MANO and KBMC
were the owners of all of the outstanding equity of Manischewitz prior to the
Acquisition. See "The Transactions".
HOLDINGS AND THE COMPANY
Holdings was founded in 1996 in order to build a fully integrated
specialty food business by acquiring food manufacturers with strong brand
names and integrating the products of these manufacturers with a strong
distribution platform. In March 1997, Holdings acquired Millbrook, one of the
largest value-added full service independent distributors of specialty foods,
health and beauty care products and general merchandise, to serve as a
platform for the growth of Holdings' specialty food business. To further
expand Holdings' specialty food product offerings, Holdings established the
Company which, in May 1998, acquired, for approximately $124.7 million,
Manischewitz, one of the U.S.'s leading branded manufacturers of Kosher food
products.
The Company, through Millbrook, provides distribution and value-added
services to over 13,000 retail locations in 40 states east of the Rocky
Mountains. The Company's principal customers include supermarkets and mass
merchandisers such as Shaws, Star Market, Stop & Shop, Food Lion, Ukrop's,
Dierbergs, Albertsons, Ames and Super Kmart. Millbrook stocks over 35,000
items. Millbrook also carries a line of its own private label brands as well
as store brands and other special need items for specific customers. Millbrook
Retail Solutions(SM), one of Millbrook's divisions, provides a variety of
merchandising services, without associated product sales, to manufacturers,
distributors and retailers across various product categories in all trade
channels.
Millbrook is among the U.S.'s leading distributors of high margin
specialty foods. Millbrook offers over 10,500 specialty food SKUs and
continually updates this product line. Since the Company's acquisition of
Millbrook, management efforts have focused on stabilizing operations,
solidifying its customer base and developing a financial infrastructure which
allows Millbrook to operate as an independent entity. Specifically, management
has focused on reducing debt, implementing programs to manage inventories and
accounts receivable and developing its customer base and acquisition strategy.
From its acquisition to March 31, 1998, Millbrook repaid $23.7 million of its
acquisition debt.
Manischewitz, founded in 1888, is the nation's leading manufacturer
of processed Kosher food products including matzos, noodles, crackers, cakes,
cookies, soups and processed fish products. Manischewitz is the only
broad-line manufacturer of processed Kosher foods in the U.S. and manufactures
under the brand names Manischewitz, Horowitz Margareten and Goodman's. The
Company believes that Manischewitz products have exceptional brand recognition
and customer loyalty. Sales of Kosher for Passover products are especially
stable as most of the Jewish population in the U.S. attend Passover seders
each year at which matzo and other Kosher
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<PAGE>
for Passover products are consumed, and consumers turn to brands they trust
when making these purchase decisions.
Sales of specialty foods were estimated to be $38.9 billion in 1997,
resulting in a compound annual growth rate of 7.0% from 1992 to 1997, compared
with 2.7% for the overall U.S. grocery industry during the same period. The
specialty food segment consists of ethnic, international, health conscious,
diet, vegetarian, natural and gourmet foods that are generally considered
higher quality than those foods more widely available in the mass market.
Within the specialty food segment, Kosher foods are characterized by a stable
and loyal customer base of Jewish consumers. This stable base, coupled with
increasing sales of Kosher foods to non-Jewish consumers, has contributed to
sales of Kosher foods increasing from $2.0 billion in 1992 to $3.3 billion in
1997, representing a compound annual growth rate of 10.2%.
BUSINESS STRATEGY
The Company believes that the combination of Millbrook and
Manischewitz will provide it with a significant opportunity to increase
revenues and profitability. The Company is pursuing a business strategy of
utilizing Millbrook's distribution infrastructure for Manischewitz products,
cross-selling to customers, aggressively marketing Manischewitz products
beyond its traditional customer base and pursuing strategic acquisitions. The
Company's strategy includes the following initiatives:
Capitalize on Millbrook's Distribution Infrastructure. The Company is
evaluating Manischewitz's distribution network of independent distributors in
order to capitalize on Millbrook's distribution infrastructure.
Cross-Sell to Existing Customers. Due to their strong consumer
loyalty and large market share, retailers consider Manischewitz products "must
have" products in their stores. To take advantage of this retail presence, the
Company intends to cross-sell products distributed by Millbrook to existing
Manischewitz retail customers, thereby creating "drag-along" sales for
Millbrook products. Similarly, to take advantage of Millbrook's extensive
distribution network, the Company intends to cross-sell Manischewitz products
to Millbrook's existing retail customers.
Aggressively Market Manischewitz Products. Manischewitz has
historically relied on its distributors to market its products and has limited
its spending on advertising and marketing to Jewish publications. To take
advantage of consumer perception of the qualities associated with Kosher
products, the Company intends to implement several initiatives to increase
sales of Manischewitz products to existing and new customers, including:
o increasing spending on advertising, marketing and promotion
of its existing products and its new product offerings;
o selectively using customer advertising, trade promotions and
allowances to stimulate sales; and
o using Millbrook's existing distribution network and retailer
relationships to sell certain of Manischewitz's products
with broad consumer appeal (e.g., cookies, crackers, noodles
and soups) in the non-Kosher aisles of retailers.
Pursue Strategic Acquisitions. The Company actively evaluates
acquisition candidates in the specialty food and distribution businesses,
although the Company does not currently have a binding agreement with respect
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to any acquisition. The Company believes that Millbrook's distribution
infrastructure provides it with an enhanced competitive position in acquiring
additional specialty food companies due to the incremental cash flow the
Company can achieve by shifting acquired companies' distribution to Millbrook.
COMPETITIVE STRENGTHS
The Company believes that the following attributes establish it as a
leader in the specialty food industry:
Leading Value-Added Distributor of Specialty Foods. The Company is
among the leading specialty food distributors in the U.S. The Company
currently offers over 10,500 SKUs and continually updates its product line. As
a result of the acquisition of Manischewitz, the Company is the leading
producer of processed Kosher food products in the U.S. The Company
differentiates itself from other specialty food distributors through its
ability to: (i) piece pick (deliver in individual units versus full cases),
which provides retailers with a wider variety of products with improved space
utilization and reduced inventory investment, (ii) offer health and beauty
care products and general merchandise and (iii) provide in-store merchandising
services. Additionally, through its Millbrook Retail Solutions division, the
Company provides a variety of value-added services, including schematic
development, space management, new store installations, remodeling of existing
stores, order writing, stocking, new item placement and development and
management of promotions.
Premier Brand Name. Founded over 100 years ago, Manischewitz is
recognized as the premier brand name in the Kosher products segment of the
U.S. specialty food industry. Manischewitz's consumer franchise has been built
on high quality products and a family-oriented tradition which has been handed
down from generation to generation. As a result, consumers associate the
Manischewitz name with higher-quality ingredients and foods prepared in
accordance with strict standards. The Company believes the strong market
position and brand name recognition of Manischewitz will further strengthen the
Company's position within the specialty food industry. Management believes that
recognition of the Manischewitz brand name is approximately 100% among Jewish
households and 80% among non-Jewish households. As a result of its strong brand
name and loyal customer base, Manischewitz's historical financial performance
has been very stable, with revenue increases in each of its last five fiscal
years.
Strong Distribution Platform. The distribution industry is
characterized by large start-up costs required to establish a distribution
network, obtain client relationships and satisfy inventory requirements. These
initial outlays, coupled with the ongoing costs of changing technology and
business trends, are significant barriers to entry for potential market
participants. The ability to compete in the industry is driven primarily by
economies of scale. Millbrook has established a significant presence in 40
states east of the Rocky Mountains, servicing over 13,000 retail locations
with an extensive distribution network. Management believes that this network
provides a strong platform for the growth of its specialty food business.
Broad Product Offering. The Company, through Millbrook, is one of the
largest distributors of specialty foods, health and beauty care products and
general merchandise with approximately 35,000 SKUs, including 10,500 specialty
food items. The Company believes a broad product offering is necessary to
compete within the specialty food industry as retailers prefer distributors
with comprehensive product offerings. The acquisition of Manischewitz provides
a broad range of Kosher branded products, which management believes will
increase sales and further strengthen the Company's relationship with
retailers.
Strong Relationships with Suppliers and Retailers. Millbrook has a
broad base of over 1,500 supplier relationships nationally, including strong
relationships with major consumer product companies such as Procter
-7-
<PAGE>
& Gamble, Johnson & Johnson, Gillette, Rubbermaid and BestFoods. Similarly,
the Company enjoys strong relationships with a number of leading retailers,
including Shaws, Star Market, Stop & Shop, Food Lion, Ukrop's, Dierbergs,
Albertsons, Ames and Super Kmart. Millbrook's top ten customers, which
collectively represented approximately 50% of its revenues during the fiscal
year ended March 31, 1998, have been customers for an average of 16 years. The
Company believes that Millbrook's strong reputation for its comprehensive
product selection, service and broad geographic coverage have enabled it to
establish and strengthen its long-term relationships with many of the leading
supermarkets and mass merchandisers in the U.S.
MANAGEMENT AND OWNERSHIP OF HOLDINGS AND THE COMPANY
Holdings was founded in 1996 by Mr. Richard A. Bernstein in order to
build a fully integrated specialty food business by acquiring food
manufacturers with strong brand names and integrating the products of these
manufacturers with a strong distribution platform. The Company and Holdings
are managed by Mr. Bernstein (Chairman, President and Chief Executive Officer
of the Company and Holdings) and an operating team of senior executives who
have been associated with Mr. Bernstein and his business activities for many
years. Mr. Bernstein intends to continue to devote a substantial portion of
his working time to the Company and Holdings.
Mr. Bernstein has extensive experience in managing businesses and
integrating acquisitions of distribution companies and manufacturing
companies. In 1987, he organized RABCO Health Services, Inc. to acquire
General Medical Corporation, a medical and surgical supply distribution
business which serviced hospitals, physicians/clinics and nursing homes, and
Harris Wholesale Company, Inc., a pharmaceutical and health and beauty care
distribution business which serviced supermarket and drug store retailers. Mr.
Bernstein successfully managed and integrated these businesses. Mr. Bernstein
was Chairman and Chief Executive Officer of RABCO Health Services, Inc. from
April 1987 through August 1993. In 1984, Mr. Bernstein acquired Western
Publishing Group, Inc., now known as Golden Books Family Entertainment, Inc.,
a publishing and consumer product company which focused primarily on
children's books, toys, games and multimedia products sold under the Golden(R)
and Golden Books(R) brands, and served as its Chairman and Chief Executive
Officer from its acquisition through May 1996.
Mr. Bernstein, other management stockholders and outside investors
own 41.3%, 32.8% and 25.9%, respectively, of the issued and outstanding shares
of common stock of Holdings (the "Common Stock") which, in turn, owns 100% of
the outstanding shares of common stock of the Company. Mr. Bernstein and other
management stockholders and outside investors together also own 100% of the
issued and outstanding shares of Series A Preferred Stock of Holdings (the
"Series A Preferred Stock"). All holders of the Common Stock and the Series A
Preferred Stock have granted to Mr. Bernstein, pursuant to a voting agreement,
the right to direct the vote of their shares so long as there is no public
market for the Common Stock. See "Certain Transactions."
Manischewitz is currently managed by Richard A. Bernstein, as acting
President and Chief Executive Officer. The Company is actively conducting a
search for a President and Chief Executive Officer of Manischewitz and
believes that an announcement of the hiring of a new President and Chief
Executive Officer will be made by year end.
Millbrook is managed by Robert A. Sigel (President and Chief
Executive Officer), who has been associated with Millbrook since 1977, having
served as Vice President, Sales and Merchandising, Executive Vice President,
President and Chief Executive Officer of Millbrook Distributors, Inc. and
President and Chief Executive Officer of the service merchandising division of
McKesson Corporation, which became the current Millbrook.
-8-
<PAGE>
THE ACQUISITION AND RELATED TRANSACTIONS
Effective March 3, 1998, the Company entered into a Purchase
Agreement (the "Purchase Agreement") to acquire Manischewitz for a purchase
price of approximately $124.7 million, which amount included the repayment of
Manischewitz's existing debt of approximately $38.8 million and approximately
$2.1 million of fees and expenses. The closing of the acquisition of
Manischewitz occurred on May 1, 1998. Concurrently with the closing, Holdings
contributed all of the capital stock of Millbrook to the Company.
Millbrook is a party to a credit agreement originally dated as of
March 31, 1997, which has been amended and restated as of May 1, 1998 to add
Manischewitz as a party (such credit agreement is referred to in this Prospectus
as the "Credit Agreement"). The Credit Agreement provides for a total commitment
of $99.5 million, consisting of revolving credit loans of up to $90.2 million
and a term loan of $9.3 million, subject to certain borrowing base limitations.
Millbrook and Manischewitz are co-borrowers under the Credit Agreement and all
of Millbrook's assets and certain assets of Manischewitz are included in
determining the borrowing base. As of August 31, 1998, Manischewitz and
Millbrook had approximately $60.0 million of additional borrowing capacity under
the Credit Agreement.
The acquisition of Manischewitz, the offering and sale of the Old
Notes, the contribution by Holdings of all of the capital stock of Millbrook
to the Company and the amendment to the Credit Agreement are collectively
referred to herein as the "Transactions."
The gross proceeds of $168.0 million raised in connection with the
sale of the Old Notes were used to (i) pay the purchase price for Manischewitz
of approximately $124.7 million, (ii) reduce outstanding borrowings by
approximately $20.3 million under the revolving credit portion of Millbrook's
Credit Agreement, (iii) fund an initial interest escrow account with
approximately $17.0 million to pay interest on the Old Holdings Notes for the
first six scheduled interest payment dates for the benefit of the holders
thereof and (iv) pay fees and expenses of approximately $6.0 million relating
to the sale of the Old Notes. See "The Transactions".
THE EXCHANGE OFFERS
THE HOLDINGS EXCHANGE OFFER
The Holdings Exchange Offer applies to $48,000,000 aggregate
principal amount of the Old Holdings Notes. The form and terms of the New
Holdings Notes will be the same as the form and terms of the Old Holdings
Notes except (i) interest on the New Holdings Notes will accrue from the last
interest payment date on which interest was paid on the Old Holdings Notes or,
if no interest has been paid on the Old Holdings Notes, from the date of
original issuance of the Old Holdings Notes, and (ii) New Holdings Notes are
being registered under the Securities Act and, therefore, will not bear
legends restricting their transfer. The New Holdings Notes will evidence the
same debt as the Old Holdings Notes and will be entitled to the benefits of
the indenture (the "Holdings Notes Indenture") pursuant to which the Old
Holdings Notes were issued. See "Description of the New Holdings Notes."
The Holdings Exchange Offer................. $1,000 principal amount of New
Holdings Notes in exchange for
each $1,000 principal amount
of Old Holdings Notes. As of
the date hereof, Old Holdings
Notes representing $48,000,000
aggregate principal amount are
outstanding. The terms of the
New Holdings Notes and the Old
Holdings Notes are
substantially identical.
-9-
<PAGE>
Based on an interpretation by
the Commission's staff set
forth in no-action letters
issued to third parties
unrelated to Holdings,
Holdings believes that New
Holdings Notes issued
pursuant to the Holdings
Exchange Offer in exchange
for Old Holdings Notes may be
offered for resale, resold
and otherwise transferred by
any person receiving the New
Holdings Notes, whether or
not that person is the
registered holder (other than
any such holder or such other
person that is an "affiliate"
of Holdings within the
meaning of Rule 405 under the
Securities Act), without
compliance with the
registration and prospectus
delivery provisions of the
Securities Act; provided that
(i) the New Holdings Notes
are acquired in the ordinary
course of business of that
holder or such other person,
(ii) neither the holder nor
such other person is engaging
in or intends to engage in a
distribution of the New
Holdings Notes, and (iii)
neither the holder nor such
other person has an
arrangement or understanding
with any person to
participate in the
distribution of the New
Holdings Notes. See "The
Exchange Offers--Purpose and
Effect." Each broker-dealer
that receives New Holdings
Notes for its own account in
exchange for Old Holdings
Notes, where those Old
Holdings Notes were acquired
by the broker-dealer as a
result of its market-making
activities or other trading
activities, must acknowledge
that it will deliver a
prospectus in connection with
any resale of such New
Holdings Notes. See "Plan of
Distribution."
Registration Rights Agreement............... The Old Holdings Notes were
sold by the Company on May 1,
1998, in a private placement in
reliance on Section 4(2) of the
Securities Act and immediately
resold by the initial purchaser
thereof, Chase Securities Inc.
(the "Initial Purchaser"), in
reliance on Rule 144A and
Regulation S promulgated under
the Securities Act (the
"Original Holdings Notes
Offering"). In connection with
the Original Holdings Notes
Offering, Holdings entered into
an exchange and registration
rights agreement (the "Holdings
Registration Rights Agreement")
with the Initial Purchaser
providing for, among other
things, the Holdings Exchange
Offer. See "The Exchange
Offers--Purpose and Effect."
Expiration Date............................. The Holdings Exchange Offer
will expire at 5:00 p.m., New
York City time, on ______,
1998, or such later date and
time to which it is extended by
Holdings.
Withdrawal.................................. The tender of Old Holdings
Notes pursuant to the Holdings
Exchange Offer may be withdrawn
at any time prior to 5:00 p.m.,
New York City time, on the
Expiration Date. Any Old
Holdings Note accepted for
exchange for any reason will be
returned without expense to the
tendering holder thereof as
promptly as
-10-
<PAGE>
practicable after the
expiration or termination of
the Holdings Exchange Offer.
Interest on the New Holdings Notes
and Old Holdings Notes..................... Interest on the New Holdings
Notes will accrue from the last
interest payment date on which
interest was paid on the Old
Holdings Notes or, if no
interest has been paid on the
Old Holdings Notes, from the
date of original issuance of
the Old Holdings Notes.
Conditions to the New Holdings Notes
Exchange Offer............................. The New Holdings Exchange Offer
is subject to certain customary
conditions, certain of which
may be waived by Holdings. See
"The Exchange Offers--Certain
Conditions to the Exchange
Offers."
Procedures for Tendering
Old Holdings Notes......................... Each holder of Old Holdings
Notes wishing to accept the
Holdings Exchange Offer must
complete, sign and date the
accompanying letter of
transmittal relating to the
Holdings Exchange Offer (the
"Holdings Letter of
Transmittal"), or a copy
thereof, in accordance with
the instructions contained
herein and therein, and mail
or otherwise deliver the
Holdings Letter of
Transmittal, or the copy,
together with the Old Holdings
Notes and any other required
documentation, to the Holdings
Exchange Agent (as defined) at
the address set forth in the
Holdings Letter of
Transmittal. Persons holding
Old Holdings Notes through the
Depository Trust Company
("DTC") and wishing to accept
the Holdings Exchange Offer
must do so pursuant to the
DTC's Automated Tender Offer
program, by which each
tendering Participant will
agree to be bound by the
Holdings Letter of
Transmittal. By executing or
agreeing to be bound by the
Holdings Letter of
Transmittal, each holder will
represent to Holdings that,
among other things, (i) the
New Holdings Notes acquired
pursuant to the Holdings
Exchange Offer are being
obtained in the ordinary
course of business of the
person receiving such New
Holdings Notes, whether or not
such person is the holder of
the Old Holdings Notes, (ii)
neither the holder nor any
other person has an
arrangement or understanding
with any person to participate
in the distribution of such
New Holdings Notes within the
meaning of the Securities Act,
(iii) neither the holder nor
any such person is an
"affiliate," as defined under
Rule 405 promulgated under the
Securities Act, of Holdings,
and (iv) if such holder or
other person is a
broker-dealer, that it will
receive New Holdings Notes for
its own account in exchange
for Old Holdings Notes that
were acquired as a result of
market- making activities and
that it will be required to
acknowledge that it will
deliver a prospectus in
connection with the resale of
such
-11-
<PAGE>
New Holdings Notes. See "The
Exchange Offers--Procedures for
Tendering."
Shelf Registration Requirements............. Pursuant to the Holdings
Registration Rights Agreement,
Holdings is required to file a
"shelf" registration statement
for a continuous offering
pursuant to Rule 415 under the
Securities Act in respect of
the Old Holdings Notes if (i)
because of any change in law or
applicable interpretation of
the staff of the Commission,
Holdings is not permitted to
effect the Holdings Exchange
Offer, (ii) the Holdings
Exchange Offer is not
consummated within 270 days
after May 1, 1998, (iii) with
respect to Old Holdings Notes
or Private Exchange Notes (as
defined in the Holdings
Registration Rights Agreement)
not eligible to be exchanged
for Holdings Exchange Notes,
the Initial Purchaser so
requests following the
consummation of the Holdings
Exchange Offer, (iv) any
applicable law or
interpretations do not permit
any holder of Old Holdings
Notes to participate in the
Holdings Exchange Offer, (v)
any holder of Old Holdings
Notes participates in the
Holdings Exchange Offer and
does not receive freely
transferable New Holdings Notes
in exchange of Old Holdings
Notes or (vi) Holdings so
elects.
Acceptance of Old Holdings Notes and
Delivery of New Holdings Notes............. Holdings will accept or
exchange any and all Old
Holdings Notes which are
properly tendered (and not
withdrawn) in the Exchange
Offer prior to 5:00 p.m., New
York City time, on the
Expiration Date. The New
Holdings Notes issued pursuant
to the Holdings Exchange Offer
will be delivered promptly
following the Expiration Date.
See "The Exchange Offers--Terms
of the Exchange Offers."
Holdings Exchange Agent..................... PNC Bank, National Association
is serving as Exchange Agent
(the "Holdings Exchange
Agent") in connection with the
Holdings Exchange Offer.
Federal Income Tax Considerations........... The exchange pursuant to the
Holdings Exchange Offer should
not be a taxable event for
federal income tax purposes.
See "Certain United States
Federal Income Tax
Considerations."
Effect of Not Tendering..................... Old Holdings Notes that are
not tendered or that are
tendered but not accepted
will, following the completion
of the Holdings Exchange
Offer, continue to be subject
to the existing restrictions
upon transfer thereof.
-12-
<PAGE>
THE COMPANY EXCHANGE OFFER
The Company Exchange Offer applies to $120,000,000 aggregate
principal amount of Old Company Notes. The form and terms of the New Company
Notes will be the same as the form and terms of the Old Company Notes except (i)
interest on the New Company Notes will accrue from the last interest payment
date on which interest was paid on the Old Company Notes or, if no interest has
been paid on the Old Company Notes, from the date of original issuance of the
Old Company Notes, and (ii) New Company Notes are being registered under the
Securities Act and, therefore, will not bear legends restricting their transfer.
The New Company Notes will evidence the same debt as the Old Company Notes and
will be entitled to the benefits of the indenture (the "Company Notes
Indenture") pursuant to which the Old Company Notes were issued. See
"Description of the New Company Notes."
The Company Exchange Offer................. $1,000 principal amount of New
Company Notes in exchange for
each $1,000 principal amount of
Old Company Notes. As of the
date hereof, Old Company Notes
representing $120,000,000
aggregate principal amount are
outstanding. The terms of the
New Company Notes and the Old
Company Notes are substantially
identical.
Based on an interpretation by
the Commission's staff set
forth in no-action letters
issued to third parties
unrelated to the Company and
the Guarantors, the Company
and the Guarantors believe
that New Company Notes issued
pursuant to the Company
Exchange Offer in exchange
for Old Company Notes may be
offered for resale, resold
and otherwise transferred by
any person receiving the New
Company Notes, whether or not
that person is the registered
holder (other than any such
holder or such other person
that is an "affiliate" of the
Company or any Guarantors
within the meaning of Rule
405 under the Securities
Act), without compliance with
the registration and
prospectus delivery
provisions of the Securities
Act; provided that (i) the
New Company Notes are
acquired in the ordinary
course of business of that
holder or such other person,
(ii) neither the holder nor
such other person is engaging
in or intends to engage in a
distribution of the New
Company Notes and (iii)
neither the holder nor such
other person has an
arrangement or understanding
with any person to
participate in the
distribution of the New
Company Notes. See "The
Exchange Offers--Purpose and
Effect." Each broker-dealer
that receives New Company
Notes for its own account in
exchange for Old Company
Notes, where those Old
Company Notes were acquired
by the broker-dealer as a
result of its market-making
activities or other trading
activities, must acknowledge
that it will deliver a
prospectus in connection with
any resale of such New
Company Notes. See "Plan of
Distribution."
Registration Rights Agreement............... The Old Company Notes were
sold by the Company on May 1,
1998, in a private placement
in reliance on Section 4(2) of
the Securities Act and
immediately resold by the
Initial Purchaser in reliance
on Rule 144A and Regulation S
promulgated under the
Securities Act (the "Original
Company Notes Offering" and,
together with the Original
Holdings Notes Offering, the
"Original
-13-
<PAGE>
Offerings"). In connection
with the Original Company
Notes Offering, the Company
entered into an exchange and
registration rights agreement
with the Initial Purchaser
(the "Company Registration
Rights Agreement") providing
for, among other things, the
Company Exchange Offer. See
"The Exchange Offers--Purpose
and Effect."
Expiration Date............................. The Company Exchange Offer
will expire at 5:00 p.m., New
York City time, on ______,
1998, or such later date and
time to which it is extended
by Company.
Withdrawal.................................. The tender of Old Company
Notes pursuant to the Company
Exchange Offer may be
withdrawn at any time prior to
5:00 p.m., New York City time,
on the Expiration Date. Any
Old Company Note accepted for
exchange for any reason will
be returned without expense to
the tendering holder thereof
as promptly as practicable
after the expiration or
termination of the Company
Exchange Offer.
Interest on the New Company Notes
and Old Company Notes...................... Interest on the New Company
Notes will accrue from the
last interest payment date on
which interest was paid on the
Old Company Notes or, if no
interest has been paid on the
Old Company Notes, from the
date of original issuance of
the Old Company Notes.
Conditions to the New Company Notes
Exchange Offer............................. The New Company Exchange Offer
is subject to certain
customary conditions, certain
of which may be waived by the
Company. See "The Exchange
Offers--Certain Conditions to
the Exchange Offers."
Procedures for Tendering
Old Company Notes.......................... Each holder of Old Company
Notes wishing to accept the
Company Exchange Offer must
complete, sign and date the
accompanying letter of
transmittal relating to the
Company Exchange Offer (the
"Company Letter of
Transmittal"), or a copy
thereof, in accordance with
the instructions contained
herein and therein, and mail
or otherwise deliver the
Company Letter of Transmittal,
or the copy, together with the
Old Company Notes and any
other required documentation,
to the Company Exchange Agent
(as defined) at the address
set forth in the Company
Letter of Transmittal.
Persons holding Old Company
Notes through the Depository
Trust Company ("DTC") and
wishing to accept the Company
Exchange Offer must do so
pursuant to the DTC's
Automated Tender Offer
program, by which each
tendering Participant will
agree to be bound by the
Company Letter of Transmittal.
By executing or agreeing to be
bound by the
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<PAGE>
Company Letter of Transmittal,
each holder will represent to
Company that, among other
things, (i) the New Company
Notes acquired pursuant to the
Company Exchange Offer are
being obtained in the ordinary
course of business of the
person receiving such New
Company Notes, whether or not
such person is the holder of
the Old Company Notes, (ii)
neither the holder nor any
other person has an
arrangement or understanding
with any person to participate
in the distribution of such
New Company Notes within the
meaning of the Securities Act,
(iii) neither the holder nor
any such person is an
"affiliate," as defined under
Rule 405 promulgated under the
Securities Act, of the
Company, or any Guarantor and
(iv) if such holder or other
person is a broker-dealer,
that it will receive New
Company Notes for its own
account in exchange for Old
Company Notes that were
acquired as a result of
market-making activities and
that it will be required to
acknowledge that it will
deliver a prospectus in
connection with the resale of
such New Company Notes. See
"The Exchange
Offers--Procedures for
Tendering."
Shelf Registration Requirements............. Pursuant to the Company
Registration Rights Agreement,
the Company is required to
file a "shelf" registration
statement for a continuous
offering pursuant to Rule 415
under the Securities Act in
respect of the Old Company
Notes if (i) because of any
change in law or applicable
interpretation of the staff of
the Commission, the Company is
not permitted to effect the
Company Exchange Offer, (ii)
the Company Exchange Offer is
not consummated within 270
days following May 1, 1998,
(iii) any holder of Old
Company Notes or Private
Exchange Notes (as defined in
the Company Registration
Rights Agreement) not eligible
to be exchanged in the
Exchange Offer requests
following the consummation of
the Company Exchange Offer,
(iv) any applicable law or
interpretations do not permit
any holder of Old Company
Notes to participate in the
Company Exchange Offer, (v)
any holder of Old Company
Notes participates in the
Company Exchange Offer and
does not receive freely
transferable New Company Notes
in exchange of Old Company
Notes or (vi) either of the
Company or of the Guarantors
so elect.
Acceptance of Old Company Notes and
Delivery of New Company Notes.............. The Company will accept or
exchange any and all Old
Company Notes which are
properly tendered (and not
withdrawn) in the Exchange
Offer prior to 5:00 p.m., New
York City time, on the
Expiration Date. The New
Company Notes issued pursuant
to the Company Exchange Offer
will be delivered promptly
following the Expiration Date.
See "The Exchange Offers--
Terms of the Exchange Offers."
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<PAGE>
Company Exchange Agent...................... PNC Bank, National Association
is serving as Exchange Agent
(the "Company Exchange Agent"
and, together with the
Holdings Exchange Agent, the
"Exchange Agent") in
connection with the Company
Exchange Offer.
Federal Income Tax Considerations........... The exchange pursuant to the
Company Exchange Offer should
not be a taxable event for
federal income tax purposes.
See "Certain United States
Federal Income Tax
Considerations."
Effect of Not Tendering..................... Old Company Notes that are not
tendered or that are tendered
but not accepted will,
following the completion of
the Company Exchange Offer,
continue to be subject to the
existing restrictions upon
transfer thereof.
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<PAGE>
THE NEW NOTES
NEW HOLDINGS NOTES
Issuer....................................... R.A.B. Holdings, Inc.
Securities Offered........................... $48,000,000 aggregate
principal amount of 13% Senior
Notes due 2008.
Maturity..................................... May 1, 2008.
Interest Payment Dates....................... May 1 and November 1 of each
year, commencing on November
1, 1998.
Interest Escrow Account...................... Approximately $17.0 million of
the net proceeds from the sale
of the Old Holdings Notes (the
"Interest Escrow Amount"),
representing funds sufficient
to pay interest on the New
Holdings Notes for the first
six scheduled interest payment
dates, will be placed into an
escrow account for the benefit
of the holders of the New
Holdings Notes. The Interest
Escrow Amount shall be adjusted
for any scheduled interest
payment.
Sinking Fund................................. None.
Optional Redemption.......................... Holdings may not redeem the
New Holdings Notes prior to
May 1, 2003. On or after such
date, Holdings may redeem the
New Holdings Notes, in whole
or in part, at the redemption
prices set forth herein,
together with accrued and
unpaid interest, if any, to
the date of redemption. See
"Description of the New
Holdings Notes--Optional
Redemption."
Change of Control............................ Upon a Change of Control (as
defined in the Holdings Notes
Indenture), Holdings will be
required to make an offer to
repurchase the New Holdings
Notes at a price equal to 101%
of the principal amount, plus
accrued and unpaid interest,
if any, to the date of
repurchase. See "Description
of the New Holdings
Notes--Change of Control."
Guarantees................................... None.
Ranking...................................... The New Holdings Notes will
rank pari passu in right of
payment with all existing and
future senior indebtedness of
Holdings and senior in right
of payment to any subordinated
indebtedness of
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<PAGE>
Holdings. The New Holdings
Notes will be effectively
subordinated in right of
payment to all indebtedness of
the Company and its
subsidiaries (including the
New Company Notes and the
Guarantees). As of August 31,
1998, Holdings had no
indebtedness outstanding other
than the Old Holdings Notes,
and Holdings' subsidiaries
have approximately $134.0
million of indebtedness
outstanding (including the Old
Company Notes). See
"Description of the New
Holdings Notes."
Restrictive Covenants........................ The Holdings Notes Indenture
under which the New Holdings
Notes will be issued will
limit, among other things, (i)
the incurrence of additional
indebtedness by Holdings, (ii)
the payment of dividends on,
and redemption of, capital
stock of Holdings, (iii)
investments, (iv) sales of
assets, (v) transactions with
Affiliates (as defined
therein) and (vi)
consolidations, mergers and
transfers of substantially all
of Holdings assets. The
Holdings Notes Indenture will
also prohibit certain
restrictions on distributions
from Restricted Subsidiaries
of Holdings. However, all of
these limitations and
prohibitions are subject to a
number of important
qualifications and exceptions.
See "Description of the New
Holdings Notes--Certain
Covenants."
Absence of a Public Market for the Holdings
Notes..................................... The New Holdings Notes
generally will be freely
transferable (subject to the
restrictions discussed
elsewhere herein) but will be
new securities for which there
will not initially be a
market. Accordingly, there can
be no assurance as to the
development or liquidity of
any market for the New
Holdings Notes. The Initial
Purchaser has advised Holdings
that it currently intends to
make a market in the New
Holdings Notes. However, the
Initial Purchaser is not
obligated to do so, and any
market making with respect to
the New Holdings Notes may be
discontinued at any time
without notice by the Initial
Purchaser. Holdings currently
does not intend to list the
New Holdings Notes on any
securities exchange or to seek
approval for quotation on the
National Association of
Securities Dealers Automated
Quotation or any other
automated quotation system.
-18-
<PAGE>
NEW COMPANY NOTES
Issuer....................................... R.A.B. Enterprises, Inc.
Securities Offered........................... $120,000,000 principal amount
of 10 1/2% Senior Notes due
2005.
Maturity..................................... May 1, 2005.
Interest Payment Dates....................... May 1 and November 1 of each
year, commencing on November
1, 1998.
Sinking Fund................................. None.
Optional Redemption.......................... Except as described below, the
Company may not redeem the New
Company Notes prior to May 1,
2002. On or after such date,
the Company may redeem the New
Company Notes, in whole or in
part, at the redemption prices
set forth herein, together
with accrued and unpaid
interest, if any, to the date
of redemption. In addition,
at any time on or prior to May
1, 2001, the Company may,
subject to certain
requirements, redeem up to 35%
of the originally issued
aggregate principal amount of
the New Company Notes with the
net cash proceeds of one or
more Public Equity Offerings
(as defined in the New Notes)
at a price equal to 110.500%
of the principal amount to be
redeemed, together with
accrued and unpaid interest,
if any, to the date of
redemption; provided that at
least 65% of the originally
issued aggregate principal
amount of the New Company
Notes remains outstanding
immediately following each
such redemption. See
"Description of the New
Company Notes--Optional
Redemption."
Change of Control............................ Upon a Change of Control (as
defined in the Company Notes
Indenture), the Company will
be required to make an offer
to repurchase the New Company
Notes at a price equal to 101%
of the aggregate principal
amount thereof, together with
accrued and unpaid interest,
if any, to the date of
repurchase. See "Description
of the New Company
Notes--Change of Control" and
"Risk Factors--Change of
Control."
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<PAGE>
Guarantees................................... The New Company Notes will be
unconditionally guaranteed
(the "Guarantees"), jointly
and severally, on an unsecured
senior basis by the Company's
existing and future Restricted
Subsidiaries (as defined)
(collectively, the
"Guarantors"). The Guarantees
will be senior unsecured
obligations of the Guarantors.
The Guarantees are subject to
release, under certain
circumstances. See
"Description of the New
Company Notes--Guarantees of
the New Company Notes" and
"Risk Factors--Fraudulent
Conveyance."
Ranking...................................... The New Company Notes and the
Guarantees will rank pari
passu in right of payment with
all existing and future senior
indebtedness of the Company
and the Guarantors,
respectively, and senior in
right of payment to any
subordinated indebtedness of
the Company and the
Guarantors, respectively. The
New Company Notes and the
Guarantees will be effectively
subordinated in right of
payment to all secured
indebtedness of the Company
and the Guarantors,
respectively, including
indebtedness of the Guarantors
under the Credit Agreement to
the extent of the value of the
assets securing such
indebtedness. As of August
31, 1998, the Company had no
indebtedness outstanding other
than the Old Company Notes,
and the Guarantors have
approximately $14.0 million of
indebtedness outstanding
(excluding the Guarantees), of
which approximately $14.0
million is secured. In
addition, as of such date, the
Guarantors had approximately
$60.0 million of additional
borrowing capacity under the
Credit Agreement. See
"Description of the New
Company Notes" and "Risk
Factors--Asset Encumbrances."
Restrictive Covenants........................ The Company Notes Indenture
under which the New Company
Notes will be issued will
limit, among other things (i)
the incurrence of additional
indebtedness by the Company
and its Restricted
Subsidiaries (as defined
therein), (ii) the payment of
dividends on, and redemption
of, capital stock of the
Company, (iii) investments,
(iv) sales of assets, (v)
transactions with Affiliates
(as defined therein) and (vi)
consolidations, mergers and
transfers of all or
substantially all of the
Company's assets. The New
Company Notes Indenture will
also prohibit certain
restrictions on distributions
from Restricted
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<PAGE>
Subsidiaries of the Company.
However, all of these
limitations and prohibitions
are subject to a number of
important qualifications and
exceptions. See "Description
of the New Company
Notes--Certain Covenants."
Absence of a Public Market for the
New Company Notes.......................... The New Company Notes
generally will be freely
transferable (subject to the
restrictions discussed
elsewhere herein) but will be
new securities for which there
will not initially be a
market. Accordingly, there can
be no assurance as to the
development or liquidity of
any market for the New Company
Notes. The Initial Purchaser
has advised the Company that
it currently intends to make a
market in the New Company
Notes. However, it is not
obligated to do so, and any
market making with respect to
the New Company Notes may be
discontinued at any time
without notice by the Initial
Purchaser. The Company
currently does not intend to
list the New Company Notes on
any securities exchange or to
seek approval for quotation on
the National Association of
Securities Dealers Automated
Quotation or any other
automated quotation system.
--------------------------
Prospective investors should carefully consider all of the
information set forth in this Prospectus and, in particular, should evaluate
the specific factors under "Risk Factors" for risks involved with an
investment in the New Notes.
Each of the Company and Holdings is a Delaware corporation. The
executive offices of the Company and Holdings are located at 444 Madison
Avenue, Suite 601, New York, New York 10022 and the telephone number is (212)
688-4500.
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<PAGE>
SUMMARY FINANCIAL DATA
Summary Pro Forma Financial Data
R.A.B. Holdings, Inc.
and R.A.B. Enterprises, Inc.
The following table sets forth summary pro forma consolidated financial data
of the Issuers for the fiscal year ended March 31, 1998 and for the three
month period ended June 30, 1998. The unaudited pro forma consolidated
financial data have been derived from the Issuers historical financial
statements for the fiscal year ended March 31, 1998 and the three month period
ended June 30, 1998 and give effect to the acquisition of Manischewitz and the
issuance of the Notes as of the beginning of each period presented. The
unaudited pro forma consolidated financial data are not intended to represent
and are not indicative of what the Issuers results of operations actually
would have been nor are they intended to project the Issuers results of
operations for any future period. The following information is qualified by
reference to, and should be read in conjunction with,"The Transactions,"
"Capitalization," "Unaudited Pro Forma Condensed Consolidated Statements of
Operations," "Selected Historical Financial Data of R.A.B. Holdings, Inc. and
R.A.B. Enterprises, Inc.", "Selected Historical Combined Financial Data of The
B. Manischewitz Company, LLC," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," Holdings and Enterprises
consolidated financial statements and unaudited condensed consolidated
financial statements, and notes thereto, and MANO's and KBMC's combined
financial statements and unaudited condensed combined financial statements,
and notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Fiscal Year Ended Three Months Ended
March 31, 1998 June 30, 1998
------------------------- -------------------------
Company Holdings Company Holdings
------- -------- ------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................... $523,241 $523,241 $118,738 $118,738
Operating expenses.......................... 505,552 505,560 118,400 118,400
Operating income............................ 17,689 17,681 338 338
OTHER FINANCIAL DATA:
Interest expense............................ $16,772 $22,171 $3,918 $5,249
Depreciation and amortization............... 9,242 9,405 2,297 2,338
Capital expenditures........................ 2,715 2,715 1,026 1,026
Ratio of earnings to fixed charges(a)....... 1.05x
</TABLE>
(a) For purposes of determining the pro forma ratio of earnings to fixed
charges, "earnings" consist of income before income taxes and fixed
charges and "fixed charges" consist of interest on all indebtedness,
amortization of deferred financing costs and that portion of rental
expense that management believes to be representative of interest. On a
pro forma basis, the deficiency in earnings to fixed charges was $4.490
million for Holdings for the fiscal year ended March 31, 1998 and $3.580
million for the Company and $4.911 million for Holdings for the three
month period ended June 30, 1998.
-22-
<PAGE>
Summary Historical Financial Data
R.A.B. Holdings, Inc.
and R.A.B. Enterprises, Inc.
The following table sets forth summary historical consolidated financial data
of the Issuers for the fiscal year ended March 31, 1998, and for the three
month periods ended June 30, 1997 and 1998, and historical financial data of
Millbrook (the "Predecessor") for each of the two years in the period ended
March 31, 1997. The historical consolidated financial data for the fiscal year
ended March 31, 1998 have been derived from the Issuers audited consolidated
financial statements, included elsewhere herein. The historical consolidated
financial data for the three month periods ended June 30, 1997 and 1998 have
been derived from the Issuers unaudited condensed consolidated financial
statements, included elsewhere herein, which in the opinion of management
include all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the information. The Predecessor financial data for
each of the two years in the period ended March 31, 1997 have been derived
from the Predecessor's audited financial statements, included elsewhere
herein. The unaudited condensed consolidated financial statements for the
three month period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the full fiscal year. The following
information is qualified by reference to, and should be read in conjunction
with, "Selected Historical Financial Data of R.A.B. Holdings, Inc. and R.A.B.
Enterprises, Inc.," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," Holdings and Enterprises consolidated
financial statements and unaudited condensed consolidated financial
statements, and notes thereto, and the Predecessor financial statements, and
notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
Predecessor(a) Company Holdings Company Holdings
---------------------- -------- --------- -------------------- -------------------
Fiscal Year Ended Fiscal Year Ended Three Months Ended Three Months Ended
March 31, March 31, June 30, June 30,
---------------------- ------------------- -------------------- -------------------
1996 1997 1998 1997 1998 1997 1998
---- ---- ---- ---- ---- ---- ----
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues $ 563,099 $ 476,175 $ 470,201 $ 470,201 $ 113,522 $ 116,571 $ 113,522 $ 116,571
Operating income 13,611 7,375 7,383 7,375 1,584 225 1,584 225
Net income (loss) 6,169 1,941 1,182 1,174 48 (1,646) 48 (2,184)
OTHER FINANCIAL DATA:
Depreciation and $ 2,970 $ 3,031 $ 4,471 $ 4,471 $ 782 $ 1,834 $ 782 $ 1,861
amortization
</TABLE>
- --------------------------------------
(a) Holdings acquired the Predecessor on March 31, 1997. Financial information
with regard to the Predecessor is based on historical results and,
accordingly, does not reflect purchase accounting adjustments or interest
associated with debt incurred to finance the acquisition. The Predecessor
was a wholly owned subsidiary of McKesson Corporation. As a wholly owned
subsidiary of McKesson Corporation, the Predecessor was provided certain
corporate and general and administrative services, including, among other
things, treasury, certain financial reporting, data processing and legal
services. Accordingly, the operations of the Predecessor include an
allocation of expenses for such services. Additionally, because McKesson
Corporation managed cash and financing requirements centrally, interest
expense and borrowing requirements were based on the then existing capital
structure. The financial position and operations of the Predecessor may
differ from results that may have been achieved had the Predecessor
operated as an independent entity.
-23-
<PAGE>
Summary Historical Combined Financial Data
The B. Manischewitz Company, LLC
The following table sets forth summary historical combined financial data of
MANO and KBMC for each of the three years in the period ended July 31, 1997,
and for the nine month periods ended April 30, 1997 and 1998. The sole asset
and only operation of MANO and KBMC is Manischewitz. The historical combined
financial data for each of the three years in the period ended July 31, 1997
have been derived from the audited combined financial statements of MANO and
KBMC, included elsewhere herein. The historical combined financial data for
the nine month periods ended April 30, 1997 and 1998 have been derived from
unaudited condensed combined financial statements of MANO and KBMC, included
elsewhere herein, which in the opinion of management include all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the information. The historical combined financial data for
the nine month period ended April 30, 1998 are not necessarily indicative of
results that may be expected for the full fiscal year. The following
information is qualified by reference to, and should be read in conjunction
with, "Selected Historical Combined Financial Data of MANO Holdings
Corporation and KBMC Acquisition Company, L.P.," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and MANO's and
KBMC's combined financial statements and unaudited condensed combined
financial statements, and notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Year Ended July 31, April 30,
-------------------------- ----------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues(a).................... $49,581 $52,399 $54,787 $46,387 $44,481
Operating income..................... 7,348 8,211 9,807 9,445 9,381
Net income(b)(c)..................... 2,267 1,932 5,321 6,057 6,291
OTHER FINANCIAL DATA:
Depreciation and amortization........ $ 2,097 $ 2,236 $ 2,664 $ 1,999 $ 1,941
</TABLE>
(a) In June 1997, Manischewitz sold its Chicago distribution operation. This
operation had revenues of $4.083 million for the nine month period ended
April 30, 1997.
(b) Fiscal 1996 net income includes an extraordinary charge for the early
extinguishment of debt ($1.965 million) and a charge for the cumulative
effect of a change in accounting principle relating to post retirement
benefits ($754,000).
(c) Effective May 31, 1996, The B. Manischewitz Company (the sole asset and
only operation of MANO and KBMC) was reorganized as a limited liability
company. Accordingly, deferred income tax attributes at May 31, 1996
flowed through the provision (benefit) for income taxes. Subsequent to
May 31, 1996, income taxes, if any, are the obligation of the
shareholders of MANO and the partners of KBMC.
-24-
<PAGE>
RISK FACTORS
Investment in the New Notes offered hereby involves a high degree of
risk. In considering the Exchange Offers holders of Old Notes should give
careful consideration to the specific factors set forth below as well as the
other information set forth in this Prospectus.
Holding Company Structure; Dependence upon Cash Flow from Subsidiaries
Each of the Issuers is a holding company that conducts its operations
through its direct and indirect wholly owned subsidiaries, Millbrook and
Manischewitz. As holding companies, each of the Issuers hold no significant
assets other than their direct or indirect investments in and advances to
Manischewitz and Millbrook. The Issuers are, therefore, dependent upon their
receipt of sufficient funds from Manischewitz and Millbrook to meet their own
obligations. The Credit Agreement permits distributions by Millbrook and
Manischewitz to the Company in an amount sufficient to pay scheduled interest
payments on the New Company Notes and, on or after November 1, 2001, to the
Company to make distributions to Holdings in an amount sufficient to allow
Holdings to pay scheduled interest payments on the New Holdings Notes, so long
as there is no event of default existing under the Credit Agreement. In
addition, the Company Notes Indenture will permit dividends or distributions
by the Company to Holdings in amounts sufficient to pay interest on the New
Holdings Notes on or after November 1, 2003 and prior to that time only to the
extent that such payment is permitted by the Restricted Payments covenant in
the Company Notes Indenture. See "Description of the New Company Notes--
Certain Covenants--Limitation on Restricted Payments." While management
believes that Millbrook and Manischewitz will be in compliance with the
covenants contained in the Credit Agreement and able to pay dividends under
the Company Notes Indenture and, therefore, able to make distributions to the
Company in amounts sufficient to pay scheduled interest payments on the New
Company Notes and distributions to Holdings in amounts sufficient to make
scheduled interest payments on the New Holdings Notes, no assurances can be
given that such will be the case. If Millbrook and Manischewitz are not able
to make distributions to the Company in an amount sufficient to pay scheduled
interest payments on the New Company Notes and to make distributions to
Holdings in an amount sufficient to allow Holdings to pay scheduled interest
payments on the New Holdings Notes, the Company and Holdings will be required
to pursue other alternatives which may include refinancing the Credit
Agreement and/or the New Notes, seeking other sources of debt or equity
capital (if available), or other alternatives. The ability of the Issuers and,
therefore, the holders of the Notes, to benefit in the distribution of any
assets of Manischewitz and Millbrook upon any liquidation of either
Manischewitz or Millbrook will be subject to the prior claims of the creditors
of Manischewitz and Millbrook.
Even if the Issuers are able to gain access to the cash flow of
Manischewitz or Millbrook, their ability to meet their cash debt service and
repayment obligations (including their obligations under the Notes) will
depend on the future operating performance and financial results of
Manischewitz and Millbrook. Factors beyond the control of Manischewitz and
Millbrook, such as prevailing economic conditions and financial, business and
other factors, may affect the future operating performance and financial
results of Manischewitz and Millbrook.
Substantial Leverage; Ability to Service Debt
The Issuers are highly leveraged. As of August 31, 1998, Holdings had no
indebtedness outstanding other than the Old Holdings Notes and Holdings'
subsidiaries had approximately $134.0 million of indebtedness outstanding
(including the Old Company Notes and excluding the Guarantees). As of such
date, the Company had no indebtedness outstanding other than the Old Company
Notes, and the Guarantors had approximately $14.0 million of indebtedness
outstanding (excluding the Guarantees), of which approximately $14.0 million
was
-25-
<PAGE>
secured. In addition, as of such date, the Guarantors had approximately $60.0
million of additional borrowing capacity under the Credit Agreement.
The degree to which the Issuers are leveraged could have important
consequences to holders of the New Notes, including the following: (i) the
ability of the Issuers to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired; (ii) a substantial portion of the cash flow from operations of the
Company and Holdings must be dedicated to the payment of interest on the New
Company Notes and, on or after November 1, 2001, on the New Holdings Notes and
interest on their other existing indebtedness, thereby reducing the funds
available for other purposes; (iii) indebtedness under the Credit Agreement
will be at variable rates of interest, which will cause Manischewitz and
Millbrook to be vulnerable to increases in interest rates; (iv) the Issuers
may be hindered in their ability to adjust rapidly to changing market
conditions; and (v) the substantial degree of leverage of the Company and
Holdings could make each of them more vulnerable in the event of a downturn in
general economic conditions or in its businesses.
The Credit Agreement matures prior to the maturity of the Notes. In the
event that Manischewitz and Millbrook are unable to refinance the Credit
Agreement or raise funds to repay the Credit Agreement through asset sales,
sales of equity or otherwise, the ability of the Issuers to pay the principal
of and interest on the New Company Notes and the New Holdings Notes would be
adversely affected.
The ability of the Company and Holdings to pay interest on the New
Company Notes and the New Holdings Notes, respectively, and to satisfy their
other obligations will depend on their future operating performance, which
will be affected by prevailing economic conditions and financial, business and
other factors, many of which are beyond their control. Although the Issuers
believe they will be able to pay their respective obligations as they come
due, there can be no assurance that the operations of Manischewitz and
Millbrook will generate earnings in any future period sufficient to cover the
fixed charges of the Issuers. In the absence of adequate operating results and
cash flows, the Issuers may be required to adopt alternative strategies that
include reducing or delaying capital expenditures, disposing of material
assets or operations, refinancing the indebtedness represented by the Notes,
seeking additional equity capital to meet their respective debt service
obligations or causing Manischewitz and Millbrook to refinance the Credit
Agreement. The Indentures contain covenants that restrict the ability of each
of the Issuers to take certain of the foregoing actions, including selling
assets and using the proceeds therefrom. There can be no assurance as to the
timing of such actions, the ability of either of the Issuers to consummate
such actions under their respective existing financial agreements or the
proceeds that either of the Issuers could realize therefrom, and there can be
no assurance that any such refinancing would be feasible at the time or that
such proceeds would be adequate to meet the obligations then due. See
"Description of Credit Agreement," "Description of the New Company Notes" and
"Description of the New Holdings Notes."
Asset Encumbrances
The New Company Notes, the New Holdings Notes and the Guarantees will be
effectively subordinated in right of payment to all secured indebtedness of
the Company, Holdings and the Guarantors, respectively, including indebtedness
of the Guarantors under the Credit Agreement, to the extent of the value of
the assets securing such indebtedness. Millbrook has granted the lenders under
the Credit Agreement a security interest in substantially all of the current
and future assets of Millbrook and the Company has pledged all of the issued
and outstanding shares of capital stock of Millbrook to secure Millbrook's
obligations under the Credit Agreement. Manischewitz has granted to the
lenders under the Credit Agreement a security interest in Manischewitz's
accounts receivable, inventory and intellectual property. Upon the occurrence
of an event of default under the Credit Agreement (whether as a result of the
failure to comply with a payment or other covenant, a cross-default or
otherwise), the parties granted such security interests under the Credit
Agreement will have a prior secured
-26-
<PAGE>
claim on the capital stock of Millbrook and the pledged assets of Millbrook and
Manischewitz. If such parties should attempt to foreclose on their collateral,
the financial condition of the Issuers and the value of the Notes would be
materially adversely affected. The holders of the Notes have no claim on the
assets of Millbrook or Manischewitz. See "Description of Credit Agreement."
Credit Agreement; Restrictive Loan Covenants
The Credit Agreement imposes upon Millbrook and on Manischewitz, certain
financial and operating covenants including, among other things, requirements
that Millbrook and Manischewitz maintain certain financial ratios and satisfy
certain financial tests, limitations on capital expenditures and restrictions
on the ability of Millbrook and Manischewitz to incur indebtedness, to pay
dividends or to take certain other corporate actions, all of which may
restrict Millbrook's and Manischewitz's ability to expand or to pursue their
business strategies and may restrict the ability of the Company or Holdings to
make payments, including interest payments, with respect to the Notes. See
"Risk Factors--Holding Company Structure; Dependence Upon Cash Flow of
Subsidiaries." Changes in economic or business conditions, results of
operations or other factors could in the future cause a violation of one or
more covenants in the Credit Agreement, entitling the holders of such
indebtedness to declare the indebtedness immediately due and payable. There
can be no assurance that the assets of Millbrook, Manischewitz and their
respective subsidiaries will be sufficient to repay any such accelerated
indebtedness. See "Description of Credit Agreement."
Restrictions Imposed on the Issuers by Terms of the Indentures
The terms of the respective Indentures will restrict, among other things,
the applicable Issuer's ability to incur additional indebtedness, incur liens,
pay dividends or make certain other Restricted Payments (which, in the case of
the Company Notes Indenture, may restrict the ability of the Company to pay
dividends or distributions to Holdings and therefore restrict Holdings'
ability to make payments on or with respect to the New Holdings Notes), enter
into certain transactions with affiliates, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the applicable Issuer, all of which may
restrict such Issuer's ability to expand or to pursue its business strategies.
See "Description of the New Company Notes" and "Description of the New
Holdings Notes."
Implementation of Business Strategy; Integration of Acquisitions
The Company is pursuing a business strategy of utilizing Millbrook's
distribution infrastructure for Manischewitz's products, cross-selling to
customers, aggressively marketing Manischewitz's products beyond its
traditional customer base and pursuing strategic acquisitions. No assurance
can be given that the integration of Manischewitz's products into Millbrook's
distribution network will be successful, that future acquisitions will be
successful or that any or all of the anticipated strategic benefits of the
Acquisition or future acquisitions will be realized. See "Summary-The
Acquisition and Related Transactions," "Business Strategy" and "The
Transactions."
Seasonality
Manischewitz's revenues and net income are affected by a seasonal bias
toward the first quarter of the calendar year due to increased revenues during
the Passover holiday. During the twelve month period ended March 31, 1998,
approximately 52% of Manischewitz's revenues occurred in the first quarter of
the calendar year. As a result of this seasonality, Manischewitz's working
capital requirements have historically increased throughout the year, peaking
in March/April, when Manischewitz's utilization of the revolving credit
portion of
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<PAGE>
the Credit Agreement is likely to be at its highest level. In the event cash
flow from operations is insufficient to provide working capital necessary to
fund its manufacturing requirements during the second quarter of any calendar
year, Manischewitz will need to borrow under the Credit Agreement or seek
other sources of capital. Although the Company believes that funds available
under the Credit Agreement, together with cash generated from operations, will
be adequate to provide for cash requirements, there can be no assurance that
such capital resources will be sufficient in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--The
B. Manischewitz Company, LLC."
Competition
The principal competitive factors in the distribution industry include,
among others, price, breadth of product offering, breadth and quality of
client services and the ability to execute specific client priorities rapidly
and consistently over a wide geographic region. Millbrook competes with other
distributors across all of its product lines. Competition among distributors
of specialty foods in the U.S. is fragmented among over 200 distributors, most
of which are small and geographically limited. In this category, supermarkets
are constantly demanding increased product offerings to entice new customers
into their stores while retaining existing clientele. In the distribution of
health and beauty care products, supermarkets demand from distributors
delivery and inventory techniques which maximize limited shelf space and
enhance product variety while helping to keep prices low. Similarly,
supermarkets increasingly rely on distributors of general merchandise to carry
items specifically matched to customer profiles. While Millbrook believes that
its extensive experience at the store level and its logistics capabilities, as
well as the breadth of product offering and breadth and quality of its
value-added services, give it a significant competitive advantage over
smaller, regional distributors, the entrance of new competitors into the
industry or the expansion of operations by existing competitors could have a
material adverse effect on Millbrook's results of operations.
The distribution industry has narrow gross profit and operating profit
margins. These narrow margins magnify the impact on operating results of
variations in sales and operating costs. Future gross profit margins may be
adversely affected by changes in product mix, vendor pricing actions and
competitive and economic pressures.
The Company's business strategy includes promoting and marketing
Manischewitz products in the non-Kosher aisles of supermarkets. Manischewitz
competes with other manufacturers in the Kosher aisle. However, outside the
Kosher aisle, Manischewitz products will compete with the products of a
significant number of companies of varying sizes, including divisions or
subsidiaries of larger companies. Many of these competitors have multiple
product lines as well as substantially greater financial and other resources
available to them. There can be no assurance that Manischewitz products can
successfully compete against the products of these competitors. See
"Business--Business of Millbrook--Competition" and "Business of
Manischewitz--Competition."
Management Information Systems
Millbrook is highly dependent upon its management information systems to
operate its business. In connection with Holdings' acquisition of Millbrook,
Millbrook entered into a Transitional Services Agreement in March 1997 with
McKesson Corporation, its former parent, whereby Millbrook utilizes, for a
fee, certain computer and data processing services and programming services of
McKesson Corporation. Since the Transitional Services Agreement is to expire
in March 1999, in October 1998, Holdings entered into a multi-year agreement
with an independent service bureau to outsource certain of its computer and
data processing services. Holdings expects these services will be provided by
the independent service bureau in January 1999.
-28-
<PAGE>
Concurrently, Millbrook is in the process of implementing new management
information systems that affect broad aspects of its operations. These systems
are expected to be completed in three to five years with projected aggregate
capital expenditures of $6.0 to $7.0 million. There can be no assurance that
such systems will be implemented successfully, will not require additional
capital expenditures to complete or that implementation of such systems will
not result in a disruption of Millbrook's operations. The failure to
successfully implement such systems could have a material adverse effect on
the Company and Holdings.
Dependence on Executive Officers
The Company and Holdings are dependent on their ability to retain the
services of their executive officers. While each of the Company and Holdings
believes that it has assembled an effective management team, the loss of any one
member of which would not materially affect its operation, the loss of either
(i) Mr. Bernstein or (ii) a number of the executive officers of the Company and
Holdings at any one time could have a material adverse effect on the Company and
Holdings. Neither the Company nor Holdings maintains "key person" life
insurance with respect to such individuals. The continued success of the
Company and Holdings will also be dependent upon their ability to retain
existing, and attract additional, qualified personnel to meet their respective
needs. See "Management--Directors and Executive Officers."
Consequences of Failure to Exchange
The untendered Old Notes not exchanged pursuant to the Exchange Offers
will remain restricted securities. Such Old Notes will continue to have
restrictions on transfer. If in the future a holder of Old Notes desires to
resell, pledge or otherwise transfer the Old Notes, such Notes may be resold,
pledged or transferred only (i) to the Company (upon conversion, redemption or
otherwise), (ii) so long as such security is eligible for resale pursuant to
Rule 144A, to a person whom the seller reasonably believes is a qualified
institutional buyer that purchases for its own account or for the account of
qualified institutional buyer to whom notice is given that the resale, pledge
or transfer is being made in reliance on Rule 144A, (iii) in a offshore
transaction in accordance with Regulation S, but only in the case of a
transfer that is effected by the delivery to the transferee of securities
registered in its name (or its nominee's name) in the books maintained by the
registrar for the Old Notes, (iv) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 (if available) or Rule 145 under
the Securities Act, (v) in reliance on another exemption from the registration
requirements of the Securities Act, but only in the case of a transfer that is
effected by the delivery to the transferee of securities registered in its
name (or its nominee's name) in the books maintained by the registrar
(currently the Trustee) for the Notes and subject to the receipt by the
registrar or co-registrar of a certification of the transferor and an opinion
of counsel satisfactory to the Company to the effect that such transfer is in
compliance with the Securities Act or (vi) pursuant to an effective
registration statement under the Securities Act, in each case in accordance
with any applicable securities law of any state of the United States. Upon
consummation of the Exchange Offers, any holder of Notes who does not elect to
accept the Exchange Offers will not be entitled to any further registration
rights under the Registration Rights Agreement or under the Purchase Agreement
with respect to such Notes except such shelf registration rights with respect
to certain Old Notes, unless such holder is not permitted by law or policy of
the Commission to participate in the Exchange Offer or is a broker-dealer. The
liquidity of the market for the Old Notes will be adversely affected upon
consummation of the Exchange Offer. See "The Exchange Offer--Purpose and
Effect."
Lack of Public Market
The New Notes are new securities for which there currently are no
markets. Although the Initial Purchaser has informed the Issuers that it
currently intends to make a market in the New Notes, it is not obligated to do
so
-29-
<PAGE>
and any such market making may be discontinued at any time without notice by the
Initial Purchaser. Accordingly, there can be no assurance as to the development
or liquidity of any market for the New Notes. To the extent that Old Notes are
exchanged in the Exchange Offers, the trading market for untendered Old Notes
will be even more limited. The New Notes are expected to be eligible for trading
in The Portal Market. The Issuers currently do not intend to list the New Notes
on any securities exchange or to seek approval for quotation on the National
Association of Securities Dealers Automated Quotation or any other automated
quotation system.
Under the Registration Rights Agreements, the Issuers have agreed to file
the Registration Statement with the Commission within 180 days after May 1,
1998 and to use their best efforts to cause such Registration Statement to
become effective within 240 days after May 1, 1998. No assurance can be given
as to the liquidity of the trading market for the New Notes, or, in the case
of non-tendering holders of Old Notes, the trading market for the Old Notes
following the Exchange Offers. See "Exchange and Registration Rights
Agreements."
Year 2000 Project
The Company utilizes computer technologies throughout its business to
effectively carry out its day-to-day operations. Computer technologies include
both information technology in the form of hardware and software, as well as
embedded technology in the Company's facilities and equipment. Similar to most
companies, the Company must determine whether its systems are capable of
recognizing and processing date sensitive information properly as the year
2000 approaches. The Company is utilizing a multi-phased concurrent approach
to address its year 2000 project. The phases included in the Company's
approach are the awareness, assessment, remediation, validation and
implementation phases. The Company has completed the awareness and assessment
phases of its project. Furthermore, the Company is well into the remediation
phase. The Company is actively correcting and replacing those systems which
are not year 2000 ready in order to ensure the Company's ability to continue
to meet its internal needs and those of its suppliers and customers. The
Company currently intends to substantially complete the remediation,
validation and implementation phases of the year 2000 project prior to June
30, 1999. This process includes the testing of critical systems to ensure that
year 2000 readiness has been accomplished. The Company currently believes it
will be able to modify, replace or mitigate its affected systems in time to
avoid any material detrimental impact on its operations. If the Company
determines that it may be unable to remediate and properly test affected
systems on a timely basis, the Company intends to develop appropriate
contingency plans for any such mission-critical systems at the time such
determination is made. While the Company is not presently aware of any
significant exposure that its systems will not be properly remediated on a
timely basis, there can be no assurances that all year 2000 remediation
processes will be completed and properly tested before the year 2000, or that
contingency plans will sufficiently mitigate the risk of a year 2000 readiness
problem. An interruption of the Company's ability to conduct its business due
to a year 2000 readiness problem could have a material adverse effect on the
Company.
The Company estimates that the aggregate costs of its year 2000 project
will be approximately $1.250 million, including costs already incurred. A
significant portion of these costs are not likely to be incremental costs, but
rather will represent the redeployment of existing resources. This
reallocation of resources is not expected to have a significant impact on the
day-to-day operations of the Company. Through June 30, 1998, approximately
$265,000 of costs were incurred with respect to this project. The anticipated
impact and costs of the project, as well as the date on which the Company
expects to complete the project, are based on management's best estimates
using information currently available and numerous assumptions about future
events. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Based on
its current estimates and information currently available, the Company does
not anticipate that the costs associated with this project will have a
material adverse effect on the Company's consolidated financial position,
results of operations or cash flows in future periods.
-30-
<PAGE>
The Company has initiated formal communications with its significant
suppliers, customers, and critical business partners to determine the extent
to which the Company may be vulnerable in the event that those parties fail to
properly remediate their own year 2000 issues. The Company has taken steps to
monitor the progress made by those parties, and intends to test critical
system interfaces, as the year 2000 approaches. The Company will develop
appropriate contingency plans in the event that a significant exposure is
identified relative to the dependencies on third-party systems. While the
Company is not presently aware of any such significant exposure, there can be,
no guarantee that the systems of third-parties on which the Company relies
will be converted in a timely manner, or that a failure to properly convert by
another company would not have a material adverse effect on the Company.
Change of Control
Upon the occurrence of a Change of Control (as defined in the
Indentures), the Company and Holdings will be required to make an offer to
repurchase the applicable Notes at a price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of repurchase. The occurrence of certain of the events which would
constitute a Change of Control may constitute a default under the Credit
Agreement. Under certain circumstances, the Credit Agreement will prohibit the
purchase of the Notes by the Company and Holdings in the event of a Change of
Control unless and until such time as the indebtedness under the Credit
Agreement is repaid in full. The failure of the Company or Holdings to
repurchase the New Company Notes or the New Holdings Notes, as applicable,
would result in a default under the respective Indentures. The inability of
Manischewitz and Millbrook to repay the indebtedness under the Credit
Agreement, if accelerated, would also constitute an event of default under
each Indenture, which could have adverse consequences to the respective Issuer
and the holders of the New Company Notes or the New Holdings Notes. In the
event of a Change of Control, there can be no assurance that each Issuer would
have sufficient assets to satisfy all of its obligations under the New Company
Notes or the New Holdings Notes. The Change of Control provision of the
Indentures may in certain circumstances delay, discourage or prevent a sale or
takeover of the Issuers. See "Description of Credit Agreement," "Description
of the New Company Notes--Change of Control" and "Description of the New
Holdings Notes--Change of Control."
Controlling Stockholder
Currently 41.3% of the Common Stock and 50% of the Series A Preferred Stock
of Holdings are held by Mr. Bernstein. Pursuant to the Voting Agreement, Mr.
Bernstein has the right to direct the vote of all shareholders to elect all of
Holdings' directors. Holdings owns all of the outstanding capital stock of the
Company. Consequently, Mr. Bernstein controls Holdings and the Company. See
"Ownership of Voting Securities" and "Certain Transactions--Voting Agreement."
Fraudulent Conveyance Considerations
The incurrence of indebtedness (such as the Notes) and the use of proceeds
thereof are subject to review under relevant federal and state fraudulent
conveyance statutes in a bankruptcy or reorganization case or a lawsuit by or on
behalf of creditors of the Company or Holdings. Under these statutes, if a court
were to find that obligations (such as the Notes) were incurred with the intent
of hindering, delaying or defrauding present or future creditors or that the
Company or Holdings received less than a reasonably equivalent value or fair
consideration for those obligations and, at the time of the occurrence of the
obligations, the obligor (i) was insolvent or rendered insolvent by reason
thereof, (ii) was engaged or was about to engage in a business or transaction
for which its remaining unencumbered assets constituted unreasonably small
capital or (iii) intended to or believed that it would incur debts beyond its
ability to pay such debts as they matured or became due, such court could void
the
-31-
<PAGE>
Company's or Holdings' obligations under the New Company Notes or the New
Holdings Notes, respectively, subordinate the New Company Notes or the New
Holdings Notes to other indebtedness of the Company or Holdings, respectively,
or take other action detrimental to the holders of the New Company Notes or
the New Holdings Notes. Some courts have held that an obligor's purchase of
its own capital stock does not constitute reasonably equivalent value or fair
consideration for indebtedness incurred to finance that purchase.
The measure of insolvency for purposes of a fraudulent conveyance claim
will vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent at a particular time if the sum
of its debts at that time is greater than the then fair value of its assets or
if the fair saleable value of its assets at that time is less than the amount
that would be required to pay its probable liability on its existing debts as
they become absolute and matured. The Company and Holdings believe that neither
the Company nor Holdings at the time of the consummation of the Transactions
(i) was insolvent or rendered insolvent by the incurrence of indebtedness in
connection with the Transactions, (ii) was in possession of insufficient
capital to run its business or (iii) incurred debts beyond its ability to
pay such debts as the same mature or become due.
There can be no assurance, however, as to the standard a court would apply
to evaluate the parties' intent or to determine whether the Company or Holdings
was insolvent at the time of, or rendered insolvent upon consummation of, the
Transactions or that, regardless of the standard, a court would not determine
that the Company or Holdings was insolvent at the time of, or rendered insolvent
upon consummation of, the Transactions.
In addition, the Guarantees may be subject to review under relevant federal
and state fraudulent conveyance and similar statutes in a bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of any of the
Guarantors. In such a case, the analysis set forth above would generally apply.
A court could void a Guarantor's obligation under its Guarantee, subordinate the
Guarantee to other indebtedness of a Guarantor or take other action detrimental
to the holders of the New Company Notes.
Disclosure Regarding Forward Looking Information
This Prospectus includes "forward looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical facts included in this Prospectus including, without
limitation, those regarding the financial position, business strategy and plans
and objectives of management for future operations of the Issuers, are forward
looking statements. Although the Issuers believe that the expectations reflected
in such forward looking statements are reasonable, there can be no assurance
that such expectations will prove to have been correct. Important factors that
could cause actual results to differ materially from such expectations
("Cautionary Statements") are disclosed herein under "Risk Factors," "Forward
Looking Statements" and elsewhere in this Prospectus including, without
limitation, in conjunction with the forward looking statements included in this
Prospectus. All subsequent written and oral forward looking statements
attributable to the Issuers or persons acting on behalf of the Issuers are
expressly qualified in their entirety by the Cautionary Statements.
Possible Price Volatility
The market price of the New Notes could be subject to significant
fluctuations in response to various factors such as quarterly or cyclical
variations in the Issuers' financial results, future announcements concerning
the Issuers or their competitors, and government regulation and developments
affecting the food industry generally. In addition, the capital markets in
recent years have experienced extreme price and volume fluctuations that often
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<PAGE>
have been unrelated or disproportionate to the operating performance of
companies. Such fluctuations may adversely affect the market price of the New
Notes.
THE TRANSACTIONS
The Acquisition
On May 1, 1998, pursuant to the Purchase Agreement, the Company acquired
Manischewitz from entities controlled by and individuals affiliated with
Kohlberg & Co., L.L.C., a New York merchant banking firm, for a purchase price
of approximately $124.7 million, which amount included the repayment of
Manischewitz's existing debt of approximately $38.8 million, and an estimated
$2.1 million of fees and expenses.
The gross proceeds of $168.0 million raised in connection with the sale of
the Old Notes were used to (i) pay the purchase price for Manischewitz of
approximately $124.7 million, (ii) reduce outstanding borrowings by
approximately $20.3 million under the revolving credit portion of Millbrook's
Credit Agreement, (iii) fund an initial interest escrow account with
approximately $17.0 million to pay interest on the Old Holdings Notes for the
first six scheduled interest payment dates for the benefit of the holders
thereof and (iv) pay fees and expenses of approximately $6.0 million relating to
the sale of the Old Notes. See "The Transactions".
Financing of the Acquisition
The net proceeds of the sale of the Old Holdings Notes was contributed by
Holdings to the common equity of the Company. The Company used the net proceeds
of the sale of the Old Company Notes, together with the capital contribution
from Holdings, to pay the total consideration for the acquisition of
Manischewitz, including the repayment by Manischewitz of the outstanding
indebtedness under the credit agreement dated as of May 31, 1996, to repay a
portion of outstanding borrowings under the Credit Agreement and the payment of
fees and expenses related to the Transactions. Concurrently with the acquisition
of Manischewitz, the Credit Agreement was amended to provide, among other
things, for Manischewitz and Millbrook to be co-borrowers under the Credit
Agreement, the granting of a security interest in the accounts receivable,
inventory and intellectual property of Manischewitz to provide collateral under
the Credit Agreement and certain assets of Manischewitz to be included in the
determination of the borrowing base. As of August 31, 1998, Manischewitz and
Millbrook had approximately $60.0 million of additional borrowing capacity under
the Credit Agreement.
USE OF PROCEEDS
Holdings and the Company will not receive any cash proceeds from the
issuance of the New Notes offered hereby. In consideration for issuing the New
Notes as contemplated in this Prospectus, Holdings and the Company will
receive in exchange a like principal amount of Old Notes, the terms of which
are identical in all material respects to the New Notes, except for certain
restrictions on transfer contained in the Old Notes. The Old Notes surrendered
in exchange for the New Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the New Notes will not result in any change
in capitalization of Holdings and the Company.
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<PAGE>
CAPITALIZATION
The following table sets forth the unaudited cash and cash equivalents and
capitalization of the Issuers as of June 30, 1998. This information should be
read in conjunction with "The Transactions," "Selected Historical Financial
Data of R.A.B. Holdings, Inc. and R.A.B. Enterprises, Inc.," "Selected
Historical Financial Data of The B. Manischewitz Company, LLC," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
Holdings and Enterprises consolidated financial statements and unaudited
condensed consolidated financial statements, and notes thereto, and MANO's and
KBMC's combined financial statements and unaudited condensed combined
financial statements, and notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
As of
June 30, 1998
-------------------------------
Company Holdings
(Dollars in Thousands)
<S> <C> <C>
Cash and cash equivalents.......................................... $2,731 $2,731
====== ======
Long-term debt (including current portion):
Credit Agreement(a)............................................. $ 10,321 $ 10,321
Company Notes................................................... 120,000 120,000
Holdings Notes.................................................. 48,000
---------- ----------
Total long-term debt............................................ 130,321 178,321
Total stockholders' equity......................................... 39,018 8,991
---------- ----------
Total capitalization............................................ $ 169,339 $ 187,312
========= =========
</TABLE>
(a) At June 30, 1998, $10.3 million was outstanding under the Credit
Agreement, consisting of revolving credit borrowings of $1.2 million and
a $9.1 million term loan, and approximately $54.3 million of additional
borrowing capacity was available under the Credit Agreement.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for
the fiscal year ended March 31, 1998 and the three month period ended June 30,
1998 include the historical operations of the Company and Holdings for the
fiscal year ended March 31, 1998 and the three month period ended June 30,
1998, respectively, and give effect to the acquisition of Manischewitz and the
issuance of the Old Notes, as if they had occurred as of the beginning of each
period presented. The pro forma adjustments give effect to the utilization of
the excess proceeds from the sale of the Old Notes to repay a portion of the
amounts outstanding under the Credit Agreement.
The aforementioned acquisition has been accounted for by the purchase method
of accounting. Accordingly, assets acquired and liabilities assumed have been
recorded at their estimated fair values, based on preliminary allocations of
purchase price, which are subject to further refinement and adjustment,
including appraisals and other analyses, with appropriate recognition given to
the effects of current interest rates and deferred income taxes. Management
does not expect that the final allocations of the purchase price for the
acquisition will differ materially from the preliminary allocations.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations are
not intended to represent and are not indicative of the results of operations
of the Company and Holdings had the transactions or events assumed therein
occurred on the dates specified, nor are they necessarily indicative of the
results of operations that may be achieved in the future. Additionally, the
Unaudited Pro Forma Condensed Consolidated Statements of Operations do not
reflect potential cost savings and revenue enhancements that management
believes may be realized following the acquisition. No assurances can be given
as to the amounts of cost savings or revenue enhancements, if any, that may be
realized.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations are
based on available information and certain assumptions and adjustments as
described in the notes thereto, which management of the Company believes is
reasonable under the circumstances. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations should be read in conjunction with "The
Transactions," "Risk Factors," "Capitalization," "Selected Historical
Financial Data of R.A.B. Holdings, Inc. and R.A.B. Enterprises, Inc.,"
"Selected Historical Combined Financial Data of The B. Manischewitz Company,
LLC," "Management's Discussion and Analysis of Financial Condition and Results
of Operations," Holdings and Enterprises consolidated financial statements and
unaudited condensed consolidated financial statements, and notes thereto, and
MANO's and KBMC's combined financial statements and unaudited condensed
combined financial statements, and notes thereto, included elsewhere herein.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
R.A.B. HOLDINGS, INC.
AND R.A.B. ENTERPRISES, INC.
Fiscal Year Ended March 31, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Historical(a) Company Holdings
---------------------------- Pro Forma Company Pro Forma Holdings
Company Manischewitz Adjustments Pro Forma Adjustments Pro Forma
-------------- --------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues..................... $ 470,201 $ 53,040 $ $ 523,241 $ $ 523,241
Costs and expenses:
Cost of sales............. 360,162 32,256 239(c) 392,657 392,657
Other costs and expenses.. 102,656 9,834 405(b)(c) 112,895 8(f) 112,903
-------------- --------------- ----------- ------------ ------------ -------------
Total costs and expenses.. 462,818 42,090 644 505,552 8 505,560
Operating income............. 7,383 10,950 (644) 17,689 (8) 17,681
Interest expense, net........ 5,079 4,239 7,454(d) 16,772 5,399(g) 22,171
-------------- --------------- ----------- ------------ ------------ -------------
Income (loss) before
provision (benefit) for
income taxes... 2,304 6,711 (8,098) 917 (5,407) (4,490)
Provision (benefit) for
income taxes................. 1,122 (265)(e) 857 (1,892)(h) (1,035)
-------------- --------------- ----------- ------------ ------------ -------------
Net income (loss)............ $ 1,182 $ 6,711 $ (7,833) $ 60 $ (3,515) $ (3,455)
============== =============== =========== ============ ============ =============
OTHER FINANCIAL DATA:
Depreciation and amortization $ 9,242 $ 9,405
Capital expenditures 2,715 2,715
<CAPTION>
Three Months Ended June 30, 1998
(Dollars in Thousands)
Historical(a) Company Holdings
------------------------------- Pro Forma Company Pro Forma Holdings
Company Manischewitz Adjustments Pro Forma Adjustments Pro Forma
-------------- --------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues..................... $ 116,571 $ 2,167 $ $ 118,738 $ $ 118,738
Costs and expenses:
Cost of sales............. 88,915 1,169 72 (c) 90,156 90,156
Other costs and expenses.. 27,431 706 107 (c) 28,244 28,244
-------------- --------------- ------------- ------------ ------------- -------------
Total costs and expenses.. 116,346 1,875 179 118,400 118,400
Operating income............. 225 292 (179) 338 338
Interest expense, net........ 2,973 323 622 (d) 3,918 1,331(g) 5,249
-------------- --------------- ------------- ------------ ------------- -------------
Income (loss) before
provision (benefit) for
income taxes................. (2,748) (31) (801) (3,580) (1,331) (4,911)
Provision (benefit) for incom
taxes........................ (1,102) (258)(e) (1,360) 512(h) (848)
-------------- --------------- ------------- ------------ ------------- -------------
Net income (loss)............ $ (1,646) $ (31) $ (543) $ (2,220) $ (1,843) $ (4,063)
============== =============== ============= ============ ============= =============
OTHER FINANCIAL DATA:
Depreciation and amortization $ 2,297 $ 2,338
Capital expenditures 1,026 1,026
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
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<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
R.A.B. HOLDINGS, INC.
AND R.A.B. ENTERPRISES, INC.
R.A.B. HOLDINGS, INC. PRO FORMA PRESENTATION
(a) The historical amounts represent (i) with respect to the fiscal year
ended March 31, 1998, those of the Company for the fiscal year ended
March 31, 1998 and Manischewitz for the twelve month period ended
March 31, 1998, net of the operating results of the Chicago
distribution subsidiary which was sold in June 1997; and (ii) with
respect to the three month period ended June 30, 1998 those of the
Company for the three month period ended June 30, 1998 and
Manischewitz for the one month period ended April 30, 1998.
COMPANY PRO FORMA ADJUSTMENTS
(b) Adjustment represents Millbrook cost savings of $593,000 principally
resulting from implementation of a comprehensive employee benefit
program which became effective January 1, 1998.
(c) Adjustments, which aggregate $1.237 million for the fiscal year ended
March 31, 1998 and $179,000 for the three month period ended June 30,
1998, represent the following:
(i) the incremental increase of $1.504 million for the fiscal year
ended March 31, 1998 and $122,000 for the three month period
ended June 30, 1998 in intangible asset amortization as a
result of the Manischewitz acquisition. The excess of cost
over the fair value of assets acquired is amortized on a
straight-line basis over 40 years;
(ii) the incremental increase of $402,000 for the fiscal year ended
March 31, 1998 and $100,000 for the three month period ended
June 30, 1998 in depreciation of plant and equipment based
upon the preliminary appraised fair value of assets acquired;
(iii) Manischewitz cost savings of $269,000 for the fiscal year
ended March 31, 1998 and $26,000 for the three month period
ended June 30, 1998 principally resulting from compensation
and benefits provided to former employees and onetime
consulting costs; and
(iv) the elimination of management fees of $400,000 for the fiscal
year ended March 31, 1998 and $17,000 for the three month
period ended June 30, 1998 paid to a related party.
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<PAGE>
(d) Adjustment represents interest expense associated with the Company
Notes and the related amortization of deferred financing costs, net of
(i) the elimination of Manischewitz historical deferred financing
costs, net of new deferred financing costs related to the Credit
Agreement; (ii) the reduction in interest associated with the
repayment of a portion of the outstanding borrowings under the Credit
Agreement; and (iii) the elimination of interest on Manischewitz
long-term debt repaid at closing, determined as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Ended
March 31, 1998 June 30, 1998
-------------- -------------
<S> <C> <C>
Interest expense and amortization of deferred financing
costs relating to the sale of the Company Notes, at a rate of
10 1/2% per annum $ 13,221 $ 1,102
Historical deferred financing costs, net of new deferred
financing costs related to the Credit Agreement (375) (30)
Interest on repayment of a portion of the Credit Agreement (2,049) (171)
Interest on Manischewitz long-term debt repaid at closing (3,343) (279)
----------------- ---------------------
Net adjustment $ 7,454 $ 622
================= =====================
</TABLE>
(e) Adjustment represents a reduction in the provision for income taxes as
a result of tax on Manischewitz income, which was previously the
obligation of its shareholders and partners, net of the incremental
tax effect on the pro forma decrease in income before provision for
income taxes, computed at an effective income tax rate of
approximately 40%. For purposes of this computation, it has been
assumed that approximately 60% of the excess of cost over the fair
value of assets acquired resulting from the Manischewitz acquisition
will be tax deductible.
HOLDINGS PRO FORMA ADJUSTMENTS
(f) Adjustment represents the historical results of operations of Holdings.
(g) Adjustment represents interest expense associated with the Holdings
Notes at a rate of 13% per annum, the related amortization of deferred
financing costs and interest income earned on the Government
Securities which comprise the Initial Interest Escrow Account.
(h) Adjustment represents the U.S. federal income tax benefit related to
the net interest expense in (g) above. For purposes of this
computation, it has been assumed that Holdings will not receive a
state tax benefit for this net interest expense. Additionally, the
income tax benefit for the three month period ended June 30, 1998 is
limited to the amount of the net deferred income tax liability due to
the establishment of a valuation allowance.
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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
R.A.B. HOLDINGS, INC.
AND R.A.B. ENTERPRISES, INC.
The following table sets forth selected historical consolidated financial data
of the Issuers as of March 31, 1998 and June 30, 1998, and for the fiscal year
ended March 31, 1998 and the three month periods ended June 30, 1997 and 1998,
and historical financial data of the Predecessor as of March 31, 1994, 1995,
1996 and 1997 and for each of the four years in the period ended March 31,
1997. The historical consolidated financial data as of March 31, 1998, and for
the fiscal year ended March 31, 1998 have been derived from the Issuers
audited consolidated financial statements, included elsewhere herein. The
historical consolidated financial data for the three month periods ended June
30, 1997 and 1998 have been derived from the Issuers unaudited condensed
consolidated financial statements, included elsewhere herein, which in the
opinion of management include all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the information. The
Predecessor financial data for each of the two years in the period ended March
31, 1997 have been derived from the Predecessor's audited financial
statements, included elsewhere herein. The historical consolidated financial
statements for the three month period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
following information is qualified by reference to, and should be read in
conjunction with, 'Management's Discussion and Analysis of Financial Condition
and Results of Operations, Holdings and Enterprises consolidated financial
statements and unaudited condensed consolidated financial statements, and
notes thereto, and the Predecessor financial statements, and notes thereto,
included elsewhere herein.
<TABLE>
<CAPTION>
Company Holdings
------------------ ------------------
Predecessor(a) Company Holdings Three Months Ended Three Months Ended
---------------------------------- ------- -------- June 30, June 30,
Fiscal Year Ended March 31, Fiscal Year Ended ------------------ -----------------
1994 1995 1996 1997 March 31, 1998 1997 1998 1997 1998
---- ---- ---- ---- -------------- ---- ---- ---- ----
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................... $728,375 $648,149 $563,099 $476,175 $470,201 $470,201 $113,522 $116,571 $113,522 $116,571
Gross profit................. 167,275 162,927 132,701 111,413 110,039 110,039 26,240 27,656 26,240 27,656
Operating expenses........... 149,837 139,528 119,090 104,038 102,656 102,664 24,656 27,431 24,656 27,431
Operating income............. 17,438 23,399 13,611 7,375 7,383 7,375 1,584 225 1,584 225
Interest expense, net........ 3,434 2,806 4,708 3,843 5,079 5,079 1,439 2,973 1,439 3,863
Non-operating income, other.. 239 19 1,600 69
Provision (benefit) for
income taxes................. 5,696 8,327 4,334 1,660 1,122 1,122 97 (1,102) 97 (1,454)
Net income (loss)............ 8,547 12,285 6,169 1,941 1,182 1,174 48 (1,646) 48 (2,184)
OTHER FINANCIAL DATA:
Depreciation and amortization $ 4,471 $ 4,471 $ 782 $ 1,834 $ 782 $ 1,861
Capital expenditures......... 2,309 2,309 148 941 148 941
Ratio of earnings to fixed
charges(b)................... 1.35x 1.35x
BALANCE SHEET DATA:
Working capital.............. $ 30,108 $ 30,003 $ 36,714 $ 41,365
Property, plant and equipment
net.......................... $ 42,221 $ 17,294 $ 16,313 $ 15,017 23,395 23,395 40,186 40,186
Total assets................. 190,245 132,147 113,026 102,731 108,875 108,772 250,355 269,358
Total debt................... 38,110 38,110 130,321 178,321
</TABLE>
- ---------------------
(a) Holdings acquired the Predecessor on March 31, 1997. Financial
information with regard to the Predecessor is based on historical results
and, accordingly, does not reflect purchase accounting adjustments or
interest associated with debt incurred to finance the acquisition. The
Predecessor was a wholly owned subsidiary of McKesson Corporation. As a
wholly-owned subsidiary of McKesson Corporation, the Predecessor was
provided certain corporate and general and administrative services,
including, among other things, treasury, certain financial reporting,
data processing and legal services. Accordingly, the operations of the
Predecessor include an allocation of expenses for such services.
Additionally, because McKesson Corporation managed cash and financing
requirements centrally, interest expense and
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<PAGE>
borrowing requirements were based on the then existing capital structure.
The financial position and operations of the Predecessor may differ from
results that may have been achieved had the Predecessor operated as an
independent entity.
(b) For purposes of determining the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes and fixed charges and
"fixed charges" consist of interest on all indebtedness, amortization of
deferred financing costs and that portion of rental expense that
management believes to be representative of interest. The deficiency in
earnings to fixed charges was $2.748 million for the Company and $3.638
million for Holdings for the three month period ended June 30, 1998.
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<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL DATA
THE B. MANISCHEWITZ COMPANY, LLC
The following table sets forth selected historical combined financial data of
MANO and KBMC as of July 31, 1993, 1994, 1995, 1996 and 1997 and for each of
the five years in the period ended July 31, 1997, and as of April 30, 1998 and
for the nine month periods ended April 30, 1997 and 1998. The sole asset and
only operation of MANO and KBMC is Manischewitz. The historical combined
financial data as of July 31, 1996 and 1997 and for each of the three years in
the period ended July 31, 1997 have been derived from MANO's and KBMC's
audited combined financial statements, included elsewhere herein. The
historical combined financial data as of April 30, 1998 and for the nine month
periods ended April 30, 1997 and 1998, have been derived from unaudited
condensed combined financial statements of MANO and KBMC, included elsewhere
herein, which in the opinion of management include all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
information. The historical combined financial data for the nine month period
ended April 30, 1998 are not necessarily indicative of results that may be
expected for the full fiscal year. The following information is qualified by
reference to, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and MANO's and
KBMC's combined financial statements and unaudited condensed combined
financial statements, and notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Year Ended Nine Months Ended
July 31, April 30,
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total Revenues(a)................... $41,199 $45,588 $49,581 $52,399 $54,787 $46,387 $44,481
Gross Profit........................ 15,522 16,575 18,382 19,331 21,229 17,937 17,039
Operating expenses.................. 11,680 11,537 11,034 11,120 11,422 8,492 7,658
Operating income.................... 3,872 5,038 7,348 8,211 9,807 9,445 9,381
Interest expense, net............... 2,080 2,328 2,946 3,705 4,486 3,388 3,090
Provision (benefit) for income taxes(b) 1,162 1,468 2,135 (145)
Net income(b)(c).................... 630 662 2,267 1,932 5,321 6,057 6,291
OTHER FINANCIAL DATA:
Depreciation and amortization....... $ 1,831 $ 2,195 $ 2,097 $ 2,236 $ 2,664 $ 1,999 $ 1,941
Capital expenditures................ 623 422 516 1,064 339 189 297
BALANCE SHEET DATA:
Working capital..................... $ 3,349 $11,126 $13,717 $11,351 $12,028 $13,299
Property, plant and equipment, net.. 9,813 12,590 12,306 12,647 12,202 11,823
Total assets........................ 49,284 56,705 59,472 59,337 59,563 64,766
Total debt.......................... 24,562 29,000 29,000 44,000 40,759 40,414
</TABLE>
(a) In June 1997, Manischewitz sold its Chicago distribution operation. This
operation had revenues of $4.083 million for the nine month period ended
April 30, 1997.
(b) Effective May 31, 1996, The B. Manischewitz Company (the sole asset and
only operation of MANO and KBMC) was reorganized as a limited liability
company. Accordingly, deferred income tax attributes at May 31, 1996
flowed through the provision (benefit) for income taxes. Subsequent to
May 31, 1996, income taxes, if any, are the obligation of the
shareholders of MANO and the partners of KBMC.
(c) Fiscal 1994 and 1996 net income includes an extraordinary charge for the
early extinguishment of debt ($482,000 and $1.965 million, respectively)
and charges for the cumulative effects of changes in accounting
principles relating to income taxes in 1994 ($98,000) and post retirement
benefits in 1996 ($754,000).
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
R.A.B. HOLDINGS, INC.
Overview
Holdings was formed in 1996 in order to build a fully integrated
specialty food business by acquiring food manufacturers with strong brand
names and integrating the products of these manufacturers with a strong
distribution platform. On March 31, 1997, Holdings acquired Millbrook, which
is one of the nation's largest value-added full service independent
distributors of specialty foods, health and beauty care products and general
merchandise. On May 1, 1998, Enterprises, a wholly-owned subsidiary of
Holdings, acquired Manischewitz. The results of operations of Manischewitz are
included in the consolidated results of operations since its date of
acquisition. Prior to its acquisition of Millbrook from McKesson Corporation
("McKesson"), Holdings had no operations. The Company, which was formed in
1998 to acquire Manischewitz, had no operations prior to such acquisition.
Predecessor Results of Operations
From 1984-1986, McKesson acquired three distribution companies, including
the Harrison, Arkansas based operation, Mass Merchandisers, Inc. ("MMI") and
the Leicester, Massachusetts based operation, Millbrook Distributors, Inc. MMI
and Millbrook Distributors, Inc. are predecessor operations of Millbrook.
During McKesson's period of ownership, these companies, which were operated as
autonomous subsidiaries until 1994- 1995, comprised a small segment of
McKesson's revenues and were considered non-health care businesses.
During the early 1990s, MMI's historically solid customer base was
threatened by structural changes in the supermarket industry. Former MMI
management's lack of responsiveness in developing programs that met the needs
of a changing industry was a major contributor to an erosion of MMI's customer
relationships. As a result, the MMI management team was replaced in 1994-1995
by senior members of Millbrook's management team with a corporate directive to
merge these McKesson stand-alone subsidiaries and to stabilize the business.
However, the period of lost focus and management inattention to the business
was significant as the predecessor Millbrook experienced declines in revenue
and profitability. Revenues and net income decreased from $728.4 million and
$8.5 million, respectively, in 1994 to $476.2 million and $1.9 million,
respectively, in 1997.
As a wholly owned subsidiary of McKesson, Millbrook was provided certain
corporate and general and administrative services including, among other
things, treasury, certain financial reporting, data processing and legal
services. Accordingly, the historical operations of Millbrook include an
allocation of expenses for such services. Additionally, because McKesson
managed cash and financing requirements centrally, interest expense and
borrowing requirements were based on the then existing capital structure. The
financial position and results of operations of Millbrook may differ from
results that may have been achieved had Millbrook operated as an independent
entity. Furthermore, the historical operations of Millbrook do not reflect
purchase accounting adjustments or interest associated with debt incurred to
finance the acquisition of Millbrook by Holdings.
As a result of the foregoing, the results of operations of Millbrook
subsequent to its acquisition by Holdings are not comparable to those of
Millbrook prior to its acquisition.
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<PAGE>
Since Millbrook's acquisition, management efforts have focused on
stabilizing operations, solidifying its customer base and developing a
financial infrastructure which allows Millbrook to operate as an independent
entity. Specifically, Holdings' management has focused on reducing debt,
implementing programs to manage inventories and accounts receivable and
developing its customer base and acquisition strategy. As a result of these
efforts, for the fiscal year ended March 31, 1998, Millbrook had revenues of
$470.2 million, compared with $476.2 million for the prior year and
outstanding debt was reduced by $23.7 million. Holdings believes that
Millbrook has the distribution technology, infrastructure and customer focus
to rapidly respond to the changing needs of its customers, and that it will
serve as a platform to continue to build Holdings' specialty food business.
General
Holdings was founded in 1996 in order to build a fully integrated
specialty food business by acquiring food manufacturers with strong brand
names and integrating the products of these manufacturers with a strong
distribution platform. Holdings' operating subsidiaries are as follows:
(i) Millbrook, is one of the nation's largest value-added full service
independent distributors of specialty foods, health and beauty care
products and general merchandise to supermarkets and mass
merchandisers. Millbrook also carries a line of its own private
label brands as well as store brands and other special need items for
specific customers. Millbrook Retail Solutions, one of
Millbrook's divisions, provides a variety of merchandising services,
without associated product sales, to manufacturers, distributors and
retailers across various product categories in all trade channels.
In order to facilitate growth and to better address the distribution
and cost concerns of its customers, Millbrook places its strategic
focus on the following areas: (i) providing a full-service,
comprehensive offering of specialty foods; (ii) specialized
distribution of "hard to manage" non-food categories; and (iii)
offering a variety of merchandising and management services to both
manufacturers and retailers across all trade channels.
(ii) Manischewitz, founded in 1888, is the nation's leading manufacturer
of processed Kosher food products including matzos, noodles,
crackers, cakes, cookies, soups and processed fish products.
Manischewitz is the only broad-line manufacturer of processed
Kosher foods in the U.S. and manufacturers under the brand names
Manischewitz, Horowitz Margareten and Goodman's.
Operating costs and expenses consist of cost of sales, distribution and
warehousing and selling, general and administrative expenses. Cost of sales
includes the cost of products manufactured and purchased by Manischewitz,
including raw materials, products purchased under co-packing arrangements and
manufacturing payroll and related employee benefits costs, and the cost of
products distributed by Millbrook. Distribution and warehousing includes
payroll and related employee benefit costs of Millbrook's distribution
operation and transportation costs. Selling, general and administrative
expenses include payroll and related employee benefit costs of Holdings sales
organizations and other general and administrative functions.
The following discussion should be read in conjunction with the audited
consolidated financial statements and unaudited condensed consolidated
financial statements of Holdings and the Company and notes thereto, included
elsewhere herein.
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<PAGE>
Three month period ended June 30, 1998 Compared to the three month period
ended June 30, 1997
Revenues for the three month period ended June 30, 1998 increased $3.1
million or 2.7% to $116.6 million as compared to $113.5 million for the three
month period ended June 30, 1997. The increase resulted from sales of the
Company's Manischewitz operation ($4.0 million) which was acquired on May 1,
1998 partially offset by a $0.9 million or 0.8% decline in Millbrook's sales
for the three month period. This decrease reflects the continued churn in the
health and beauty care / general merchandise portion of the business as
certain customer losses were partially offset by the addition of new
customers. Manischewitz revenues were $4.0 million since its acquisition
compared to $4.4 million for the comparable pre-acquisition period. This
decrease reflects a slower sales rate during the period as there was initial
distributor uncertainty resulting from the acquisition.
Gross profit for the three month period ended June 30, 1998 was $27.7
million, as compared to $26.2 million for the three month period ended June
30, 1997, an increase of 5.4%. As a percentage of revenues, the gross profit
margin increased to 23.7% for the three month period ended June 30, 1998, as
compared to 23.1% for the three month period ended June 30, 1997. The increase
resulted from growth in Millbrook's third-party service merchandising business
and the contribution of the gross profit margin on Manischewitz's sales since
its acquisition, partially offset by Millbrook's shift in sales mix from
higher margin general merchandise to lower margin health and beauty care
products.
Distribution and warehousing expenses for the three month period ended
June 30, 1998 were $9.1 million, as compared to $9.0 million for the three
month period ended June 30, 1997. Selling, general and administrative expenses
for the three month period ended June 30, 1998 were $17.9 million, as compared
to $15.7 million for the three month period ended June 30, 1997. The $2.2
million increase consists of $1.2 million from Manischewitz's operations since
its acquisition and a $1.0 million or 6.5% increase from Millbrook's
operations. The increase at Millbrook primarily relates to increased selling
expenses associated with the acquisition of new business as new customer
acquisition costs, which include the proposal and product conversion process,
are expensed as incurred. As such, the continued churn in the health and
beauty care / general merchandise portion of the business and the ongoing
supermarket retailer consolidation negatively impacted profitability during
the period.
Interest expense for the three month period ended June 30, 1998 was $3.9
million (consisting of $0.9 million for Holdings and $3.0 million for
Enterprises), as compared to $1.4 million for each of Holdings and Enterprises
for the three month period ended June 30, 1997. This increase resulted from
higher average outstanding debt and interest rates as the Old Notes were sold in
May, 1998 to fund the acquisition of Manischewitz.
The benefit for income taxes for the three month period ended June 30,
1998 was $1.5 million for Holdings and $1.1 million for Enterprises, as
compared to a provision of $0.1 million for each of Holdings and Enterprises
for the three month period ended June 30, 1997. The decrease of $1.6 million
for Holdings and $1.2 million for Enterprises principally relates to the
results of operations.
As a result of the foregoing, net income (loss) for the three month
period ended June 30, 1998 was ($2.2) million for Holdings and ($1.6) million
for Enterprises, as compared to $0.1 million for each of Holdings and
Enterprises for the three month period ended June 30, 1997.
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<PAGE>
Fiscal year ended March 31, 1998 Compared to the fiscal year ended March 31,
1997
Revenues for the fiscal year ended March 31, 1998 decreased $6.0 million
or $1.2% to $470.2 million, as compared to $476.2 million for the fiscal year
ended March 31, 1997. The decrease resulted from certain customer losses,
partially offset by the addition of new customers.
Gross profit for the fiscal year ended March 31, 1998 was $110.0 million,
as compared to $111.4 million for the fiscal year ended March 31, 1997, a
decrease of 1.2%. As a percentage of revenues, the gross profit margin was
23.4% for the years ended March 31, 1998 and 1997. The gross profit margin was
consistent with the prior year as the decline in general merchandise gross
profit dollars was offset by increased specialty food gross profit dollars.
Distribution and warehousing expenses for the fiscal year ended March 31,
1998 were $37.3 million, as compared to $38.2 million for the fiscal year
ended March 31, 1997, a decrease of 2.2%. Selling expenses for the fiscal year
ended March 31, 1998 were $43.8 million, as compared to $45.3 million for the
fiscal year ended March 31, 1997, a decrease of 3.3%. General and
administrative expenses for the fiscal year ended March 31, 1998 were $21.6
million.
Interest expense of $5.1 million, for the fiscal year ended March 31,
1998, principally relates to amounts borrowed under the Credit Agreement for
Millbrook's operating needs and for Holdings to finance the acquisition of
Millbrook. The average interest rate on debt outstanding during the fiscal
year ended March 31, 1998 was 9.6%. See "Financial Condition, Liquidity and
Capital Resources."
General and administrative expenses and interest expense for the fiscal
year ended March 31, 1998 are not comparable to such expenses incurred for the
fiscal year ended March 31, 1997.
The provision for income taxes was $1.1 million for the fiscal year ended
March 31, 1998, representing an effective rate of 48.8%. The effective income
tax rate was significantly higher than the Federal statutory rate due to state
income taxes and the impact of other items, principally the disallowance of
meals and entertainment expenses in relation to pre-tax income.
As a result of the foregoing, Holdings and Enterprises had net income of
$1.2 million for the fiscal year ended March 31, 1998.
PREDECESSOR MILLBROOK DISTRIBUTION SERVICES INC.
Fiscal year ended March 31, 1997 Compared to the fiscal year ended March 31,
1996
Revenues for the fiscal year ended March 31, 1997 decreased $86.9 million
or 15.4% to $476.2 million, as compared to $563.1 million for the fiscal year
ended March 31, 1996. The decrease resulted from the decline in the customer
base.
Gross profit for the fiscal year ended March 31, 1997 was $111.4 million,
as compared to $132.7 million for the fiscal year ended March 31, 1996, a
decrease of 16.0%. As a percentage of revenues, the gross profit margin was
23.4% for the fiscal year ended March 31, 1997, which is comparable to the
23.6% for the fiscal year ended March 31, 1996.
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<PAGE>
Operating expenses (consisting of distribution and warehousing and
selling, general and administrative expenses) for the fiscal year ended March
31, 1997 decreased $15.1 million or 12.6% to $104.0 million, as compared to
$119.1 million for the fiscal year ended March 31, 1996. As a percentage of
sales, operating expenses increased to 21.8% for the fiscal year ended March
31, 1997, as compared to 21.1% for the fiscal year ended March 31, 1996. The
decline in operating expenses is directly related to a reduction in account
management personnel and the decrease in other expenses associated with lost
sales. Further, operating expenses as a percentage of sales increased as these
cost reductions were not sufficient to offset lost sales.
Interest expense for the fiscal year ended March 31, 1997 decreased $.9
million or 18.4% to $3.8 million, as compared to $4.7 million for the fiscal
year ended March 31, 1996. Interest expense represented an allocation from
McKesson relating to Millbrook's operations.
Millbrook was included in the consolidated federal income tax return of
McKesson. The provision for income taxes has been computed as if Millbrook
filed its own federal income tax return, without regard to its tax sharing
arrangement with McKesson. The provision for income taxes for the fiscal year
ended March 31, 1997 decreased $2.6 million or 61.7% to $1.7 million, as
compared to $4.3 million for the fiscal year ended March 31, 1996, principally
relating to the results of operations.
As a result of the foregoing, Millbrook's net income for the fiscal year
ended March 31, 1997 decreased $4.3 million or 68.5% to $1.9 million, as
compared to $6.2 million for the fiscal year ended March 31, 1996.
Financial Condition, Liquidity and Capital Resources
The acquisition of Millbrook was financed by the initial capitalization
of Holdings with approximately $10.1 million, consisting of Series A Preferred
Stock and Common Stock, and with $61.8 million of borrowings under the Credit
Agreement. The Credit Agreement provided for revolving credit loans of up to
$90.2 million and a term loan of $9.8 million. The acquisition of Manischewitz
was financed by the sale of $168.0 million of the Old Notes, the proceeds of
which were used to (i) pay the purchase price of approximately $124.7 million,
(ii) reduce outstanding borrowings by approximately $20.3 million under the
revolving credit portion of Millbrook's Credit Agreement, (iii) fund an
initial escrow account with approximately $17.0 million to pay interest on the
Old Holdings Notes for the first six scheduled interest payment dates for the
benefit of the holders thereof and (iv) pay fees and expenses of approximately
$6.0 million relating to the sale of the Old Notes. At June 30, 1998, there
was approximately $10.3 million outstanding under the Credit Agreement,
consisting of $1.2 million of revolving credit loans and a $9.1 million term
loan. Substantially all of Millbrook's assets and the accounts receivable and
inventory of Manischewitz are pledged to provide collateral under the terms of
the Credit Agreement.
At June 30, 1998, Millbrook and Manischewitz had approximately $2.7
million of cash and $54.3 million of available borrowing capacity under the
Credit Agreement. Under the terms of the Credit Agreement, the Company is
restricted from making distributions to Holdings to pay dividends, including
dividends related to Holdings' Series A Preferred Stock. At June 30, 1998,
cumulative unpaid dividends on Holdings' Series A Preferred Stock were
approximately $1.25 million. See "Description of Credit Agreement."
Operations for the three months ended June 30, 1998, excluding non-cash
charges for depreciation and amortization, utilized cash of $0.3 million for
Holdings and provided cash of $0.2 million for Enterprises as compared to
providing cash of $0.8 million for each of Holdings and Enterprises for the
three months ended June 30, 1997. During the three months ended June 30, 1998
and 1997, other changes in assets and liabilities resulting from operating
activities provided cash of $8.4 million for Holdings and $7.9 million for
Enterprises and $21.0
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<PAGE>
million for Holdings and $21.7 million for Enterprises, respectively, resulting
in net cash provided by operating activities of $8.1 million for each of
Holdings and Enterprises and $21.8 million for Holdings and $22.5 million for
Enterprises, respectively. Investing activities, which principally consisted of
the acquisition of Manischewitz in the 1998 period and the acquisitions of
property and equipment, resulted in a use of cash of $125.2 million and $0.1
million, respectively, for the three month periods ended June 30, 1998 and 1997.
During the three month period ended June 30, 1998, financing activities, which
principally consisted of the sale of $168.0 million of Senior Notes, offset by
debt issuance costs of $6.0 million, the funding of a $17.0 million interest
escrow account and the repayment of borrowings under the Credit Agreement of
$27.8 million in 1998, provided cash of $117.2 million. During the three month
period ended June 30, 1997, financing activities used cash of $20.1 million for
repayment of borrowings under the Credit Agreement.
Operations for the fiscal year ended March 31, 1998, excluding non-cash
charges for depreciation and amortization and deferred income taxes, provided
cash of $5.5 million. During the fiscal year ended March 31, 1998, other
changes in assets and liabilities resulting from operating activities provided
cash of $20.4 million for Holdings and $21.1 million for Enterprises,
resulting in net cash provided by operating activities of $25.9 million for
Holdings and $26.6 million for Enterprises. Investing activities, which
principally consisted of acquisitions of property, plant and equipment,
resulted in a use of cash of $2.2 million for the fiscal year ended March 31,
1998. During the fiscal year ended March 31, 1998, financing activities used
cash of $23.7 million, principally consisting of the repayment of borrowings
under the Credit Agreement.
At June 30, 1998, working capital for Holdings and Enterprises was $41.4
million and $36.7 million, respectively.
Forward Looking Liquidity and Capital Resources
Concurrent with the acquisition of Manischewitz, the Credit Agreement was
amended to provide, among other things, for: (i) Manischewitz and Millbrook to
be co-borrowers under the Credit Agreement; (ii) certain assets of
Manischewitz were pledged to provide collateral under the Credit Agreement,
including accounts receivable, inventory and intellectual property of
Manischewitz; and (iii) the inclusion of Manischewitz's accounts
receivable and inventory in determining the borrowing base.
Holdings and the Company anticipate that capital expenditures during its
fiscal year ending March 31, 1999 will approximate $4.0 to $5.0 million. It is
anticipated that such capital commitment amount will be financed through
working capital, operating leases and cash flow from operations.
Interest payments on the Notes and under the Credit Agreement represent
significant obligations of Holdings, the Company and their subsidiaries. The
primary source of liquidity of Holdings and the Company will be cash flows
from operations and borrowings under the Credit Agreement. Holdings and the
Company believe that, based on current and anticipated financial performance,
cash flows from operations, borrowings under the Credit Agreement and
dividends and other distributions available from their respective subsidiaries
will be adequate to meet anticipated requirements for capital expenditures,
working capital and scheduled interest payments on the Notes. However, the
capital requirements of Holdings and the Company are subject to change. Each
of Holdings and the Company believes that it has sufficient borrowing capacity
and access to debt markets to pursue acquisition opportunities and fund
extraordinary working capital requirements, if necessary. At June 30, 1998,
Holdings and the Company had total outstanding indebtedness of $178.3 million
and $130.3 million, respectively. The ability of Holdings and the Company to
satisfy capital requirements, to borrow under the Credit Agreement and to repay
or refinance the Notes will be dependent upon the future financial performance
of Holdings and the Company, which in turn will
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<PAGE>
be subject to general economic conditions and to financial, business and other
factors, including factors beyond Holdings' control. See "Risk
Factors--Substantial Leverage; Ability to Service Debt."
Year 2000 Project
The Company utilizes computer technologies throughout its business to
effectively carry out its day-to-day operations. Computer technologies include
both information technology in the form of hardware and software, as well as
embedded technology in the Company's facilities and equipment. Similar to most
companies, the Company must determine whether its systems are capable of
recognizing and processing date sensitive information properly as the year
2000 approaches. The Company is utilizing a multi-phased concurrent approach
to address the year 2000 project. The phases included in the Company's
approach are the awareness, assessment, remediation, validation and
implementation phases. The Company has completed the awareness and assessment
phases of its project. Furthermore, the Company is well into the remediation
phase. The Company is actively correcting and replacing those systems which
are not year 2000 ready in order to ensure the Company's ability to continue
to meet its internal needs and those of its suppliers and customers. The
Company currently intends to substantially complete the remediation,
validation and implementation phases of the year 2000 project prior to June
30, 1999. This process includes the testing of critical systems to ensure that
year 2000 readiness has been accomplished. The Company currently believes it
will be able to modify, replace, or mitigate its affected systems in time to
avoid any material detrimental impact on its operations. If the Company
determines that it may be unable to remediate and properly test affected
systems on a timely basis, the Company intends to develop appropriate
contingency plans for any such mission-critical systems at the time such
determination is made. While the Company is not presently aware of any
significant exposure that its systems will not be properly remediated on a
timely basis, there can be no assurances that all year 2000 remediation
processes will be completed and properly tested before the year 2000, or that
contingency plans will sufficiently mitigate the risk of a year 2000 readiness
problem. An interruption of the Company's ability to conduct its business due
to a year 2000 readiness problem could have a material adverse effect on the
Company.
The Company estimates that the aggregate costs of its year 2000 project
will be approximately $1.250 million, including costs already incurred. A
significant portion of these costs are not likely to be incremental costs, but
rather will represent the redeployment of existing resources. This
reallocation of resources is not expected to have a significant impact on the
day-to-day operations of the Company. Through June 30, 1998, approximately
$265,000 of costs were incurred with respect to this project. The anticipated
impact and costs of the project, as well as the date on which the Company
expects to complete the project, are based on management's best estimates
using information currently available and numerous assumptions about future
events. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Based on
its current estimates and information currently available, the Company does
not anticipate that the costs associated with this project will have a
material adverse effect on the Company's consolidated financial position,
results of operations or cash flows in future periods.
The Company has initiated formal communications with its significant
suppliers, customers, and critical business partners to determine the extent
to which the Company may be vulnerable in the event that those parties fail to
properly remediate their own year 2000 issues. The Company has taken steps to
monitor the progress made by those parties, and intends to test critical
system interfaces, as the year 2000 approaches. The Company will develop
appropriate contingency plans in the event that a significant exposure is
identified relative to the dependencies on third-party systems. While the
Company is not presently aware of any such significant exposure, there can be,
no guarantee that the systems of third-parties on which the Company relies
will be converted in a timely manner, or that a failure to properly convert by
another company would not have a material adverse effect on the Company.
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<PAGE>
Effects of Inflation and Other Matters
For the three month period ended June 30, 1998 and the fiscal year ended
March 31, 1998, Holdings and the Company's cost of product remained relatively
stable. To the extent possible, Holdings and the Company's objective is to
offset the impact of inflation through productivity enhancements, cost
reductions and price increases.
Holdings is not involved in any significant environmental matters.
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure
about Segments of an Enterprise and Related Information" was issued in June
1997 and is effective for financial statements for periods beginning after
December 15, 1997. This statement establishes standards for the manner in
which operating segments of public reporting entities are presented in interim
and annual financial statements. Holdings and the Company believe its current
reporting systems will enable it to comply with the requirements of SFAS No.
131.
THE B. MANISCHEWITZ COMPANY, LLC
Overview
Manischewitz, founded in 1888, is the nation's leading manufacturer of
processed Kosher food products including matzos, noodles, crackers, cakes,
cookies, soups and processed fish products. Manischewitz is the only
broad-line manufacturer of processed Kosher foods in the U.S. and manufactures
under the brand names Manischewitz, Horowitz Margareten and Goodman's.
In June 1997, Manischewitz sold its Chicago distribution operation. This
operation had net revenues of $6.7 million, $6.8 million, $6.8 million and
$4.1 million for the fiscal years ended July 31, 1997, 1996 and 1995 and for
the nine month period ended April 30, 1997, respectively.
Effective May 31, 1996, The B. Manischewitz Company (the sole asset and
only operation of MANO and KBMC) was reorganized as a limited liability
company. Accordingly, deferred income tax attributes at May 31, 1996 flowed
through the provision (benefit) for income taxes. Subsequent to May 31, 1996,
income taxes, if any, are the obligation of the shareholders of MANO and the
partners of KBMC. Therefore, period to period comparisons of the provision for
income taxes are not meaningful.
General
Manischewitz's operating costs and expenses consist of cost of sales and
selling, general and administrative expenses. Cost of sales includes the cost
of products manufactured and purchased by Manischewitz, including raw
materials, co-packing arrangements and manufacturing payroll and related
employee benefit costs. Selling, general and administrative expenses include
payroll and related employee benefit costs of the Manischewitz sales
organization, and other general and administrative functions.
Manischewitz's revenues and net income are affected by a seasonal bias
toward the first quarter of the calendar year due to increased revenues during
the Passover holiday. During the twelve month period ended March 31, 1998,
approximately 52% of Manischewitz's revenues occurred in the first quarter of
the calendar year. As a result of this seasonality, Manischewitz's working
capital requirements have historically increased
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throughout the year, peaking in March/April, when Manischewitz's utilization
of the revolving credit portion of its credit agreement is at its highest
level.
The following discussion should be read in conjunction with the audited
combined financial statements and the unaudited condensed combined financial
statements of MANO and KBMC and notes thereto, included elsewhere herein.
Nine month period ended April 30, 1998 Compared to the nine month period ended
April 30, 1997
Total revenues for the nine month period ended April 30, 1998 decreased
$1.9 million or 4.1% to $44.5 million, as compared to $46.4 million for the
nine month period ended April 30, 1997. The decrease in revenues was due to
the sale of the Chicago distribution operation in June of 1997, partially
offset by increased sales of matzo, processed fish and noodles.
Gross profit for the nine month period ended April 30, 1998 was $17.0
million, as compared to $17.9 million for the nine month period ended April
30, 1997, a decrease of 5.0%. As a percentage of total revenues, the gross
profit margin decreased to 38.3% for the nine month period ended April 30,
1998, as compared to 38.7% for the nine month period ended April 30, 1997.
These decreases principally resulted from an unfavorable shift in revenue mix
to lower margin products, partially offset by selected price increases in
matzo and matzo-related products.
Selling, general and administrative expenses decreased $0.8 million to
$7.7 million for the nine month period ended April 30, 1998, as compared to
$8.5 million for the nine month period ended April 30, 1997. As a percentage
of total revenues, selling, general and administrative expenses decreased to
17.2% for the nine month period ended April 30, 1998, as compared to 18.3% for
the nine month period ended April 30, 1997. These decreases principally
resulted from the sale of the Chicago distribution operation.
Interest expense for the nine month period ended April 30, 1998 decreased
$0.3 million to $3.1 million, as compared to $3.4 million for the nine month
period ended April 30, 1997. This decrease resulted from reductions in the
average outstanding balances under the revolving credit agreement and
outstanding term loans.
As a result of the foregoing, net income for the nine month period ended
April 30, 1998 was $6.3 million, as compared to $6.1 million for the nine
month period ended April 30, 1997.
Fiscal year ended July 31, 1997 Compared to the fiscal year ended July 31,
1996
Total revenues for the fiscal year ended July 31, 1997 increased $2.4
million or 4.6% to $54.8 million, as compared to $52.4 million for the fiscal
year ended July 31, 1996. The increase in revenues resulted from increased
sales of matzo, processed fish, noodles and crackers.
Gross profit for the fiscal year ended July 31, 1997 was $21.2 million,
as compared to $19.3 million for the fiscal year ended July 31, 1996, an
increase of $1.9 million. As a percentage of total revenues, the gross profit
margin increased to 38.7% for the fiscal year ended July 31, 1997, as compared
to 36.9% for the fiscal year ended July 31, 1996. This improvement was due to
selected price increases and the implementation of a consistent and more
limited Passover product return policy.
Selling, general and administrative expenses increased $0.3 million to
$11.4 million for the fiscal year ended July 31, 1997, as compared to $11.1
million for the fiscal year ended July 31, 1996. As a percentage of total
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revenues, selling, general and administrative expenses decreased to 20.8% for
the fiscal year ended July 31, 1997, as compared to 21.2% for the fiscal year
ended July 31, 1996. This improvement resulted from increased sales leverage
and lower marketing expenses, partially offset by higher trade promotions.
Interest expense for the fiscal year ended July 31, 1997 increased $0.8
million to $4.5 million, as compared to $3.7 million for the fiscal year ended
July 31, 1996. This increase was due to an increase in outstanding debt which
resulted from the recapitalization of Manischewitz in July 1996.
As a result of the foregoing, income before provision (benefit) for
income taxes, extraordinary item and cumulative effect of a change in
accounting principle for the fiscal year ended July 31, 1997 was $5.3 million,
as compared to $4.5 million for the fiscal year ended July 31, 1996.
Net income for the fiscal year ended July 31, 1996 includes an
extraordinary item for the early extinguishment of debt ($2.0 million)
relating to the recapitalization referred to above and the cumulative effect
of a change in accounting principle relating to post retirement benefits ($0.8
million).
Fiscal year ended July 31, 1996 Compared to the fiscal year ended July 31,
1995
Total revenues for the fiscal year ended July 31, 1996 increased $2.8
million or 5.7% to $52.4 million, as compared to $49.6 million for the fiscal
year ended July 31, 1995. The increase in revenues resulted from increased
sales of matzo, processed fish, noodles and crackers.
Gross profit for the fiscal year ended July 31, 1996 was $19.3 million,
as compared to $18.4 million for the fiscal year ended July 31, 1995, an
increase of $0.9 million. As a percentage of total revenues, the gross profit
margin remained relatively unchanged at 36.9% for the fiscal year ended July
31, 1996, as compared to 37.1% for the fiscal year ended July 31, 1995.
Selling, general and administrative expenses increased $0.1 million to
$11.1 million for the fiscal year ended July 31, 1996, as compared to $11.0
million for the fiscal year ended July 31, 1995. As a percentage of total
revenues, selling, general and administrative expenses decreased to 21.2% for
the fiscal year ended July 31, 1996, as compared to 22.3% for the fiscal year
ended July 31, 1995. This improvement resulted from increased sales leverage.
Interest expense for the fiscal year ended July 31, 1996 increased $0.8
million to $3.7 million, as compared to $2.9 million for the fiscal year ended
July 31, 1995. This increase was primarily due to higher average outstanding
borrowings.
As a result of the foregoing, income before provision (benefit) for
income taxes, extraordinary item and cumulative effect of a change in
accounting principle for the fiscal year ended July 31, 1996 was $4.5 million,
as compared to $4.4 million for the fiscal year ended July 31, 1995.
Net income for the fiscal year ended July 31, 1996 includes an
extraordinary item for the early extinguishment of debt ($2.0 million)
relating to the recapitalization referred to above and the cumulative effect
of a change in accounting principle relating to post retirement benefits ($0.8
million).
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Financial Condition, Liquidity and Capital Resources
Operations for the fiscal years ended July 31, 1997 and 1996 and the nine
month period ended April 30, 1998 before changes in assets and liabilities
provided cash of $8.0 million, $4.5 million and $8.1 million, respectively.
During the fiscal years ended July 31, 1997 and 1996 and the nine month period
ended April 30, 1998, other changes in assets and liabilities resulting from
operating activities, used cash of $1.5 million, $5.0 million and $5.3
million, respectively, resulting in net cash provided by (used in) operating
activities of $6.5 million, ($0.5) million and $2.8 million, respectively.
Investing activities provided (used) cash of $0.7 million and ($1.1)
million for the fiscal years ended July 31, 1997 and 1996, respectively. The
investing activities were principally related to the net proceeds from a
distributorship agreement during the fiscal year ended July 31, 1997, the
purchase of equipment during the fiscal year ended July 31, 1996. No cash from
investing activities was generated during the nine month period ended April
30, 1998.
Financing activities used cash of $5.8 million, $2.4 million and $3.9
million for the fiscal years ended July 31, 1997 and 1996 and the nine month
period ended April 30, 1998, respectively. The financing activities were
principally related to: (i) revolving credit and term loan borrowings and
repayments; and (ii) distributions to partners.
Effects of Inflation
For the nine month period ended April 30, 1998 and the fiscal year ended
July 31, 1997, raw material costs, principally flour, were slightly lower than
the comparable periods of the prior year. During these periods, packaging
materials were relatively stable while labor costs rose slightly. To the
extent possible, Manischewitz's objective is to offset the impact of inflation
through productivity enhancements, cost reductions and price increases.
BUSINESS
General
Holdings was founded in 1996 in order to build a fully integrated
specialty food business by acquiring food manufacturers with strong brand
names and integrating the products of these manufacturers with a strong
distribution platform. In March 1997, Holdings acquired Millbrook, one of the
largest value-added full service independent distributors of specialty foods,
health and beauty care products and general merchandise, to serve as a
platform for the growth of Holdings' specialty food business. To further
expand Holdings' specialty food product offerings, Holdings established the
Company which, on May 1, 1998 acquired, for approximately $124.7 million,
Manischewitz, one of the U.S.'s leading branded manufacturers of Kosher food
products. Simultaneously with the closing of the acquisition of Manischewitz
by the Company, Holdings contributed all of the capital stock of Millbrook to
the Company, and Millbrook became a wholly owned subsidiary of the Company.
The Company, through Millbrook, provides distribution and value-added
services to over 13,000 retail locations in 40 states east of the Rocky
Mountains. The Company's principal customers include supermarkets and mass
merchandisers such as Shaws, Star Market, Stop & Shop, Food Lion, Ukrop's,
Dierbergs, Albertsons, Ames and Super Kmart. Millbrook stocks over 35,000
items. Millbrook also carries a line of its own private label brands as well
as store brands and other special need items for specific customers. Millbrook
Retail
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Solutions, one of Millbrook's divisions, provides a variety of
merchandising services, without associated product sales, to manufacturers,
distributors and retailers across various product categories in all trade
channels.
Millbrook is among the U.S.'s leading distributors of high margin
specialty foods. Millbrook offers over 10,500 specialty food SKUs and
continually updates this product line. Since the Company's acquisition of
Millbrook, management efforts have focused on stabilizing operations,
solidifying its customer base and developing a financial infrastructure which
allows Millbrook to operate as an independent entity. Specifically, management
has focused on reducing debt, implementing programs to manage inventories and
accounts receivable and developing its customer base and acquisition strategy.
From its acquisition to March 31, 1998, Millbrook repaid $23.7 million of its
acquisition debt.
Manischewitz, founded in 1888, is the nation's leading manufacturer of
processed Kosher food products including matzos, noodles, crackers, cakes,
cookies, soups and processed fish products. Manischewitz is the only
broad-line manufacturer of processed Kosher foods in the U.S. and manufactures
under the brand names Manischewitz, Horowitz Margareten and Goodman's. The
Company believes that Manischewitz products have exceptional brand recognition
and customer loyalty. Sales of Kosher for Passover products are especially
stable as most of the Jewish population in the U.S. attend Passover seders
each year at which matzo and other Kosher for Passover products are consumed,
and consumers turn to brands they trust when making these purchase decisions.
Sales of specialty foods were estimated to be $38.9 billion in 1997,
resulting in a compound annual growth rate of 7.0% from 1992 to 1997, compared
with 2.7% for the overall U.S. grocery industry during the same period. The
specialty food segment consists of ethnic, international, health conscious,
diet, vegetarian, natural and gourmet foods that are generally considered
higher quality than those foods more widely available in the mass market.
Within the specialty food segment, Kosher foods are characterized by a stable
and loyal customer base of Jewish consumers. This stable base, coupled with
increasing sales of Kosher foods to non-Jewish consumers, has contributed to
sales of Kosher foods increasing from $2.0 billion in 1992 to $3.3 billion in
1997, representing a compound annual growth rate of 10.2%.
Business Strategy
The Company believes that the combination of Millbrook and Manischewitz
will provide it with a significant opportunity to increase revenues and
profitability. The Company is pursuing a business strategy of utilizing
Millbrook's distribution infrastructure for Manischewitz products, and
cross-selling to customers, aggressively marketing Manischewitz's products
beyond its traditional customer base and pursuing strategic acquisitions. The
Company's strategy includes the following initiatives:
Capitalize on Millbrook's Distribution Infrastructure. The Company is
evaluating Manischewitz's distribution network of independent distributors in
order to capitalize on Millbrook's distribution infrastructure.
Cross-Sell to Existing Customers. Due to their strong consumer loyalty
and large market share, retailers consider Manischewitz products "must have"
products in their stores. To take advantage of this retail presence, the
Company intends to cross-sell products distributed by Millbrook to existing
Manischewitz retail customers, thereby creating "drag-along" sales for
Millbrook products. Similarly, to take advantage of Millbrook's extensive
distribution network, the Company intends to cross-sell Manischewitz products
to Millbrook's existing retail customers.
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Aggressively Market Manischewitz Products. Manischewitz has historically
relied on its distributors to market its products and has limited its spending
on advertising and marketing to Jewish publications. To take advantage of
consumer perception of the qualities associated with Kosher products, the
Company intends to implement several initiatives to increase sales of
Manischewitz products to existing and new customers, including:
o increasing spending on advertising, marketing and promotion of its
existing products and its new product offerings;
o selectively using customer advertising, trade promotions and
allowances to stimulate sales; and
o using Millbrook's existing distribution network and retailer
relationships to sell certain of Manischewitz's products with broad
consumer appeal (e.g., cookies, crackers, noodles and soups) in the
non-Kosher aisles of retailers.
Pursue Strategic Acquisitions. The Company actively evaluates acquisition
candidates in the specialty food and distribution businesses, although the
Company does not currently have a binding agreement with respect to any
acquisition. The Company believes that Millbrook's distribution infrastructure
provides it with an enhanced competitive position in acquiring additional
specialty food companies due to the incremental cash flow the Company can
achieve by shifting acquired companies' distribution to Millbrook.
Competitive Strengths
The Company believes that the following attributes establish it as a
leader in the specialty food industry:
Leading Value-Added Distributor of Specialty Foods. The Company is among
the leading specialty food distributors in the U.S. The Company currently
offers over 10,500 SKUs and continually updates its product line. As a result
of the acquisition of Manischewitz, the Company is the leading producer of
processed Kosher food products in the U.S. The Company differentiates itself
from other specialty food distributors through its ability to: (i) piece pick
(deliver in individual units versus full cases), which provides retailers with
a wider variety of products with improved space utilization and reduced
inventory investment, (ii) offer health and beauty care products and general
merchandise and (iii) provide in-store merchandising services. Additionally,
through its Millbrook Retail Solutions division, the Company provides a
variety of value-added services, including schematic development, space
management, new store installations, remodeling of existing stores, order
writing, stocking, new item placement and development and management of
promotions.
Premier Brand Name. Founded over 100 years ago, Manischewitz is
recognized as the premier brand name in the Kosher products segment of the
U.S. specialty food industry. Manischewitz's consumer franchise has been built
on high quality products and a family-oriented tradition which has been handed
down from generation to generation. As a result, consumers associate the
Manischewitz name with higher-quality ingredients and foods prepared in
accordance with strict standards. The Company believes the strong market
position and brand name recognition of Manischewitz will further strengthen the
Company's position within the specialty food industry. Management believes that
recognition of the Manischewitz brand name is approximately 100% among Jewish
households and 80% among non-Jewish households. As a result of its strong brand
name and loyal customer base, Manischewitz's historical financial performance
has been very stable, with revenue increases in each of its last five fiscal
years.
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Strong Distribution Platform. The distribution industry is characterized
by large start-up costs required to establish a distribution network, obtain
client relationships and satisfy inventory requirements. These initial
outlays, coupled with the ongoing costs of changing technology and business
trends, are significant barriers to entry for potential market participants.
The ability to compete in the industry is driven primarily by economies of
scale. Millbrook has established a significant presence in 40 states east of
the Rocky Mountains, servicing over 13,000 retail locations with an extensive
distribution network. Management believes that this network provides a strong
platform for the growth of its specialty food business.
Broad Product Offering. The Company, through Millbrook, is one of the
largest distributors of specialty foods, health and beauty care products and
general merchandise with approximately 35,000 SKUs, including 10,500 specialty
food items. The Company believes a broad product offering is necessary to
compete within the specialty food industry as retailers prefer distributors
with comprehensive product offerings. Manischewitz provides a broad range of
Kosher branded products, which management believes will increase sales and
further strengthen the Company's relationship with retailers.
Strong Relationships with Suppliers and Retailers. Millbrook has a broad
base of over 1,500 supplier relationships nationally, including strong
relationships with major consumer product companies such as Procter & Gamble,
Johnson & Johnson, Gillette, Rubbermaid and BestFoods. Similarly, the Company
enjoys strong relationships with a number of leading retailers, including
Shaws, Star Market, Stop & Shop, Food Lion, Ukrop's, Dierbergs, Albertsons,
Ames and Super Kmart. Millbrook's top ten customers, which collectively
represented approximately 50% of its revenues during the fiscal year ended
March 31, 1998, have been customers for an average of 16 years. The Company
believes that Millbrook's strong reputation for its comprehensive product
selection, service and broad geographic coverage have enabled it to establish
and strengthen its long-term relationships with many of the leading
supermarkets and mass merchandisers in the U.S.
BUSINESS OF MILLBROOK
General
Millbrook is one of the largest value-added full service independent
distributors of specialty foods, health and beauty care products and general
merchandise, providing distribution and value-added services to over 13,000
retail locations in 40 states east of the Rocky Mountains. Millbrook's
principal customers include supermarkets and mass merchandisers such as Shaws,
Star Market, Stop & Shop, Food Lion, Ukrop's, Dierbergs, Albertsons, Ames and
Super Kmart. Millbrook stocks over 35,000 items, which include over 10,500
specialty food SKUs. Millbrook also carries a line of its own private label
brands as well as store brands and other special need items for specific
customers. Millbrook Retail Solutions, one of Millbrook's divisions,
provides a variety of merchandising services, without associated product
sales, to manufacturers, distributors and retailers across various product
categories in all trade channels.
The Industry
Distributors provide valuable services to both manufacturers of consumer
products and retailers. Manufacturers benefit from distributors' broad retail
coverage, efficient order processing and inventory management. Distributors
provide retailers access to broad product lines, the ability to place small
quantity orders and inventory management. Large distributors with broad
geographic coverage and an extensive offering of SKUs generally have a
competitive advantage.
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The number of manufacturers and retailers has decreased due to
consolidation over the past several years. Additionally, retailers have
increasingly focused on reducing supply chain costs and improving margins. As
a result, manufacturers and retailers are increasingly dependent on
distributors to provide a range of in-store retailing and merchandising
functions previously performed by retail and/or manufacturer personnel.
Distributors are increasingly participating in all stages of marketing for the
products distributed, including category management, promotions, schematic
design and display of products. In order to efficiently provide such services,
technological innovation has become an essential element in the distribution
industry. The costs of the required investments in technology can be
prohibitive for smaller distributors.
Millbrook is one of only a few distributors that focuses specifically on
the distribution of specialty foods, health and beauty care products and
general merchandise. The specialty food market consists of ethnic,
international, health conscious, diet, natural, vegetarian and gourmet foods
that are generally of better quality than those national brands more widely
available in the mass market. The specialty food segment accounted for an
estimated 8.9% of grocery sales in 1997 and has grown at a rate of 7.0% from
1992 to 1997, as compared to 2.6% for the overall U.S. grocery industry for
the same period. Additionally, specialty foods typically generate higher
margins for retailers than those realized on other products sold in
supermarkets. As a result, supermarkets are expected to continue adding new
specialty food items to their product offerings and aggressively promoting
such items to capture these higher margins.
Retailers are employing a number of marketing techniques to increase the
sales of high margin specialty food items. Stores are using kiosks and free
standing displays to attractively present the product to the consumer. In
addition, retailers are beginning to segregate specialty food into specific
categories, such as ethnic foods, cookies and sauces. By utilizing a
"store-within-a-store" approach for specialty food, the products receive prime
shelf space within the store. In addition, merchandising expertise is a key
selection criteria for determining the retailers' choice of a specialty food
distributor. Millbrook is well-positioned because of its merchandising
expertise and advanced technology in merchandising services to help its
retailers capture the advantages of this growing product category.
The health and beauty care segment includes baby care, cosmetics,
deodorants, first-aid, hair care, over-the-counter medications, toiletries and
oral hygiene and skin care products. The general merchandise segment covers a
wide variety of non-food products including housewares, pet supplies,
stationery, baby needs, photo and cleaning supplies. Competition in both the
health and beauty care and general merchandise categories has been intense
following the growth of mass merchandisers that have captured market share by
offering larger assortments at "everyday low pricing." Despite losing share,
supermarkets have maintained a stable base of customers and are expected to
continue to be a key outlet for health and beauty care products and general
merchandise through the expansion of product variety and the ability to offer
consumers one-stop shopping.
Products Distributed
Through its comprehensive offering of 35,000 SKUs, consisting of
specialty foods, health and beauty care products and general merchandise,
Millbrook is able to efficiently distribute to its customers a wide variety of
products.
Specialty Foods. Millbrook stocks more than 10,500 specialty food items.
For the fiscal year ended March 31, 1998, specialty food sales were
approximately $123.2 million and represented 26.2% of total revenues.
Millbrook's specialty food segment consists of more than 8,000 SKUs of ethnic
and gourmet foods and more than 2,500 SKUs of natural foods and supplements.
Millbrook offers ethnic foods such as Kosher, Asian, Italian, Irish, Indian,
Mexican, Greek and German products, and gourmet foods such as teas, coffees,
spices, baking
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ingredients, condiments, candies, crackers, cookies, jams and jellies.
Millbrook's natural food products and supplements include items such as
grains, cereals, snacks, beverages, energy bars, baking ingredients, pasta and
sauces.
Millbrook views its specialty food segment as a prime opportunity for
future growth. Due to the higher margins associated with specialty foods,
supermarkets are expected to continue adding new specialty food items to their
product offerings. To accommodate its retail customers' desire for a broader
offering of specialty foods, Millbrook has moved aggressively to carry a wide
variety of specialty food products. Management believes that Millbrook's
product breadth, together with its merchandising expertise and advanced
technology in merchandising services, will continue to enable its retail
customers to capture the advantages of this growing product category.
Health and Beauty Care. The health and beauty care segment has
traditionally been Millbrook's largest segment in terms of sales. For the
fiscal year ended March 31, 1998, health and beauty care sales were
approximately $240.3 million and represented 51.1% of total revenues.
Millbrook currently carries approximately 13,500 health and beauty care items,
including a full line of national brands and private labels. Millbrook's
private label health and beauty care products are offered under its
ValuStar(R) brand, which represents less than 5% of total revenues.
Health and beauty care product offerings have grown due to new product
introductions and the explosive growth in over-the-counter medications. This
creates the need for retailers to maximize variety in minimal shelf space.
Supermarkets, Millbrook's primary customer base, have lost market share in
health and beauty care products to mass merchandisers and drug stores in
recent years. The mass merchandisers have grown their sales of these products
by offering larger assortments at "everyday low pricing." In response to this
industry shift, Millbrook's strategy has been to expand its customer base to
include companies such as Ames, Super Kmart and Bradlees. However,
supermarkets have begun to recapture lost market share by increasing the shelf
space allocated to health and beauty care items and expanding the variety of
those items carried. Management believes that Millbrook's capabilities and
extensive product selection make it uniquely qualified to serve both the
growing mass merchandiser demand and meet the current expanding needs of the
supermarket retailers for health and beauty care items.
General Merchandise. Millbrook currently carries approximately 11,000
general merchandise items. For the fiscal year ended March 31, 1998, general
merchandise accounted for approximately $106.7 million and represented 22.7%
of total revenues. Although the traditional supermarket cannot afford to
devote as much space to the general merchandise category as compared to the
mass merchandisers, supermarkets have the advantage of more frequent customer
traffic. This fact ensures that supermarkets will remain a key outlet for
general merchandise. In addition, targeting certain departments such as pet,
bath and stationery as destination categories adds to the importance of
general merchandise in supermarkets and the attractiveness of distributors'
expanded product lines.
Retail Services
Millbrook traditionally has supplemented its product distribution with
full supporting services such as schematic development, space management, new
store installations, remodeling of existing stores, order writing, stocking,
new item placement and development and management of promotions.
Over time, gross profit margins from these services have eroded
principally as a result of the retail phenomenon of "everyday low pricing." As
a result, Millbrook has begun to "unbundle" each of the elements of the
full-service program and use activity-based costing to charge the customer for
each supporting service on a
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stand-alone basis. In addition, Millbrook has begun to offer these services
without product distribution and to alternate retail channels. This
fundamental change in the packaging of the services Millbrook offers to its
customers resulted in the formation of Millbrook Retail Solutions as a
separate group to focus solely on providing merchandising services.
By utilizing a predominantly part-time, hourly workforce, Millbrook
Retail Solutions has significant cost advantages over manufacturers and
retailers. Manufacturers and retailers are beginning to realize that the
frequency of in-store merchandising is growing dramatically along with the
associated costs. Consequently, outsourcing these functions to a lower cost
and more efficient alternative such as Millbrook Retail Solutions is
attractive. Millbrook Retail Solutions' experienced personnel, customer base
and technology combined with Millbrook's established infrastructure position
Millbrook to compete effectively in the rapidly growing third-party service
industry. In particular, management believes that Millbrook's advanced
technology in planogramming and its category management capabilities enable it
to provide service offerings that are not readily available from the
competition.
Customers
Millbrook's top ten customers, which collectively represented
approximately 50% of its revenues during the fiscal year ended March 31, 1998,
have been customers for an average of 16 years. Millbrook sells to
supermarkets and mass merchandisers. For the fiscal year ended March 31, 1998,
supermarkets represented 89% of revenues and mass merchandisers represented
11% of revenues. From 1995 to 1998, revenues from mass merchandisers increased
from less than 1% to approximately 11%. While Millbrook enjoys long-term
relationships with most of its customers, consistent with industry practice,
substantially all of Millbrook's customer agreements are on a month-to-month
basis. Millbrook has long-term supply agreements with certain of its
significant customers.
Suppliers
Millbrook purchases products from the leading suppliers in each of its
business segments. For the fiscal year ended March 31, 1998, the five largest
suppliers in each of Millbrook's three principal business segments were World
Finer Foods, BestFoods, T.J. Lipton, R.C. Bigelow and Motts USA for specialty
foods, Procter & Gamble, Johnson & Johnson, Gillette, Warner-Lambert and
American Home Products for health and beauty care products and Rubbermaid,
Inc., Hartz Mountain Corp., Mead, Eveready Battery Company and Eastman Kodak
Company for general merchandise. The five largest suppliers in each such
business segment represented 18%, 5% and 6%, respectively, of total purchases.
Competition
Specialty Foods. The competition in the specialty foods segment is
fragmented among over 200 distributors, most of which are small and
geographically limited. Supermarkets are constantly demanding increased
specialty food product offerings to entice new consumers into their stores
while retaining existing clientele. This requires distributors to continually
monitor consumer and manufacturer trends with active implementation of
category management programs.
Millbrook is able to effectively compete in the specialty foods segment
based on its breadth of products and its logistics capabilities. Its "piece
pick" capability gives retailers Millbrook's product variety without the
inventory investment in slow-moving, high margin specialty food products.
Unlike most other specialty food distributors, Millbrook offers a single
source of supply for specialty foods, health and beauty care products and
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general merchandise. This generates significant transportation and distribution
efficiencies that are unique to Millbrook. Millbrook's principal competitors in
this segment are Haddon House, Hagemeyer and Gourmet Awards.
Health and Beauty Care. Supermarkets have historically placed health and
beauty care products wherever shelf space was available. As supermarkets do
not have the available shelf space to compete with the breadth of health and
beauty care items carried by mass merchandisers, they have become reliant on
delivery and inventory techniques that maximize shelf space and product
variety. Management is of the opinion that Millbrook's "piece pick" capability
and breadth of health and beauty care product assortment allows its
supermarket customers to effectively compete with mass merchandisers in this
product category. Millbrook's principal competitors in this segment are
SuperValu, Fleming and Associated Wholesale Grocers.
General Merchandise. Supermarkets are refocusing their efforts to carry
general merchandise specifically matched to their customer profiles and
rethinking the manner in which general merchandise is allocated shelf space.
Product competition in selection and promotion at the retail level favors
distributors such as Millbrook. Millbrook's buying power results in a large
assortment of general merchandise that is continually tailored to meet its
customers and the consumers' specifications. Through Millbrook's "piece pick"
capability, this assortment is available to the retailers without the required
inventory investment and space allocation. Millbrook's principal competitors
in this segment are SuperValu, Fleming and Associated Wholesale Grocers.
Retail Services. The retail services industry is competitive and is
predominantly comprised of a large number of small organizations that are
either retailer, channel or region specific. It is the opinion of management
that there are approximately 120 retail service companies competing with
Millbrook Retail Solutions. Management believes that its principal competitors
in the retail service segment include PIA Merchandising, PIMMS, Powerforce and
Spar. The principal competitive factors within the industry include breadth
and quality of client services, price, the ability to execute specific client
priorities rapidly and consistently over a wide geographical region and
technological compatibility. The combination of breadth and quality of
services currently available is unique in this industry given Millbrook Retail
Solutions' retail-oriented technology base, extensive experience at the store
level and Millbrook's logistics capabilities. See "Risk Factors-Competition."
Management Information Systems and Technology
Millbrook uses a sophisticated management information system which
provides its customers with efficient and cost-effective order management and
value-added marketing and merchandising services, and which management
believes gives Millbrook a competitive advantage over smaller, less
technologically sophisticated distributors in the industry. Millbrook's order
management services enable it to (i) permit customers to utilize Millbrook's
integrated inventory management system for forecasting, distribution
requirements planning and purchasing; (ii) capture customer orders at retail
locations, which are electronically transmitted to Millbrook's operations data
center; and (iii) quickly fill orders and pick, pack and ship those orders
within 24 hours.
Millbrook's merchandising services provide: (i) computerized space and
shelf management programs for inventory control; (ii) customer research
analysis for better purchasing decisions; (iii) a variety of reporting menus
to facilitate analysis of a particular marketing program's effectiveness; and
(iv) computerized merchandising systems that are able to integrate with
customers' existing systems. In addition, the system's "piece pick" capability
gives Millbrook's customers a large assortment of merchandise without the
required inventory investment and space allocation. See "Risk Factors -
Management Information System" and "Risk Factors-Year 2000 Project."
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Facilities
Millbrook's corporate headquarters are located in Leicester,
Massachusetts, where management and administrative functions are performed.
Millbrook currently utilizes five distribution centers:
<TABLE>
<CAPTION>
Approximate Lease
Square Expiration
Property Location Own or Lease Footage Date
<S> <S> <C> <C> <C>
National Support Center/Distribution Center............ Harrison, AR Own 1,200,000 --
Corporate Headquarters/Distribution Center............. Leicester, MA Lease 340,000 11/3/06
Distribution Center.................................... Worcester, MA Lease 220,000 8/31/02
Distribution Center.................................... Ozark, AL Own 210,000 --
Distribution Center.................................... Greenville, NC Lease 110,000 3/31/99
</TABLE>
In addition, Millbrook utilizes 139 transfer depots located in 33
states.
Millbrook owns or leases its fleet of 110 tractors, 250 trailers and
325 vans.
Employees
As of March 31, 1998, Millbrook had a total of 1,900 full-time
employees, 150 part-time employees and the ability to draw upon 1,000
part-time service merchandisers nationwide. Millbrook believes that its
relations with its employees are generally good.
Litigation
Millbrook is subject to litigation in the ordinary course of its
business. Millbrook is not a party to any lawsuit or proceeding which, in the
opinion of management, is likely to have a material adverse effect on
Millbrook.
BUSINESS OF MANISCHEWITZ
General
Manischewitz, founded in 1888, is the nation's leading manufacturer
of processed Kosher food products including matzos, noodles, crackers, cakes,
cookies, soups and processed fish products. Manischewitz is the only
broad-line manufacturer of processed Kosher foods in the U.S. and manufactures
under the brand names Manischewitz, Horowitz Margareten and Goodman's. The
Company believes that Manischewitz products have exceptional brand recognition
and customer loyalty. Sales of Kosher for Passover products are especially
stable as most of the Jewish population in the U.S. attend Passover seders
each year at which matzo and other Kosher for Passover products are consumed,
and consumers turn to brands they trust when making purchase decisions.
The Industry
The U.S. grocery industry has been characterized by relatively stable
growth based on modest price and population increases, with total sales of
approximately $436.0 billion in 1997 reflecting a compound annual
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growth rate of 2.7% for the five years ended 1997. Specialty foods were
estimated to be $38.9 billion, or 8.9% of the U.S. grocery industry in 1997,
and have outpaced the growth of the overall U.S. grocery industry with an
estimated compound annual growth rate of 7.0% for the five years ended 1997.
The specialty food segment consists of ethnic, international, health
conscious, diet, vegetarian, natural and gourmet foods. Kosher food is one of
the fastest growing categories of the specialty food segment, and has grown at
a compound annual growth rate of 10.2% for the five years ended 1997,
accounting for approximately $3.3 billion in 1997 sales. Kosher foods are
characterized by a stable base of loyal consumers represented primarily by the
Jewish population. Since 1992, sales of Kosher foods have increased
significantly among non-Jewish consumers due to heightened awareness of the
quality of ingredients and processing techniques used in manufacturing Kosher
foods, together with growing interest in healthier foods.
Kosher foods are manufactured in accordance with Jewish dietary laws
which require strict adherence to quality and cleanliness standards. Achieving
such standards requires specialized knowledge and the approval of a designated
Kosher certification agency. Due to the production methods used, Kosher
products are generally considered to contain higher quality and healthier
ingredients and to have less preservatives. Approximately 40% of the overall
Kosher category is Kosher for Passover products, which products are prepared
under more stringent guidelines than other Kosher products. Passover-related
sales are particularly stable as most of the Jewish population in the U.S.
attend Passover seders each year at which matzo and other Kosher for Passover
products are consumed.
Recently, several national brand food manufacturers have modified
products to be Kosher certified with the intent of broadening their appeal and
increasing sales. While such products have contributed to the growth of the
number of Kosher products available, they generally are not sold as Kosher or
Kosher for Passover. Manischewitz is one of the leading manufacturers of
Kosher for Passover products.
Products
Manischewitz's core business consists of traditional products sold
primarily to Jewish consumers. Manischewitz was traditionally a manufacturer
of products normally consumed during certain Jewish holidays, primarily
Passover (which occurs during the spring) and Rosh Hashanah (which occurs
during the fall). Manischewitz believes that, among the Jewish population,
approximately 100% recognize the Manischewitz brand name and 90% have tried
one or more Manischewitz products. There is also a high awareness, respect and
trust for the Manischewitz brand name among the non-Jewish population.
Manischewitz believes that, among the non-Jewish population, approximately 80%
are familiar with the Manischewitz brand name and over 50% have tried one or
more Manischewitz products.
Manischewitz has built on its strong brand awareness and consumer
base by offering a broader assortment of products that can be consumed
throughout the year, as well as continuing to expand its product offerings to
accommodate changing tastes and the popularity of various food items.
Manischewitz's new product offerings include toffee crunch macaroons, pilaf
mixes, various soup mixes and mini bagel chips. Many of the new product
offerings are intended to appeal to the mainstream population to expand the
customer base for Manischewitz's product line.
Manischewitz also licenses its name to other entities for use in the
manufacture, distribution and sale of certain Kosher products including wine,
bread, seltzer water and confectionery products. In fiscal 1997, licensing
represented approximately 1% of total revenues.
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<PAGE>
Baked Products. Baked products include daily matzo, Passover matzo
(produced at more exacting standards dictated by religious tenets for
Passover) and crackers. All of these products are baked at Manischewitz's
Jersey City, New Jersey facility. Matzo products in this segment are sold
under the Manischewitz, Horowitz Margareten and Goodman's brand names. Matzo
sales generated approximately 27% of Manischewitz's total revenues in fiscal
1997. Manischewitz has a license agreement with Goodman's to use its name on
matzo products and matzo-related products through 2003. In fiscal 1997, matzo
products and matzo-related products sold under the Goodman's name represented
approximately 2% of total revenues.
Manufactured Products. Manufactured products consist of a variety of
fish, soups, borscht and other processed foods. The principal product in this
segment is gefilte fish, a blended combination of whitefish, pike and carp
manufactured at Manischewitz's Vineland, New Jersey facility. Gefilte fish
constitutes the second largest product line for Manischewitz and accounted for
approximately 13% of its total revenues in fiscal 1997.
Co-Packed Products. Manischewitz markets a number of co-packed
products, including cookies, confectionery products, noodles, pasta and dry
mixes under the Manischewitz, Horowitz Margareten and Goodman's brand names.
Manischewitz also markets a variety of dry soup mixes which are manufactured
by outside entities. Manischewitz expects to continue to employ co-packers as
a capital efficient means of bringing its new products to market.
Marketing and Product Development
In fiscal 1997, marketing and trade promotion spending represented
approximately 7% of total revenues, which is an increase over previous years.
However, as a percentage of revenue, management believes that marketing and
trade promotion expenses have historically remained substantially below other
food manufacturers. Marketing has been restricted to its core market and,
accordingly, spending has been limited and is generally equal to approximately
2% of revenues. As part of its business strategy, the Company intends to
significantly increase spending on advertising, marketing and promotion of
Manischewitz's existing products and new product offerings. In addition, the
Company intends to use Millbrook's existing distribution network and retailer
relationships to sell certain of Manischewitz's products with broader consumer
appeal into the non-Kosher aisles of retailers.
To maintain and expand its business, Manischewitz is committed to
improving and expanding its traditional product lines and introducing new
products that appeal to both Jewish and non-Jewish consumers. During the last
few years, the Manischewitz product line has been expanded to broaden its
popular appeal. Packaging has been updated to better communicate good taste
and high quality and enhance visibility on store shelves. Manischewitz has
introduced no-fat and low-fat items to reinforce the positive health aspects
of its products. Where appropriate, recipes have been improved and new flavors
introduced to strengthen and broaden the brand's appeal. In addition,
Manischewitz has introduced new products targeted at both Jewish and
non-Jewish consumers and has begun to capitalize on the positive Manischewitz
brand image among consumers. In fiscal 1997, new products introduced since
1993 generated approximately 17% of Manischewitz's total revenues.
Distribution
Manischewitz principally sells its products to independent distributors
operating throughout the U.S. and Canada, two of which represented approximately
31% of total revenues in fiscal 1997. Among its customer base, supermarkets
represented approximately 90% of Manischewitz's fiscal 1997 total revenues and
other customers represented approximately 10%. Management believes that
Manischewitz's five largest supermarket customers are American
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Stores, Ralph's, ShopRite, Pathmark and A&P. In addition, Manischewitz has
developed a marketing arrangement with Wal-Mart to carry Manischewitz's
products in its supercenters and general merchandise stores.
Management estimates that its products are sold in a majority of the
supermarkets throughout the U.S. Manischewitz products are "must carry" items
for many supermarkets in the U.S. due to their importance to Jewish consumers.
The Company intends to seek to obtain from supermarkets shelf space sections
other than in the Kosher aisle. The ability to display Manischewitz's products
in the non-Kosher supermarket aisles for products such as cookies, crackers,
noodles and sauces will enhance awareness of Manischewitz products,
particularly among the non-Jewish consumer. To support these efforts, the
Company intends to increase promotional and advertising expenditures to
enhance product presence and increase sales.
The Company is evaluating Manischewitz's distribution network of
independent distributors in order to capitalize on Millbrook's distribution
infrastructure. In addition, the Company intends, in certain geographic areas,
to add Manischewitz's products to the products distributed by Millbrook.
Competition
Manischewitz competes within a small group of branded Kosher
manufacturers, in which it has achieved leading market shares over many years.
In the matzo category, all of the domestic producers have been in the industry
for over 80 years. The strength of Manischewitz's brand names, the
complexities of complying with Kosher manufacturing requirements and the
relatively modest size of the market have all contributed to the stability of
the competitive environment faced by Manischewitz. Unlike most food
manufacturers, Manischewitz does not presently face competition in its core
products from any private label products because of the unique knowledge and
processes involved in manufacturing Kosher food. This lack of private label
competition gives Manischewitz much more flexibility with respect to pricing its
core products. The Company's business strategy includes promoting and marketing
Manischewitz products in the non-Kosher aisles of supermarkets. However, outside
the Kosher aisle, Manischewitz products will compete with the products of a
significant number of companies of varying sizes, including divisions or
subsidiaries of larger companies. Many of these competitors have multiple
product lines as well as substantially greater financial and other resources
available to them.
Manischewitz's major competitor in the production and distribution of
matzo is Streit's, a family-owned regional marketer limited primarily to the New
York area.
Within the gefilte fish market, Manischewitz competes with Rokeach and
its related brands, including Mothers, Old Vienna and Mrs. Adlers.
Ultimately, Manischewitz's competitive strength comes from an
exceptionally loyal consumer franchise built over more than 100 years.
Manischewitz has earned its trusted reputation in the Jewish community because
of its adherence to the religious dictates associated with the manufacture of
Kosher products and its high quality products. In addition, Manischewitz
enjoys substantial brand awareness in the markets it serves. Accordingly,
management believes that Manischewitz's loyal customer base and strong name
recognition make the brand less vulnerable to competition with respect to its
core products. See "Risk Factors-Competition."
Raw Materials
Manischewitz utilizes a variety of basic raw materials in the
manufacture of its matzo and matzo-related products, principally flour.
Manischewitz also utilizes significant quantities of various fish in the
manufacture
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of its gefilte fish. Supplies of these ingredients are readily available from a
number of sources and are purchased based on price.
Trademarks
Manischewitz owns a number of registered trademarks in the U.S.,
Canada, Europe, Israel, South Africa and South America. The registered
trademarks in the U.S. include Manischewitz(R), Horowitz Margareten(R),Onion
Tams(R), Passover Pantry(R), Tam Tam(R), Vege-Matzo(R), Wheat Tams(R), Design
Star of David(R) and Star of David & Lion Design(R). Manischewitz has granted
exclusive licenses in connection with the manufacture and sale of wine,
vinegar and certain flavored juice products, seltzer, Kosher packaged rye and
pumpernickel breads and rolls and pickle products. Such licenses are limited
in scope to certain territories and entitle Manischewitz to royalties based on
the net sales or revenues of the licensed products sold. Management is not
aware of any facts that would have a material adverse impact on the continued
use of any of its trademarks and trade names.
Facilities
Manischewitz's corporate headquarters are located in Jersey City, New
Jersey, where management and administrative functions are performed.
Manischewitz occupies the following properties, all of which are used in
connection with its food business:
<TABLE>
<CAPTION>
Approximate Lease
Square Expiration
Property Location Own or Lease Footage Date
<S> <C> <C> <C> <C>
Bakery................................................. Jersey City, NJ Own 86,000 --
Manufacturing facility................................. Vineland, NJ Own 67,700 --
Warehouse.............................................. Jersey City, NJ Lease 43,500 8/31/00
Office................................................. Jersey City, NJ Lease 9,600 8/31/00
</TABLE>
The Jersey City, New Jersey bakery operates on a two-shift basis
(each shift consists of eight hours) during three months of the year and a
three-shift basis for seven months of the year. The plant is shut down for the
month of July for maintenance and in August to prepare the plant to meet the
Kosher requirements for Passover. The facility has computerized production
equipment and utilizes approximately 120,000 pounds of flour per shift.
The Vineland, New Jersey manufacturing and warehousing facility is
located on a five-acre site. It has the capacity to produce 11,000 pounds of
processed food per shift. The facility operates on a single shift basis
throughout the year, with its primary maintenance period in April.
Employees
As of March 31, 1998, Manischewitz had a total of 250 full-time
employees and 30 part-time employees. Manischewitz believes its relations with
its employees are generally good.
Litigation
Manischewitz is subject to litigation in the ordinary course of its
business. Manischewitz is not a party to any lawsuit or proceeding which, in
the opinion of management, is likely to have a material adverse effect on
Manischewitz.
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<PAGE>
MANAGEMENT
Directors and Executive Officers of Holdings and the Company
The directors and executive officers of Holdings and the Company, and
where indicated, the senior executive officer of each of Manischewitz and
Millbrook is as set forth in the table below:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Richard A. Bernstein*.............................. 52 Chairman, President, Chief Executive Officer and
Director of Holdings and the Company
Lewis J. Korman*................................... 53 Vice Chairman and Director of Holdings
Steven M. Grossman*................................ 37 Executive Vice President, Chief Financial
Officer, Treasurer and Director of Holdings and
the Company
James A. Cohen, Esq.*.............................. 52 Senior Vice President--Legal Affairs and
Secretary --Director of the Company
Ira A. Gomberg*.................................... 55 Senior Vice President
Hal B. Weiss*...................................... 41 Assistant Treasurer
Richard H. Hochman................................. 53 Director of Holdings
Jenny Morgenthau................................... 52 Director of Holdings
Michael A. Pietrangelo............................. 55 Director of Holdings
</TABLE>
* Titles of these individuals are the same for the Company and Holdings
unless otherwise specified.
Senior executive officer of Manischewitz:
Richard A. Bernstein is the acting President and Chief Executive Officer. The
Company is actively conducting a search for a President and Chief Executive
Officer of Manischewitz and believes that an announcement of the hiring of a
new President and Chief Executive Officer will be made by year end.
<TABLE>
<CAPTION>
Senior executive officer of Millbrook:
<S> <C> <C>
Robert A. Sigel.................................... 45 President and Chief Executive Officer of
Millbrook Distribution Services Inc.
</TABLE>
RICHARD A. BERNSTEIN has served as Chairman, President and Chief
Executive Officer and as a director of each of the Company and Holdings since
their inception in March, 1998 and December , 1996, respectively. In addition
to his positions with the Company and Holdings, Mr. Bernstein is a member of
the Board of Directors and Chairman of Millbrook. Mr. Bernstein is Chairman
and Manager of RABCO Luxury Holdings, LLC, a New York limited liability
company ("RABCO"), a diversified holding entity for luxury products, which has
the exclusive right, through its subsidiary, Breguet, LLC ("Breguet") to
distribute Breguet(R) watches and time pieces in the United States, Canada,
Mexico, Central and South America, and throughout the Caribbean. Mr. Bernstein
is also President of P&E Properties, Inc., a private commercial real estate
ownership/management company of which Mr. Bernstein is the sole shareholder
("P&E Properties"). Mr. Bernstein was the Chairman and Chief Executive Officer
and a director of Western Publishing Group, Inc. from 1984 to May 1996. Mr.
Bernstein also served as Chairman of the Board and Chief Executive Officer of
RABCO Health Services, Inc. and General Medical Corporation, a medical and
surgical supply distribution company, from April 1987 through August 1993,
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and Chairman and Chief Executive Officer of Harris Wholesale Company, a
pharmaceutical and health and beauty care distribution company, from 1989
through May 1992. Mr. Bernstein devotes substantial time to other business and
charitable activities.
LEWIS J. KORMAN has been Vice Chairman of Holdings since its inception
and is a director of Holdings. Mr. Korman is also an advisor to a company
engaged in the marketing and distribution of products designed to enhance
wellness and beauty. He also serves as a consultant to companies engaged in
financial transactions in the motion picture industry. Mr. Korman also is
involved in the structuring of entrepreneurial transactions in the entertainment
industry. Prior to joining Holdings in January 1997, Mr. Korman was President
and Chief Operating Officer of Savoy Pictures Entertainment, Inc. from its
founding in 1992 until its merger with Silver King Communications, Inc. in
December 1996. Prior thereto, Mr. Korman was Senior Vice President and Chief
Operating Officer of Columbia Pictures Entertainment, Inc. (and Chairman of its
Motion Picture Group) until its sale to Sony at the end of 1989.
STEVEN M. GROSSMAN has been Executive Vice President, Chief Financial
Officer and Treasurer and a director of the Company and Holdings since their
inception. In addition to his positions with the Company and Holdings, Mr.
Grossman is Executive Vice President--Finance and Administration of Millbrook
and the Executive Vice President, Chief Financial Officer and Treasurer of
Manischewitz. Mr. Grossman is also Executive Vice President and Chief Financial
Officer of RABCO and Breguet and Chief Financial Officer of P&E Properties. Mr.
Grossman was Executive Vice President and Chief Financial Officer of Western
Publishing Group, Inc. from June 1994 to May 1996 and Vice President--Financial
Planning of Western Publishing Group, Inc. from July 1992 to June 1994 and of
RABCO Health Services, Inc. from July 1992 to August 1993.
JAMES A. COHEN, ESQ. has been Senior Vice President--Legal Affairs and
Secretary of the Company and Holdings since their inception. In addition to his
positions with the Company and Holdings, Mr. Cohen is the Senior Vice
President--General Counsel of Millbrook and Manischewitz. Mr. Cohen is also
Senior Vice President--Legal Affairs of RABCO and Breguet and a senior executive
of P&E Properties. Mr. Cohen was Senior Vice President--Legal Affairs and
Secretary of Western Publishing Group, Inc. from 1984 to May 1996 and Senior
Vice President-- Legal Affairs and Secretary of RABCO Health Services, Inc. from
April 1987 through August 1993.
IRA A. GOMBERG has been Senior Vice President of the Company and
Holdings since their inception. In addition to his position with the Company and
Holdings, Mr. Gomberg is a Senior Vice President of Millbrook and Manischewitz.
Mr. Gomberg is also Senior Vice President of RABCO and Breguet and a senior
executive of P&E Properties. Mr. Gomberg was Vice President of Western
Publishing Group, Inc. from 1986 to May 1996 and Executive Vice President of
RABCO Health Services, Inc. from April 1987 through August 1993.
HAL B. WEISS has been Assistant Treasurer of the Company and Holdings
since their inception. In addition to his position with the Company and
Holdings, Mr. Weiss is a Vice President and Assistant Treasurer of Millbrook and
Manischewitz. Mr. Weiss is also the Assistant Treasurer of RABCO and Breguet
and Controller of P&E Properties. Mr. Weiss served as Assistant Treasurer of
Western Publishing Group, Inc. from 1990 through May 1996 and Assistant
Treasurer of RABCO Health Services, Inc. from April 1987 through August 1993.
RICHARD H. HOCHMAN is Chairman of Regent Capital Management Corp., a
private investment company, making equity and mezzanine investments in
companies, and has served in that capacity since April 1995. From 1990 through
April 1995, he was a Managing Director of the Corporate Finance Department of
PaineWebber Incorporated and served as a member of its Debt and Equity
Commitment Committees. Prior to joining PaineWebber, Mr. Hochman served as a
Managing Director of Drexel Burnham Lambert, Inc. from 1984
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through 1990. Mr. Hochman also serves on the Board of Directors of Cablevision
Systems Corp. and Lite-Flite, Ltd.
JENNY MORGENTHAU has been Chief Executive Officer of The Fresh Air
Fund, one of New York's preeminent charitable corporations, for more than the
past five years. Prior to joining The Fresh Air Fund, Ms. Morgenthau worked for
New York City's Special Services for Children, the Department of City Planning
and the New York State Urban Development Corporation. Ms. Morgenthau serves on
the board of directors of a number of charitable and cultural organizations.
MICHAEL PIETRANGELO is a partner in the Memphis, Tennessee law firm of
Pietrangelo Cook PLC, which he joined in February 1998. Previously, Mr.
Pietrangelo was President of Johnson Products Co., a subsidiary of IVAX
Corporation that manufactured and sold cosmetic and health and beauty care
products, principally intended for the African-American consumer. Mr.
Pietrangelo also has held a number of executive positions in the consumer
products industry at Schering-Plough Corporation, including President of the
Personal Care Products Group, and has served as President and Chief Operating
Officer of Western Publishing Company, Inc. and President and Chief Executive
Officer of Cleo, Inc., a subsidiary of Gibson Greetings, Inc.
ROBERT A. SIGEL has been President, Chief Executive Officer and
director of Millbrook since it was acquired by Holdings from McKesson in March
1997. Mr. Sigel has been associated with Millbrook's business since 1977, having
served as Vice President, Sales and Merchandising, Executive Vice President,
President and Chief Executive Officer of Millbrook Distributors, Inc. and
President and Chief Executive Officer of the service merchandising division of
McKesson, which became the current Millbrook. From 1995 through March 1997 Mr.
Sigel also served as a Corporate Vice President of McKesson and on McKesson's
Management Board.
COMPENSATION FOR EXECUTIVE OFFICERS
The following table sets forth the compensation earned or paid,
including deferred compensation, by Holdings and the Company to the Chief
Executive Officer of Holdings and the Company (the "CEO") and the most highly
compensated executive officers of Holdings and the Company (collectively, the
"Named Executive Officers") for services rendered for the fiscal year ended
March 31, 1998. To the extent the Named Executive Officers are also officers of
any subsidiaries of the Company, they did not receive additional compensation
for serving as such.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Other Annual
Compensation Options/SARs
Name and Principal Position Year Salary ($) Bonus($) ($) (#)
<S> <C> <C> <C> <C> <C>
Richard A. Bernstein...................... 1998 $ -- (1) $ -- $ -- --
Chairman, President and CEO
</TABLE>
(1) Neither Holdings nor the Company pays Mr. Bernstein and certain other
executive officers a salary. The Company reimburses P&E Properties
for personal services, including executive services, rendered by
certain of its executive officers. Mr. Bernstein does not receive a
salary from P&E Properties for executive services rendered to
Holdings and the Company. See "Certain Transactions -- Related Party
Transactions."
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<PAGE>
CERTAIN TRANSACTIONS
Voting Agreement
Mr. Bernstein is a party to a voting agreement (the "Voting Agreement")
with each of the holders of Holdings' Series A Preferred Stock and Common Stock
(collectively, the "Stockholders"), under which the Stockholders agree to vote
all their shares of Series A Preferred Stock and Common Stock as Mr. Bernstein
may direct or, if no direction is given, in a manner consistent with the manner
in which Mr. Bernstein votes his shares of Series A Preferred Stock or Common
Stock, as the case may be. The Voting Agreement also provides that Stockholders
shall execute any written consent of holders of Series A Preferred Stock or
Common Stock, as the case may be, as directed by Mr. Bernstein or, if no
direction is given, in a manner which is consistent with the vote or written
consent of Mr. Bernstein on the matter, and shall not execute any other consent
of holders of Series A Preferred Stock or Common Stock, as the case may be.
In the event that a Stockholder who is a party to the Voting Agreement
fails to vote such Stockholder's shares or give a written consent with respect
to such Stockholder's shares in accordance with the Voting Agreement, under the
Voting Agreement each Stockholder has granted to Mr. Bernstein a proxy to vote
the Stockholder's shares or execute such consent in any manner as Mr. Bernstein
may determine in his sole and absolute discretion. Under the Voting Agreement,
Mr. Bernstein shall not be liable, directly or indirectly, to any Stockholder or
anyone claiming under such Stockholder, as a result of any vote or the exercise
by Mr. Bernstein of any proxy pursuant to the Voting Agreement, whether or not
that vote or exercise of proxy adversely affects, or results in the diminution
of the value of, such Stockholder's shares.
The Voting Agreement shall terminate on the earliest of (i) the date a
Stockholder (and such Stockholder's heirs, personal representatives (as used in
the Voting Agreement), donees and trustees of any trusts in which such
Stockholder has an interest, during the Stockholder's life or upon his death)
ceases to own any of Holdings' shares; (ii) the date on which Holdings' Common
Stock is listed or admitted to trade on any national securities exchange or is
quoted on the National Association of Securities Dealers Automated Quotation
system or similar means if the National Association of Securities Dealers
Automated Quotation system no longer provides such information; and (iii) ten
years from the date of the Voting Agreement. The Voting Agreement is binding on
the Stockholder's successors, heirs, personal representatives, donees and
trustees of any trust in which the Stockholder has an interest, during the
Stockholder's life or upon his death, and shall inure to the benefit of the
successor or successors of Mr. Bernstein's interest in Holdings' Common Stock
including, without limitation, Mr. Bernstein's heirs, personal representatives
and the trustees of any trust in which Mr. Bernstein has an interest, during his
life or created upon his death, and the Stockholder, therefore, shall vote his
Shares and execute written consents in respect of his Shares as such successors
of Mr. Bernstein may designate.
Related Party Transactions
Concurrent with Millbrook's acquisition by Holdings and Manischewitz's
acquisition by the Company, Millbrook through Holdings and Manischewitz through
the Company entered into separate arrangements with P&E Properties, an entity of
which Mr. Bernstein is the sole shareholder, whereby Millbrook agreed to pay a
quarterly management fee of $100,000 and Millbrook and Manischewitz agreed to
reimburse P&E Properties for reasonable services and out-of-pocket and other
expenses incurred on Millbrook's and Manischewitz's behalf. For the three month
period ended June 30, 1998 and for the fiscal year ended March 31, 1998, P&E
Properties was reimbursed $200,000 and $800,000, respectively, for reasonable
services provided to Millbrook. The Company reimburses P&E Properties for
personal services, including executive services, rendered by certain of its
executive officers. Mr. Bernstein does not receive a salary from P&E Properties
for executive services rendered to Holdings and the Company. Each of Holdings
and the Company believes that the terms of the arrangement with P&E Properties
was no less favorable than could have been obtained from unaffiliated third
parties on an arm's length basis.
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Shareholders Agreements
Each Millbrook and Manischewitz employee who owns shares of Holdings'
Common Stock (each, an "Employee Shareholder") is a party to a Shareholders
Agreement with Holdings, which prohibits transfer of such shares other than to a
member of the Employee Shareholder's immediate family or a trustee of a trust
for the benefit of the Employee Shareholder or his immediate family under
certain circumstances. In the event of termination of the Employee Shareholder's
employment under certain circumstances, Holdings has the option or obligation to
purchase all the Employee Shareholder's shares at prices not greater than fair
market value.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the date of this Prospectus,
certain information regarding the beneficial ownership of the Common Stock and
Series A Preferred Stock of Holdings (i) by each person who is known by Holdings
to own beneficially more than 5% of the outstanding shares of Common Stock or
Series A Preferred Stock of Holdings, (ii) by each of Holdings' directors and
executive officers and (iii) by all directors and executive officers of Holdings
as a group. Holdings believes that the beneficial owners of the securities
listed below, based on information furnished by such owners, have investment and
voting power with respect to all the shares of Common Stock and Series A
Preferred Stock of Holdings shown as being beneficially owned by them subject to
a Voting Agreement (as defined). See "Certain Transactions--Voting Agreement."
Holdings owns 200 shares of the Common Stock of the Company, which represents
all of the issued and outstanding capital stock of the Company.
<TABLE>
<CAPTION>
Number of Number of
Shares of Percentage Shares of Series
Common of Total A Preferred
Stock of Shares of Stock of
Holdings Common Holdings
Name and Address of Beneficially Stock of Beneficially
Beneficial Owners (a) Owned Holdings Owned
- --------------------- ----- -------- -----
<S> <C> <C> <C>
Richard A. Bernstein........................................... 42,500 41.3% 10,000
Robert A. Sigel................................................ 6,600 6.4 200
James A. Cohen, Esq............................................ 3,610 3.5 120
Steven M. Grossman............................................. 3,490 3.4 80
Lewis J. Korman................................................ 3,450 3.4 400
Ira A. Gomberg................................................. 2,850 2.8 200
Hal B. Weiss................................................... 1,460 1.4 120
Richard H. Hochman............................................. 1,200 1.2 400
Michael A. Pietrangelo......................................... 360 .3 120
Jenny Morgenthau............................................... 300 .3 100
All directors and executive officers as a group
(10 persons)................................................... 65,820 64.0% 11,740
</TABLE>
(a) The address for Messrs. Bernstein, Cohen, Grossman, Korman, Gomberg
and Weiss is 444 Madison Avenue, Suite 601, New York, New York 10022.
The address for Robert A. Sigel is c/o Millbrook Distribution
Services Inc., Route 56, 88 Huntoon Memorial Highway, Leicester,
Massachusetts 01524. The address for Mr. Hochman is Regent Capital
Management Corp., 505 Park Avenue, 17th Floor, New York, New York
10022. The address for Mr. Pietrangelo is Pietrangelo Cook PLC, Suite
190, International Plaza, 6410 Poplar, Memphis, Tennessee 38119 and
the address for Ms. Morgenthau is c/o The Fresh Air Fund, 1040 Avenue
of the Americas, New York, New York 10018.
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THE EXCHANGE OFFERS
PURPOSE AND EFFECT
The Old Notes were sold by the Issuers on May 1, 1998 in the Original
Offerings. In connection with the Original Offerings, the Company and the
Guarantors entered into the Company Registration Rights Agreement dated May 1,
1998 with the Initial Purchaser and Holdings entered into the Holdings
Registration Rights Agreement dated May 1, 1998 with the Initial Purchaser.
The Registration Rights Agreements require that the Issuers file a
registration statement under the Securities Act with respect to the New Notes
and, upon the effectiveness of that registration statement, offer to the
holders of the Old Notes the opportunity to exchange their Old Notes for a
like principal amount (or principal amount at maturity) of New Notes, which
will be issued without a restrictive legend and may be reoffered and resold by
the holder without registration under the Securities Act. The Registration
Rights Agreements further provide that the Issuers must use their respective
best efforts to cause the registration statement to be declared effective on
or before December 27, 1998. Except as provided below, upon the completion of
the Exchange Offers, the Issuers' obligations to register the Old Notes and
the New Notes will terminate. Copies of the Registration Rights Agreements
have been filed as an exhibit to the Registration Statement of which this
Prospectus is a part and investors in the New Notes are strongly encouraged to
read the Registration Rights Agreements. The discussion of the Registration
Rights Agreements is subject to, and is qualified in its entirety by reference
these agreements. As a result of the filing and the effectiveness of the
Registration Statement on or before December 27, 1998, certain liquidated
damages provided for in the Registration Rights Agreements will not become
payable by the Issuers.
In order to participate in an Exchange Offer, a holder must represent
to the applicable Issuer, among other things, that (i) the New Notes acquired
pursuant to such Exchange Offer are being obtained in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the holder of the Old Notes, (ii) neither the holder nor any such other person
is engaging in or intends to engage in a distribution of the New Notes, (iii)
neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iv) neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 promulgated under the Securities Act, of, in the case
of the Holdings Exchange Offer, Holdings, or, in the case of the Company
Exchange Offer, the Company or any Guarantor, and (v) if such holder or other
person is a broker-dealer, that it will receive New Notes for its own account
in exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
In accordance with the Registration Rights Agreements, each Issuer is
required to file a "shelf" registration statement for a continuous offering
pursuant to Rule 415 under the Securities Act in respect of the Old Notes if
(i) because of any change in law or applicable interpretations of the staff of
the Commission, such Issuer is not permitted to effect its Exchange Offer,
(ii) its Exchange Offer is not consummated within 270 days following the
applicable Original Offering, (iii) any holder of Old Notes or Private
Exchange Notes (as defined in the Registration Rights Agreements) requests
following the Exchange Offers, (iv) any applicable law or interpretations do
not permit any holder of Old Notes to participate in the applicable Exchange
Offer, (v) any holder of Old Notes that participates in the applicable
Exchange Offer and does not receive freely transferrable New Notes in exchange
for Old Notes or (vi) the applicable Issuer so elects. In the event that an
Issuer is obligated to file a "shelf" registration statement, it will be
required to keep such "shelf" registration statement effective for up to two
years. Other than as set forth in this paragraph, no holder will have the
right to participate in the "shelf" registration statement nor otherwise to
require that the applicable Issuer register such holder's shares of Old Notes
under the Securities Act. See "The Exchange Offer -- Procedures for
Tendering."
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Based on an interpretation by the Commission's staff set forth in
no-action letters issued to third-parties unrelated to the Issuers, the
Issuers believe that New Notes issued pursuant to the Exchange Offers in
exchange for Old Notes may be offered for resale, sold and otherwise
transferred by any person receiving such New Notes, whether or not such person
is the holder (other than any such holder or such other person which is an
"affiliate" of Holdings, the Company or any of the Guarantors within the
meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that (i) the New Notes are acquired in the ordinary course of
business of that holder or such other person, (ii) neither the holder nor such
other person is engaging in or intends to engage in a distribution of the New
Notes, and (iii) neither the holder nor such other person has an arrangement
or understanding with any person to participate in the distribution of the New
Notes. Any holder who tenders in an Exchange Offer for the purpose of
participating in a distribution of New Notes cannot rely on this
interpretation by the Commission's staff and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a secondary resale transaction. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, whether the Old Notes were acquired
by that broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offers (except as set forth
in the Registration Rights Agreements), holders of Old Notes not tendered will
not have any further registration rights and those Old Notes will continue to
be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for a holder's Old Notes could be adversely affected upon
completion of the Exchange Offers if the holder does not participate in the
Exchange Offers.
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letters of Transmittal, the Issuers will accept any and
all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Issuers will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the applicable Exchange Offer. Holders may
tender some or all of their Old Notes pursuant to the Exchange Offers.
However, Old Notes may be tendered only in integral multiples of $1,000 in
principal amount.
The form and terms of the New Notes will be substantially the same as
the form and terms of the Old Notes except that (i) interest on the New Notes
will accrue from the last interest payment date on which interest was paid on
such Old Note, or, if no interest was paid, from the date of the original
issuance of the Old Note, and (ii) the New Notes have been registered under
the Securities Act and will not bear legends restricting their transfer. The
New Notes will evidence the same debt as the Old Notes and will be issued
pursuant to, and entitled to the benefits of, the respective Indenture.
As of ___________, 1998, Old Holdings Notes representing $48,000,000
aggregate principal amount were outstanding and Old Company Notes representing
$120,000,000 aggregate principal amount were outstanding. This Prospectus,
together with the Letters of Transmittal, is being sent to registered holders
and to others believed to have beneficial interests in the Old Notes. Holders
of Old Notes do not have any appraisal or dissenters' rights under the General
Corporation Law of the State of Delaware or the respective Indenture in
connection with the Exchange Offers. The Company intends to conduct the
Exchange Offers in accordance with
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the applicable requirements of the Exchange Act and the rules and regulations of
the Commission promulgated thereunder.
The Issuers shall be deemed to have accepted validly tendered Old
Notes when, as, and if the Issuers have given oral or written notice thereof,
to the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the New Notes from the Company and
Holdings. If any tendered Old Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offers will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letters of Transmittal, transfer taxes with respect to the exchange of
Old Notes pursuant to the Exchange Offers. The Company will pay all charges
and expenses, other than certain applicable taxes, in connection with the
Exchange Offer. See "The Exchange Offers -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean, with respect to either
Exchange Offer, 5:00 p.m., New York City time, on , 1998, unless
an Issuer, in its sole discretion, extends the Exchange Offer applicable to its
Old Notes, in which case the term "Expiration Date" shall mean the latest date
and time to which such Exchange Offer is extended. In any event, each Exchange
Offer will be held open for at least thirty (30) days. In order to extend its
Exchange Offer, the applicable Issuer will issue a notice of any extension by
press release or other public announcement prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Each Issuer reserves the right, in its sole discretion (i) to delay accepting
any Old Notes, to extend its Exchange Offer, or, if any of the conditions set
forth under "The Exchange Offers -- Conditions to the Exchange Offers" shall not
have been satisfied, to terminate such Exchange Offer by giving oral or written
notice of such delay, extension or termination to the applicable Exchange Agent,
as the case may be, or (ii) to amend the terms of its Exchange Offer in any
manner.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in an Exchange
Offer. Except as set forth under "The Exchange Offers -- Book Entry Transfer,"
to tender in an Exchange Offer a holder must complete, sign and date the
Letter of Transmittal applicable to such Exchange Offer, or a copy thereof,
have the signature-thereon guaranteed if required by such Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or copy
to the Exchange Agent for such Exchange Offer prior to the Expiration Date for
such Exchange Offer. In addition, either (i) certificates for such Old Notes
must be received by the Exchange Agent for such Exchange Offer along with the
Letter of Transmittal applicable to such Exchange Offer, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Old Notes, if that procedure is available, into the account of the Exchange
Agent for such Exchange Offer at (the "DTC") (the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described below,
must be received by such Exchange Agent prior to the Expiration Date, or (iii)
the Holder must comply with the guaranteed delivery procedures described
below. To be tendered effectively, a Letter of Transmittal and other required
documents must be received by the appropriate Exchange Agent at its address
set forth under "The Exchange Offers -- Exchange Agents" prior to the
Expiration Date.
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The tender by a holder that is not withdrawn before the Expiration
Date will constitute an agreement between that holder and the applicable
issuer in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal applicable to such Issuer's Exchange
Offer.
THE METHOD OF DELIVERY OF OLD NOTES, A LETTER OF TRANSMITTAL, AND ALL
OTHER REQUIRED DOCUMENTS TO AN EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE ISSUERS. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES, OR NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender should contact the registered holder promptly and instruct
the registered holder to tender on the beneficial owner's behalf. If the
beneficial owner wishes to tender on the owner's own behalf, the owner must,
prior to completing and executing a Letter of Transmittal and delivering the
owner's Old Notes, either make appropriate arrangements to register ownership
of the Old Notes in the beneficial owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership
may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined
below) unless Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on such Letter of Transmittal
or (ii) for the account of an Eligible Institution. If signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, the guarantee must be by any eligible guarantor institution
that is a member of or participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program, the Stock
Exchange Medallion Program, or an "Eligible Guarantor Institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If a Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a property completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.
If a Letter of Transmittal or any Old Notes or bond powers are signed
by trustee, executors, administrators, guardians, attorneys-in-fact, officers
of corporations, or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and evidence satisfactory to the
relevant issuer of their authority to so act must be submitted with such
Letter of Transmittal unless waived by the relevant Issuer.
All questions as to the validity, form, eligibility (including time
of receipt), acceptance, and withdrawal of tendered Old Notes will be
determined by the Issuers in their sole discretion, which determination will
be final and binding. Each Issuer reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the acceptance of
which would, in the opinion of counsel for such Issuer, be unlawful. Each
Issuer also reserves the right to waive any defects, irregularities, or
conditions of tender as to particular Old Notes. An Issuer's interpretation of
the terms and conditions of its Exchange Offer (including the instructions in
a Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Issuer of such Old Notes shall
determine. Although each Issuer intends to notify holders of defects or
irregularities with respect to tenders of Old Notes,
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neither the Issuers, the Exchange Agent, nor any other person shall incur any
liability for failure to give such notification. Tenders of Old Notes will not
be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
property tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in the Letter of Transmittal accompanying
such Old Notes, as soon as practicable following the Expiration Date.
In addition, each Issuer reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offers --Conditions to
the Exchange Offer," to terminate its Exchange Offer and, to the extent
permitted by applicable law, purchase Old Notes in the open market, in
privately negotiated transactions, or otherwise. The terms of any such
purchases or offers could differ from the terms of such Issuer's Exchange
Offer.
By tendering, each holder will represent that, among other things,
(i) the New Notes acquired pursuant to such Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder of the Old Notes, (ii) neither the
holder nor any such other person is engaging or intends to engage in a
distribution of such New Notes, (iii) neither the holder nor any such other
person has an arrangement or understanding with any person to participate in
the distribution of such New Notes within the meaning of the Securities Act,
(iv) neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 promulgated under the Securities Act, of, in the case
of the Old Holdings Notes, Holdings, and, in the case of the Old Company
Notes, the Company or any Guarantor, and (v) if such holder or other person is
a broker-dealer, that it will receive New Notes for its own account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
In all cases, issuance of New Notes for Old Notes that are accepted
for exchange pursuant to an Exchange Offer will be made only after timely
receipt by the Exchange Agent for such Exchange Offer of certificates for such
Old Notes or a timely Book-Entry Confirmation of such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility, a property
completed and duty executed Letter of Transmittal (or, with respect to the DTC
and its participants, electronic instructions in which the tendering holder
acknowledges its receipt of and agreement to be bound by the Letter of
Transmittal for such Exchange Offer) and all other required documents. If any
tendered Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer for such Old Notes or if Old Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Old Notes will be returned without expense to
the tendering Holder thereof (or, in the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer for such Old Notes.
BOOK-ENTRY TRANSFER
The Exchange Agent will make requests to establish accounts with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offers within two business days after the date of
this Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of Old
Notes being tendered by causing the Book-Entry Transfer Facility to transfer
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Old Notes may be effected
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through book-entry transfer at the Book-Entry Transfer Facility, a Letter of
Transmittal or copy thereof, with any required signature guarantees and any
other required documents, must, in any case other than as set forth in the
following paragraph, be transmitted to and received by the Exchange Agent at
its address set forth under "The Exchange Offers -- Exchange Agents" on or
prior to the Expiration Date or the guaranteed delivery below must be complied
with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept an Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through
DTC's communication system in place of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the participant's acknowledgment of its receipt of and agreement to be
bound by the Letter of Transmittal for such Old Notes.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible institution a property completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the issuer of the
Old Notes tendered (by telegram, telex, facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of such Old Notes
and the amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the applicable Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry confirmation, as the case may be, and all other
documents required by the applicable Letter of Transmittal, are received by
the Exchange Agent within three NYSE trading days after the date of execution
of the Notice of Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written
or (for a DTC participant) electronic ATOP transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth in this
Prospectus prior to 5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the
Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Old Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee of such
Old Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender, and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the holder who tendered such
Old Notes. All questions as to the validity, form,
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and eligibility (including time of receipt) of such notices will be determined
by the Issuer of the Old Notes subject to such notice, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer relating to such Old Notes. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender, or termination of the
Exchange Offer relating to such Old Notes. Property withdrawn Old Notes may be
retendered by following one of the procedures under "The Exchange Offers --
Procedures for Tendering" at any time on or prior to the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFERs
Notwithstanding any other provision of the Exchange Offers, an Issuer
shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes and may terminate or amend such Issuer's Exchange
Offer if at any time before the acceptance of such Old Notes for exchange or
the exchange of the New Notes for such Old Notes, such Issuer determines that
its Exchange Offer violates applicable law, any applicable interpretation of
the staff of the Commission or any order of any governmental agency or court
of competent jurisdiction.
The foregoing conditions are for the sole benefit of the Issuers and
may be asserted by the Issuers regardless of the circumstances giving rise to
any such condition or may be waived by the Issuers in whole or in part at any
time and from time to time in their sole discretion. The failure by an Issuer
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
In addition, an Issuer will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus is a part or the
qualification of the indenture relating to such Issuer's New Notes under the
Trust Indenture Act of 1939, as amended (the "TIA"). In any such event the
Issuer is required to use every reasonable effort to obtain the withdrawal of
any stop order at the earliest possible time.
EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the
Exchange Agent. PNC Bank, National Association ("PNC") has been appointed as
the Exchange Agent. PNC is also the Trustee under the Holdings Notes Indenture
and the Company Notes Indenture. PNC and Chase Manhattan Trust Company,
National Association ("Chase") have entered into an agreement (the "PNC/Chase
Agreement") pursuant to which PNC's corporate trust and escrow business will
be purchased by Chase upon the satisfaction of certain pre-closing conditions
and the issuance of appropriate regulatory approvals. Accordingly, if the
PNC/Chase Agreement is
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consummated, Chase will become the Holdings Exchange Agent, the Company
Exchange Agent, and the Trustee under the Indentures. Questions, requests for
assistance and requests for additional copies of the Prospectus or a Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
PNC Bank, National Association
Corporate Trust Department
Two Tower Center Boulevard, 20th floor
East Brunswick, New Jersey 08816
Attn: Julie Salovitch-Miller, Vice President
Phone: 732-220-3733
Fax: 732-220-3745
FEES AND EXPENSES
The Issuers will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offers. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Issuers.
The estimated cash expenses to be incurred in connection with the
Exchange Offers will be paid by the Issuers and are estimated in the aggregate
to be $250,000, which includes fees and expenses of the Trustees for the Old
Notes, accounting, legal, printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith except that holders who
instruct an Issuer to register New Notes in the name of, or request that Old
Notes not tendered or not accepted in an Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
DESCRIPTION OF THE NEW COMPANY NOTES
The New Company Notes will be issued under an indenture (the "Company
Notes Indenture"), dated as of May 1, 1998, by and among the Company, the
Guarantors and PNC Bank, National Association, as Trustee (the "Trustee"). The
following summary of certain provisions of the Company Notes Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the TIA, and to all of the provisions of the Company Notes
Indenture, including the definitions of certain terms therein and those terms
made a part of the Company Notes Indenture by reference to the TIA as in
effect on the date of the Company Notes Indenture. A copy of the Company Notes
Indenture may be obtained from the Company or the Initial Purchaser. The
definitions of certain capitalized terms used in this section are set forth
below under "--Certain Definitions."
Principal, Maturity and Interest
The New Company Notes are unsecured senior obligations of the
Company. The New Company Notes are limited in aggregate principal amount to
$120.0 million, and will mature on May 1, 2005. Interest on the New Company
Notes will accrue at the rate of 10 1/2% per annum and will be payable
semiannually in cash on each
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May 1 and November 1, commencing on November 1, 1998, to the persons who are
registered Holders (as defined) at the close of business on the April 15 and
October 15 immediately preceding the applicable interest payment date.
Interest on the New Company Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from and
including the date of issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
The New Company Notes will be issued in fully registered form only,
without coupons, in denominations of $1,000 and integral multiples thereof.
Initially, the Trustee will act as Paying Agent and Registrar for the New
Company Notes. The New Company Notes may be presented for registration or
transfer and exchange at the offices of the Registrar, which initially will be
the Trustee's corporate trust operations office. The Company may change any
Paying Agent and Registrar without notice to holders of the New Company Notes
(the "Holders"). The Company will pay principal (and premium, if any) on the
New Company Notes at the Trustee's corporate trust operations office in
Pittsburgh, Pennsylvania. The Company will maintain an office in New York, New
York and will also pay principal (and premium, if any) on the New Company
Notes at the Company's offices in New York, New York. At the Company's option,
interest (and premium, if any) may be paid at the Trustee's corporate trust
operations office or by check mailed to the registered address of Holders. Any
Old Company Notes that remain outstanding after the completion of the Exchange
Offer, together with the New Company Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Company Notes Indenture.
The New Company Notes will not be entitled to the benefit of any
mandatory sinking fund.
Redemption
Optional Redemption. The New Company Notes will be redeemable, at the
Company's option, in whole or in part at any time, on and after May 1, 2002,
upon not less than 30 nor more than 60 days notice, at the following
redemption prices (expressed as percentages of the principal amount thereof)
if redeemed during the twelve-month period commencing on May 1 of the year set
forth below, plus, in each case, accrued and unpaid interest thereon, if any,
to the date of redemption:
Year Percentage
- ---- ----------
2002 ................................................... 105.250%
2003 ................................................... 102.625%
2004 and thereafter..................................... 100.000%
Optional Redemption upon Public Equity Offerings. At any time, or
from time to time, on or prior to May 1, 2001, the Company may, at its option,
use the net cash proceeds of one or more Public Equity Offerings (as defined
below) of the Company or Holdings to redeem up to 35% of the originally issued
aggregate principal amount of the New Company Notes at a price equal to
110.500% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that at least 65% of the
principal amount of New Company Notes originally issued remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, (i) the Company
shall make such redemption not more than 120 days after the closing of any
such Public Equity Offering and (ii) in the case of a Public Equity Offering
by Holdings, the Company is a wholly owned subsidiary of Holdings and the
proceeds
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thereof in an amount sufficient to effect such redemption shall be contributed
to the Company as common equity capital.
Selection and Notice of Redemption
In the event that less than all of the New Company Notes are to be
redeemed at any time, selection of such New Company Notes for redemption will
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which such New Company Notes are
listed or, if such New Company Notes are not then listed on a national
securities exchange, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided, however, that no New
Company Notes of a principal amount of $1,000 or less shall be redeemed in
part; provided, further, that if a partial redemption is made with the
proceeds of a Public Equity Offering, selection of the New Company Notes or
portions thereof for redemption shall be made by the Trustee only on a pro
rata basis or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days
before the redemption date to each Holder of New Company Notes to be redeemed
at its registered address. If any New Company Note is to be redeemed in part
only, the notice of redemption that relates to such New Company Note shall
state the portion of the principal amount thereof to be redeemed. A new note
in a principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original New
Company Note. On and after the redemption date, interest will cease to accrue
on New Company Notes or portions thereof called for redemption as long as the
Company has deposited with the Paying Agent funds in satisfaction of the
applicable redemption price pursuant to the Company Notes Indenture.
Guarantees
Each Guarantor unconditionally guarantees, on a senior basis, jointly
and severally, to each Holder and the Trustee, the performance of the
Company's obligations under the Company Notes Indenture and the New Company
Notes, including the payment, when due, of principal of and interest on the
New Company Notes. The Guarantees will be effectively subordinated in right of
payment to all existing and future secured Indebtedness of the related
Guarantor to the extent of the value of the assets securing such Indebtedness.
Thus, in the event of an insolvency, bankruptcy, reorganization or liquidation
of a Guarantor, there may not be sufficient amounts remaining to satisfy the
claims of the Holders of New Company Notes with respect to the Guarantee of
such Guarantor after satisfying the claims of secured creditors of such
Guarantor and making provision for payment of the Indebtedness of such
Guarantor to its trade creditors, which Indebtedness is pari passu with the
Guarantee.
The obligations of each Guarantor are limited to the maximum amount
which, after giving effect to all other contingent and fixed liabilities of
such Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Guarantor in respect of the obligations of
such other Guarantor under its Guarantee or pursuant to its contribution
obligations under the Company Notes Indenture, will result in the obligations
of such Guarantor under the Guarantee not constituting a fraudulent conveyance
or fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in an amount pro rata, based on the net assets of
each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets
to the Company or another Guarantor that is a Wholly Owned Restricted Subsidiary
without limitation, or with other Persons upon the terms and conditions set
forth in the Company Notes Indenture. See "--Certain Covenants--Merger,
Consolidation and Sale of Assets." In the event all of the Capital Stock of a
Guarantor is sold by the Company and the sale complies
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with the provisions set forth in "--Certain Covenants--Limitation on Asset
Sales," the Guarantor's Guarantee will be released.
Separate financial statements of the Guarantors are not included
herein because such Guarantors are jointly and severally liable with respect
to the Company's obligations pursuant to the New Company Notes, and the
aggregate net assets, earnings and equity of the Guarantors and the Company
are substantially equivalent to the net assets, earnings and equity of the
Company on a consolidated basis.
Change of Control
The Company Notes Indenture will provide that upon the occurrence of
a Change of Control, each Holder will have the right to require that the
Company purchase all or a portion of such Holder's New Company Notes pursuant
to the offer described below (the "Change of Control Offer"), at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest to the date of purchase.
Within 30 days following the date upon which the Change of Control
occurred, the Company shall send, by first class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state, among other things, the
purchase date, which shall be a business day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, other than as may be
required by applicable law (the "Change of Control Payment Date"). Holders
electing to have a New Company Note purchased pursuant to a Change of Control
Offer will be required to surrender the New Company Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the New
Company Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third business day prior to the
Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that
the Company will have available funds sufficient to pay the Change of Control
purchase price for all the New Company Notes that might be delivered by
Holders seeking to accept the Change of Control Offer. In the event the
Company is required to purchase outstanding New Company Notes pursuant to a
Change of Control Offer, the Company expects that it would seek third party
financing to the extent it does not have available funds to meet its purchase
obligations. However, there can be no assurance that the Company would be able
to obtain such financing. Neither the Board of Directors of the Company nor
the Trustee may waive the covenant relating to a Holder's right to redemption
upon a Change of Control.
Restrictions in the Company Notes Indenture described herein on the
ability of the Company and its Restricted Subsidiaries to incur additional
Indebtedness, to grant Liens on its property, to make Restricted Payments and
to make Asset Sales may also make more difficult or discourage a takeover of
the Company, whether favored or opposed by the management of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the New Company Notes, and there can be no
assurance that the Company or the acquiring party will have sufficient
financial resources to effect such redemption or repurchase. Such restrictions
and the restrictions on transactions with Affiliates may, in certain
circumstances, make more difficult or discourage any leveraged buyout of the
Company or any of its Subsidiaries by the management of the Company. While
such restrictions cover a wide variety of arrangements which have
traditionally been used to effect highly leveraged transactions, the Company
Notes Indenture may not afford the Holders of New Company Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
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The Credit Agreement provides that certain change of control events
with respect to the Company (including a Change of Control) would constitute a
default thereunder. Any Permitted Refinancings of the Credit Agreement to
which the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when the Company
is prohibited from purchasing New Company Notes, the Company could seek the
consent of its lenders to the purchase of New Company Notes or could attempt
to repay the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing New Company Notes. In such case, the Company's
failure to purchase tendered New Company Notes would constitute an Event of
Default under the Company Notes Indenture which would, in turn, constitute a
default under the Credit Agreement.
The meaning of the phrase "all or substantially all" as used in the
definition of "Change of Control" with respect to a sale of assets varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree
of uncertainty in ascertaining whether a particular transaction would involve
a disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether a Change of Control has occurred and
whether the New Company Notes are subject to a Change of Control Offer.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of New Company Notes pursuant to a Change of Control Offer. To the
extent that the provisions of any securities laws or regulations conflict with
the "Change of Control" provisions of the Company Notes Indenture, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the "Change of Control"
provisions of the Company Notes Indenture by virtue thereof.
Certain Covenants
The Company Notes Indenture will contain, among others, the following
covenants:
Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock. The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (other
than Permitted Indebtedness) and the Company will not issue any Disqualified
Capital Stock and will not permit its Restricted Subsidiaries to issue any
Preferred Stock except Preferred Stock of a Restricted Subsidiary issued to
(and as long as it is held by) the Company or a Wholly Owned Restricted
Subsidiary of the Company; provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company and the
Guarantors may incur Indebtedness (including, without limitation, Acquired
Indebtedness) and the Company may issue Disqualified Capital Stock of the
Company, if, in either case, at the time of and immediately after giving pro
forma effect to such incurrence of such Indebtedness or the issuance of such
Disqualified Capital Stock, as the case may be, and the use of proceeds
therefrom, the Company's Consolidated Fixed Charge Coverage Ratio is greater
than 2.0 to 1.0.
The Company will not, and will not cause or permit any Guarantor to,
directly or indirectly, incur any Indebtedness that purports to be by its
terms (or by the terms of any agreement governing such Indebtedness)
subordinated to any other Indebtedness of the Company or of such Guarantor, as
the case may be, unless such Indebtedness is also by its terms (or by the
terms of any agreement governing such Indebtedness) made expressly
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subordinated to the New Company Notes or the Guarantee of such Guarantor, as
the case may be, to the same extent and in the same manner as such
Indebtedness is subordinated to such other Indebtedness.
For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described in the various clauses of the definition of
Permitted Indebtedness, the Company, in its sole discretion, shall classify
such item of Indebtedness and shall only be required to include the amount and
type of such Indebtedness in one of such clauses.
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any Restricted Subsidiary to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock, (b) redeem any Capital Stock
of the Company or Holdings or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock, or (c) make any Investment
(other than Permitted Investments) (each of the foregoing actions set forth in
clauses (a), (b), and (c) being referred to as a "Restricted Payment"), if at
the time of such Restricted Payment or immediately after giving effect
thereto, (i) a Default shall have occurred and be continuing or (ii) the
Company is not able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with the "Limitation on Incurrence
of Additional Indebtedness and Issuance of Disqualified Capital Stock"
covenant or (iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined reasonably and in good faith by the Board of
Directors of the Company) shall exceed the sum (the "Basket"), without
duplication, of: (v) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company earned subsequent to the Issue Date and on or prior to the date
the Restricted Payment occurs (the "Reference Date") (treating such period as
a single accounting period); plus (w) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Restricted Subsidiary of
the Company) from the issuance and sale subsequent to the Issue Date and on or
prior to the Reference Date of Qualified Capital Stock of the Company (other
than Qualified Capital Stock, the proceeds of which are to be used to redeem
New Company Notes pursuant to the provisions described under
"Redemption--Optional Redemption Upon Public Equity Offerings"); plus (x) 100%
of the net cash proceeds received by the Company from any Person (other than a
Restricted Subsidiary of the Company) from the issuance subsequent to the
Issue Date of Indebtedness convertible or exchangeable into Qualified Capital
Stock of the Company that has actually been so converted or exchanged,
together with the aggregate net cash proceeds received by the Company (other
than from a Restricted Subsidiary of the Company) at the time of such
conversion or exchange; plus (y) without duplication of any amounts included
in clause (iii)(x) above, 100% of the aggregate net cash proceeds of any
equity contribution received by the Company from a holder of the Company's
Capital Stock; plus (z) the amount equal to the net reduction in Investments
(other than Permitted Investments) made by the Company or any of its
Restricted Subsidiaries in any Person resulting from, and without duplication,
(i) repurchases or redemptions of such Investments by such Person, proceeds
realized upon the sale of such Investment to an unaffiliated purchaser and
repayments of loans or advances or other transfers of assets by such Person to
the Company or any Restricted Subsidiary of the Company or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investment") not to exceed, in
the case of any Restricted Subsidiary, the amount of Investments previously
made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was included in the calculation of Restricted
Payments; provided, however, that no amount shall be included under this
clause (z) to the extent it is already included in Consolidated Net Income.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
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dividend would have been permitted on the date of declaration; (2) if no
Default shall have occurred and be continuing, (i) the acquisition of any
shares of Capital Stock of the Company or Holdings solely in exchange for
shares of Qualified Capital Stock of the Company or Holdings, respectively, or
(ii) the making of any Restricted Payment from the net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company; (3) so long as
no Default shall have occurred and be continuing, repurchases by the Company
of Common Stock of Holdings from employees of the Company or any of its
Subsidiaries or their authorized representatives (other than Permitted
Holders) upon the death, disability or termination of employment of such
employees, in an aggregate amount not to exceed 5% of the cumulative
Consolidated Net Income of the Company earned subsequent to the Issue Date and
on or prior to the date such repurchase occurs; (4) any repurchase of equity
interests deemed to occur upon the exercise of stock options if such equity
interest represents a portion of the exercise price of such option; (5)
payments or other distributions to Holdings solely to enable Holdings to pay
audit, accounting, legal, Commission filing fees and similar expenses actually
incurred, to pay franchise or other similar taxes when due and to pay other
corporate overhead expenses of Holdings actually incurred, provided that such
expenses and taxes arise as a result of Holdings' Investment in the Company,
and provided further that the aggregate amount of such payments does not
exceed $1.0 million in any fiscal year; (6) payments to Holdings to fund taxes
due from Holdings for any given taxable year in an amount equal to the
Company's "separate return liability," as if the Company were the parent of a
consolidated group (for purposes of this clause (6), "separate return
liability" for a given taxable year shall mean the hypothetical United States
tax liability of the Company determined as if the Company had filed its own
United States federal tax return for such taxable year); (7) the payment to
Holdings of (i) any dividend or other distribution in an aggregate amount not
to exceed $600,000 in any fiscal year to permit Holdings to pay management
fees to P&E Properties or any of its Affiliates and (ii) any dividend or other
distribution to reimburse P&E Properties or any of its Affiliates for
reasonable services and out-of-pocket and other costs and expenses actually
incurred in connection with such services; and (8) if no Default shall have
occurred and be continuing, the payment to Holdings of any dividend or other
distribution to permit Holdings to pay cash interest when due on the Holdings
Notes on and after the fifth anniversary of the Issue Date. In determining the
aggregate amount of Restricted Payments made subsequent to the Issue Date in
accordance with clause (iii) of the immediately preceding paragraph, amounts
expended pursuant to clauses (1), (2)(ii), (3), (4), (7)(i) and (8) shall be
included in such calculation and amounts expended pursuant to clause (2)(i),
(5), (6) and (7)(ii) shall not be included in such calculation.
The amount of any non-cash Restricted Payment shall be the fair
market value, on the date such Restricted Payment is made, of the assets or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted
Payment. The fair market value of any non-cash Restricted Payment shall be
determined by the Board of Directors of the Company whose resolution with
respect thereto shall be delivered to the Trustee, such determination to be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if such fair market value exceeds
$1.5 million. Not later than 60 days after the end of any fiscal quarter (100
days in the case of the last fiscal quarter of the fiscal year) during which
any Restricted Payment is made, the Company shall deliver to the Trustee an
Officers' Certificate stating that all Restricted Payments made during such
fiscal quarter were permitted and setting forth the basis upon which the
calculations required by this covenant were computed, together with a copy of
any opinion or appraisal required by the Indenture.
Limitation on Asset Sales. The Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by the Company's Board of Directors), (ii) at least
80% of the consideration received by the Company or the Restricted Subsidiary,
as the case may be, from such Asset Sale
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shall be in the form of (x) cash or Cash Equivalents, (y) Replacement Assets
or (z) any combination of the foregoing and is received at the time of such
disposition; and (iii) upon the consummation of an Asset Sale, the Company
shall apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 270 days of receipt thereof either
(A) to prepay any Indebtedness incurred pursuant to clause (ii) or clause
(xii) of the definition of "Permitted Indebtedness" (other than subordinated
Indebtedness) and effect a permanent reduction thereunder, (B) to make an
investment in Replacement Assets or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) and (iii)(B). On the
271st day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines, as the
case may be, not to apply the Net Cash Proceeds relating to such Asset Sale as
set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding
sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of
Net Cash Proceeds which have not been applied on or before such Net Proceeds
Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of
the next preceding sentence (each a "Net Proceeds Offer Amount") shall be
applied by the Company or such Restricted Subsidiary to make an offer to
purchase (the "Net Proceeds Offer") on a date (the Net Proceeds Offer Payment
Date") not less than 30 nor more than 45 days following the applicable Net
Proceeds Offer Trigger Date, from all holders of New Company Notes and Pari
Passu Indebtedness (to the extent required by the terms of such Indebtedness)
on a pro rata basis based on the aggregate amount outstanding of New Company
Notes and Pari Passu Indebtedness requiring such an offer to be made, that
amount of New Company Notes and Pari Passu Indebtedness in the aggregate equal
to the Net Proceeds Offer Amount at a price equal to, with respect to the New
Company Notes, 100% of the principal amount of the New Company Notes to be
purchased, plus accrued and unpaid interest thereon, if any, to the date of
purchase, and with respect to any Pari Passu Indebtedness, an amount not
greater than 100% of the principal amount, or accreted value, of such Pari
Passu Indebtedness; provided, however, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary, as the
case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to
any such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. The Company may defer the
Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5,000,000 resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5,000,000, shall be applied as required pursuant
to this paragraph). Pending the final application of such Net Cash Proceeds,
the Company may temporarily cause the Guarantors to reduce Indebtedness under
the Revolving Credit Facility or invest such Net Cash Proceeds in Cash
Equivalents.
For purposes of clause (ii)(x) of the immediately preceding
paragraph, the term "cash" shall include the amount of any Indebtedness for
borrowed money or any Capitalized Lease Obligations (A) that is assumed by the
transferee of any assets or property which constitutes the Asset Sale or (B)
with respect to the sale or disposition of all of the Capital Stock of a
Restricted Subsidiary, that remains the liability of such Restricted
Subsidiary subsequent to such sale or other disposition, in each case provided
that there is no further recourse to the Company or any of its Restricted
Subsidiaries with respect to such Indebtedness.
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold
the properties and assets of the Company and its Restricted Subsidiaries not
so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets
of the Company or its Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
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Each Net Proceeds Offer will be mailed to the record Holders as shown
on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in the Company Notes Indenture. Upon receiving notice of the Net
Proceeds Offer, Holders may elect to tender their New Company Notes in whole
or in part in integral multiples of $1,000 in exchange for cash. To the extent
Holders properly tender New Company Notes in an amount exceeding the Net
Proceeds Offer Amount, New Company Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds
Offer shall remain open for a period of 20 business days or such longer period
as may be required by applicable law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of New Company Notes pursuant to a Net Proceeds Offer. To the
extent that the provisions of any securities laws or regulations conflict with
the "Asset Sale" provisions of the Company Notes Indenture, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached or violated any of its obligations under the "Asset
Sale" provisions of the Company Notes Indenture by virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary; or (c) transfer any of its property or assets
to the Company or any other Restricted Subsidiary, except for such
encumbrances or restrictions existing under or by reason of: (1) applicable
law; (2) the Indentures; (3) customary non-assignment provisions of any
contract or any lease governing a leasehold interest of any Restricted
Subsidiary; (4) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person or the properties or assets of
the Person so acquired; (5) agreements existing on the Issue Date, including
the Credit Agreement, to the extent and in the manner such agreements are in
effect on the Issue Date; (6) an agreement governing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4) or (5) above; provided, however, that
the provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less favorable, taken as a whole, to the Company in
any material respect as determined by the Board of Directors of the Company in
their reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (4), (5); or (7) restrictions imposed by any agreement to sell, or
otherwise dispose of, assets pending the closing of such sale.
Limitation on Liens. The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or permit or suffer to exist any Liens of any kind against or
upon any property or assets of the Company or any of its Restricted
Subsidiaries whether owned on the Issue Date or acquired after the Issue Date,
or any proceeds therefrom, or assign or otherwise convey any right to receive
income or profits therefrom unless (i) in the case of Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to
the New Company Notes, the New Company Notes are secured by
a Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the New Company Notes are equally and
ratably secured, except for (1) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date; (2)
Indebtedness incurred pursuant to clause (ii) of the definition of "Permitted
Indebtedness"; (3) Liens securing the New Company Notes and the Guarantees;
(4) Liens of the Company or a Wholly Owned Restricted Subsidiary on assets of
any Restricted Subsidiary; (5)
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Liens securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under the Company
Notes Indenture and which has been incurred in accordance with the provisions
of the Company Notes Indenture; provided, however, that such Liens (x) are no
less favorable, taken as a whole, to the Holders and are not more favorable to
the lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced and (y) do not extend to or cover any property
or assets of the Company or any of its Restricted Subsidiaries not securing
the Indebtedness so Refinanced; and (6) Permitted Liens.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or series of related transactions, consolidate or merge
with or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of
the Company's assets (determined on a consolidated basis for the Company and
the Company's Restricted Subsidiaries) whether as an entirety or substantially
as an entirety to any Person unless: (i) either (1) the Company shall be the
surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
the Person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Company and of the
Company's Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any state thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due
and punctual payment of the principal of, and premium, if any, and interest on
all of the New Company Notes and the performance of every covenant of the New
Company Notes and the Company Notes Indenture on the part of the Company to be
performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
such transaction), the Company or such Surviving Entity, as the case may be,
shall be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the "--Limitation on Incurrence of
Additional Indebtedness and Issuance of Disqualified Capital Stock" covenant;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture, comply with the applicable provisions of the Company
Notes Indenture and that all conditions precedent in the Company Notes
Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all
or substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Company Notes Indenture will provide that upon any consolidation,
combination or merger or any transfer of all or substantially all of the
assets of the Company in accordance with the foregoing, in which the Company
is not the continuing corporation, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted
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for, and may exercise every right, power and privilege of, the Company under
the Company Notes Indenture and the New Company Notes with the same effect as
if such surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and the Company Note
Indenture in connection with any transaction complying with the provisions of
"--Limitation on Asset Sales") will not, and the Company will not cause or
permit any Guarantor to, consolidate with or merge with or into any Person
other than the Company or any other Guarantor unless: (i) the entity formed by
or surviving any such consolidation or merger (if other than the Guarantor) or
to which such sale, lease, conveyance or other disposition shall have been
made is a corporation organized and existing under the laws of the United
States or any state thereof or the District of Columbia; (ii) such entity
assumes by supplemental indenture all of the obligations of the Guarantor on
the Guarantee; (iii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and (iv)
immediately after giving effect to such transaction and the use of any net
proceeds therefrom on a pro forma basis, the Company could satisfy the
provisions of clause (ii) of the first paragraph of this covenant. Any merger
or consolidation of a Guarantor with and into the Company (with the Company
being the surviving entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary need only comply with clause (iv) of the first paragraph
of this covenant.
Limitations on Transactions with Affiliates. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable, taken as a whole,
than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other
property with a fair market value in excess of $500,000 shall be approved by
the Board of Directors of the Company or such Restricted Subsidiary, as the
case may be, such approval to be evidenced by a Board Resolution stating that
such Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Restricted Subsidiary enters into
an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value of more
than $1,500,000, the Company or such Restricted Subsidiary, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as to
the fairness of such transaction or series of related transactions to the
Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the
same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary in the ordinary course as determined in good faith by the Company's
Board of Directors; (ii) transactions exclusively between or among the Company
and any of its Wholly Owned Restricted Subsidiaries or exclusively between or
among such Wholly Owned Restricted Subsidiaries, provided such transactions
are not otherwise prohibited by the Company Notes Indenture; (iii) any written
agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto
so long as any such amendment is not more disadvantageous to the Holders in
any material respect than the agreement as in effect on the Issue Date); (iv)
loans or advances to employees of the Company or any Restricted Subsidiary
(other than Permitted Holders) in the ordinary course and in an aggregate
amount not to exceed $250,000 at any one time outstanding; (v) payments (A) to
P&E Properties or any of its Affiliates in an aggregate amount not to exceed
$600,000 in any fiscal year to pay management fees and (B) to reimburse P&E
Properties
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or any of its Affiliates for reasonable services and out-of-pocket costs and
other expenses actually incurred in connection with such services; and (vi)
payments permitted by the "Limitation on Restricted Payments" covenant.
Additional Subsidiary Guarantees. If the Company or any of its
Restricted Subsidiaries transfers or causes to be transferred, in one
transaction or a series of related transactions, any property to any
Restricted Subsidiary that is not a Guarantor, or if the Company or any of its
Restricted Subsidiaries shall organize, acquire or otherwise invest in another
Restricted Subsidiary, then such transferee or acquired or other Restricted
Subsidiary shall (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which
such Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the New Company Notes and the Company Notes
Indenture on the terms set forth in the Company Notes Indenture and (ii)
deliver to the Trustee an opinion of counsel that such supplemental indenture
has been duly authorized, executed and delivered by such Restricted Subsidiary
and constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary. Thereafter, such Restricted Subsidiary shall be a
Guarantor for all purposes of the Company Notes Indenture.
Subsidiaries. The Company shall not have any Subsidiaries except
Wholly Owned Restricted Subsidiaries and Unrestricted Subsidiaries.
Designation of Unrestricted Subsidiaries. The Company may designate
after the Issue Date any Subsidiary of the Company as an "Unrestricted
Subsidiary" under the Company Notes Indenture (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation; and
(ii) the Company would be permitted to make an Investment (other than
a Permitted Investment) at the time of such Designation (assuming the
effectiveness of such Designation) pursuant to the "Limitation on Restricted
Payments" covenant in an amount (the "Designation Amount") equal to the fair
market value of the Company's proportionate interest in the net worth of such
Subsidiary on such date calculated in accordance with GAAP.
Neither the Company nor any Restricted Subsidiary shall at any time
(x) provide credit support for or guarantee any Indebtedness of any
Unrestricted Subsidiary (including any undertaking, agreement or instrument
evidencing such Indebtedness); provided, that the Company may pledge equity
interests or Indebtedness of any Unrestricted Subsidiary on a nonrecourse
basis such that the pledgee has no claim whatsoever against the Company other
than to obtain such pledged property, (y) be directly or indirectly liable for
any Indebtedness of any Unrestricted Subsidiary or (z) be directly or
indirectly liable for any Indebtedness of an Unrestricted Subsidiary which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary, except for
any nonrecourse guarantee given solely to support the pledge by the Company of
the capital Stock of any Unrestricted Subsidiary. For purposes of the
foregoing, the Designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be deemed to include the Designation of all of the
Subsidiaries of such Subsidiary.
Any such Designation by the Company shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving
effect to such Designation and an officers' certificate certifying that such
designation complied with the foregoing provisions.
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Conduct of Business. The Company and its Restricted Subsidiaries will
not engage in any businesses other than Permitted Businesses.
Reports to Holders. The Company will deliver to the Trustee within 15
days after the filing of the same with the Commission, copies of the quarterly
and annual reports and of the information, documents and other reports, if
any, which the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. The Company Notes Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the
Trustee and Holders with such annual reports and such information, documents
and other reports specified in Sections 13 and 15(d) of the Exchange Act. The
Company will also comply with the other provisions of TIA Section 314(a). In
addition, for so long as any New Company Notes remain outstanding, the Company
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act, and, to any beneficial
holder of New Company Notes, if not obtainable from the SEC, information of
the type that would be filed with the SEC pursuant to the foregoing
provisions, upon the request of any such holder.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee or stockholder, as such, of the
Company, the Guarantors or any of their respective Affiliates, or any of their
respective heirs, estates or personal representatives, shall have any
liability for any obligations of the Company under the New Company Notes or
the Company Notes Indenture or for any claim based on, or in respect of, or by
reason of, such obligations or their creation. Each holder of New Company
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the New Company
Notes.
Events of Default
The following events are defined in the Company Notes Indenture as
"Events of Default":
(i) the failure to pay interest on any New Company Notes when the
same becomes due and payable and the default continues for a period of 30
days;
(ii) the failure to pay the principal on any New Company Notes, when
such principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase New Company
Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer);
(iii) a default in the observance or performance of any other
covenant or agreement contained in the Company Notes Indenture which default
continues for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from the
Trustee or the Holders of at least 25% of the outstanding principal amount of
the New Company Notes (except in the case of a default with respect to the
"Merger, Consolidation and Sale of Assets" covenant, which will constitute an
Event of Default with such notice requirement but without such passage of time
requirement);
(iv) a default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of the Company or any Significant
Subsidiaries having an outstanding principal amount of $2,000,000 or more
individually or in the aggregate that has resulted in the acceleration of the
payment of such Indebtedness or failure by the Company or any Significant
Subsidiary to pay principal when due at the stated
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maturity of any such Indebtedness and such default or defaults shall have
continued after any applicable grace period and shall not have been cured or
waived;
(v) one or more judgments in an aggregate amount in excess of
$2,000,000 shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become final
and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null and void and unenforceable or any
of the Guarantees is found to be invalid or any of the Guarantors denies its
liability under its Guarantee (other than by reason of release of a Guarantor
in accordance with the terms of the Company Notes Indenture).
If an Event of Default (other than an Event of Default specified in
clause (vi) above with respect to the Company) shall occur and be continuing,
the Trustee or the Holders of at least 25% in principal amount of outstanding
New Company Notes may declare the principal of and accrued interest on all the
New Company Notes to be due and payable by notice in writing to the Company
and the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same shall
become immediately due and payable. If an Event of Default specified in clause
(vi) above with respect to the Company occurs and is continuing, then all
unpaid principal of, and premium, if any, and accrued and unpaid interest on
all of the outstanding New Company Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
The Company Notes Indenture provides that, at any time after a
declaration of acceleration with respect to the New Company Notes as described
in the preceding paragraph, the Holders of a majority in principal amount of
the New Company Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any outstanding
judgment or judicial decree, (ii) if all existing Events of Default have been
cured or waived except nonpayment of principal or interest that has become due
solely because of the acceleration, (iii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the New Company
Notes may waive any existing Default or Event of Default under the Company
Notes Indenture, and its consequences, except a default in the payment of the
principal of or interest on any New Company Notes.
Holders of the New Company Notes may not enforce the Company Notes
Indenture or the New Company Notes except as provided in the Company Notes
Indenture and under the TIA. Subject to the provisions of the Company Notes
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Company Notes
Indenture at the request, order or direction of any of the Holders, unless
such Holders have offered to the Trustee reasonable indemnity. Subject to all
provisions of the Company Notes Indenture and applicable law, the Holders of a
majority in aggregate principal amount of the then
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outstanding New Company Notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee.
Under the Company Notes Indenture, the Company is required to provide
an officers' certificate to the Trustee promptly upon any such officer
obtaining knowledge of the occurrence of any Default or Event of Default
(provided that such officers shall provide such certification at least
annually whether or not they know of any Default or Event of Default) that has
occurred and, if applicable, describe such Default or Event of Default and the
status thereof.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to
the outstanding New Company Notes ("Legal Defeasance"). Such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding New Company Notes, except for (i)
the rights of Holders to receive payments in respect of the principal of,
premium, if any, and interest on the New Company Notes when such payments are
due, (ii) the Company's obligations with respect to the New Company Notes
concerning issuing temporary New Company Notes, registration of New Company
Notes, mutilated, destroyed, lost or stolen New Company Notes and the
maintenance of an office or agency for payments, (iii) the rights, powers,
trust, duties and immunities of the Trustee and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Company
Notes Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Company Notes Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the New Company
Notes. In the event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, reorganization and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the New Company Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the New
Company Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Company Notes Indenture,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance shall not result in a breach or violation of, or
constitute a default
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under the Company Notes Indenture or any other material agreement or
instrument to which the Company or any of its Significant Subsidiaries is a
party or by which the Company or any of its Significant Subsidiaries is bound;
(vi) the Company shall have delivered to the Trustee an officers' certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and (vii) the Company shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent provided for or relating to the Legal Defeasance or
the Covenant Defeasance have been complied with. Notwithstanding the
foregoing, the opinion of counsel required by clause (ii) above with respect
to a Legal Defeasance need not be delivered if all New Company Notes not
therefore delivered to the Trustee for cancellation (x) have become due and
payable, (y) will become due and payable on the maturity date within one year
or (z) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
Satisfaction and Discharge
The Company Notes Indenture will be discharged and will cease to be
of further effect (except as to surviving rights or registration of transfer
or exchange of the New Company Notes, as expressly provided for in the Company
Notes Indenture) as to all outstanding New Company Notes when (i) either (a)
all the New Company Notes theretofore authenticated and delivered (except
lost, stolen or destroyed New Company Notes which have been replaced or paid
and New Company Notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter repaid
to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation or (b) all New Company Notes not theretofore
delivered to the Trustee for cancellation have become due and payable and the
Company has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire Indebtedness on
the New Company Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the New
Company Notes to the date of deposit together with irrevocable instructions
from the Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; (ii) the Company has
paid all other sums payable under the Company Notes Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate
and an opinion of counsel stating that all conditions precedent under the
Company Notes Indenture relating to the satisfaction and discharge of the
Company Notes Indenture have been complied with.
Modification of the Company Notes Indenture
From time to time, the Company, the Guarantors and the Trustee,
without the consent of the Holders, may amend the Company Notes Indenture for
certain specified purposes, including curing ambiguities, defects
or inconsistencies, so long as such change does not, in the opinion of the
Trustee, adversely affect the rights of any of the Holders in any material
respect. In formulating its opinion on such matters, the Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an opinion of counsel. Other modifications and
amendments of the Company Notes Indenture may be made with the consent of the
Holders of a majority in principal amount of the then outstanding New Company
Notes issued under the Company Notes Indenture, except that, without the
consent of each Holder affected thereby, no amendment may: (i) reduce the
amount of New Company Notes whose Holders must consent to an amendment; (ii)
reduce the rate of or change or have the effect of changing the time for
payment of interest, including defaulted interest, on any New Company Notes;
(iii) reduce the principal of or change or have the effect of changing the
fixed maturity of any New Company Notes, or change the date on which any New
Company Notes may be subject to redemption or repurchase, or reduce the
redemption or repurchase price therefor; (iv) make any New Company Notes
payable in money other than that stated in the New Company Notes; (v) make any
change in provisions of the Company
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Notes Indenture protecting the right of each Holder to receive payment of
principal of and interest on the New Company Notes on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of the New Company Notes to waive Defaults or
Events of Default; (vi) amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Control Offer in
the event of a Change of Control or make and consummate a Net Proceeds Offer
with respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto; (vii) subordinate the New
Company Notes or any Guarantee to any other obligation of the Company or such
Guarantor, as the case may be; or (viii) release any Guarantor from any of its
obligations under its Guarantee or the Company Notes Indenture, other than in
accordance with the terms of the Company Notes Indenture.
Governing Law
The Company Notes Indenture provides that it, the New Company Notes
and the Guarantees will be governed by, and construed in accordance with, the
laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law
of another jurisdiction would be required thereby.
The Trustee
The Company Notes Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties
as are specifically set forth in the Company Notes Indenture. During the
existence of an Event of Default, the Trustee will exercise such rights and
powers vested in it by the Company Notes Indenture, and use the same degree of
care and skill in its exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
The Company Notes Indenture and the provisions of the TIA contain
certain limitations on the rights of the Trustee, should it become a creditor
of the Company, to obtain payments of claims in certain cases or to realize on
certain property received in respect of any such claim as security or
otherwise. Subject to the TIA, the Trustee will be permitted to engage in
other transactions; provided that if the Trustee acquires any conflicting
interest as described in the TIA, it must eliminate such conflict within 30
days, obtain permission within 30 days from the Commission to continue as
Trustee or resign.
PNC and Chase have entered into the PNC/Chase Agreement pursuant to
which PNC's corporate trust and escrow business will be purchased by Chase
upon the satisfaction of certain pre-closing conditions and the issuance of
appropriate regulatory approvals. Accordingly, if the PNC/Chase Agreement is
consummated, Chase will become the Holdings Exchange Agent, the Company
Exchange Agent, and the Trustee under the Company Notes Indenture.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in
the Company Notes Indenture. Reference is made to the Company Notes Indenture
for the full definition of all such terms, as well as any other terms used
herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with the Company or any of its
Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in
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each case not incurred by such Person in connection with, or in anticipation
or contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other
Person who, directly or indirectly, through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or by contract; and
the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"amend" means amend, modify, supplement, restate or amend and
restate, including successively; and "amending" and "amended" have correlative
meanings.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or any Restricted Subsidiary, or shall be
merged with or into the Company or any Restricted Subsidiary, or (b) the
acquisition by the Company or any Restricted Subsidiary of the assets of any
Person (other than a Restricted Subsidiary) which constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer by the Company or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than the Company or a Restricted Subsidiary of (a) any Capital
Stock of any Restricted Subsidiary; or (b) any other property or assets of the
Company or any Restricted Subsidiary other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) the sale
or disposition of inventory in the ordinary course of business, (ii) the sale
or other disposition of obsolete, worn out, damaged or otherwise unsuitable or
unnecessary equipment or other obsolete assets, (iii) the exchange of assets
for other non-cash assets that are (a) useful in the Permitted Business and
(b) have a fair market value at least equal to the fair market value of the
assets being exchanged (as determined by the Board of Directors in good
faith), (iv) the sale or other disposition of Cash Equivalents, (v) the grant
of any license of intellectual property rights in the ordinary course of
business, (vi) any transaction or series of related transactions in any fiscal
year for which the Company or its Restricted Subsidiaries receive aggregate
consideration of less than $1.0 million and (vii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under "Merger, Consolidation and Sale of Assets."
"Board of Directors" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be
in full force and effect on the date of such certification, and delivered to
the Trustee.
"Borrowing Base Amount" means, as of the date of determination, an
amount equal to the sum, without duplication, of (i) 80% of the book value of
the accounts receivable and (ii) 55% of the book value of the inventories of
the Company and its Restricted Subsidiaries, taken as a whole, as set forth in
the most recent monthly consolidated financial statements of the Company
prepared and determined in accordance with GAAP.
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"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, equity interests, participations or other
equivalents (however designated and whether or not voting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified
and accounted for as capital lease obligations under GAAP and, for purposes of
this definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or 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 one of the two highest ratings
obtainable from either Standard & Poor's Corporation or any successor thereto
("S&P") or Moody's Investors Service, Inc. or any successor thereto
("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 (or the equivalent successor rating) from S&P or at least P-1 (or
the equivalent successor rating) from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States of
America or any state thereof or the District of Columbia or any U.S. branch of
a foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; (v) repurchase obligations with a term
of not more than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
of the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of the Company Notes Indenture) other than to Holdings or a wholly owned
Subsidiary of Holdings (or any successor thereto) or any Permitted Holder;
(ii) the approval by the holders of Capital Stock of the Company of any plan
or proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of the Company Notes Indenture);
(iii) any Person or Group (other than the Permitted Holders) shall become the
owner, directly or indirectly, beneficially or of record, of shares
representing more than 50% of the aggregate ordinary voting power represented
by the issued and outstanding Capital Stock of the Company; or (iv) the
replacement of a majority of the Board of Directors of the Company over a
two-year period from the directors who constituted the Board of Directors of
the Company at the beginning of such period, and such replacement shall not
have been approved by a vote of at least a majority of the Board of Directors
of the Company then still in office who either were members of such Board of
Directors at the beginning of such period or whose election as a member of
such Board of Directors was previously so approved.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person"s common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
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"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii)
to the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable
to sales or dispositions outside the ordinary course of business), (B)
Consolidated Interest Expense and (C) Consolidated Non-Cash Charges less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or the repayment, repurchase, defeasance or other discharge of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment
of Indebtedness in the ordinary course of business for working capital
purposes pursuant to working capital facilities, occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four Quarter
Period and on or prior to the Transaction Date, as if such incurrence or the
repayment, repurchase, defeasance or other discharge, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the
Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including or excluding, as applicable, any Consolidated
EBITDA (including any pro forma expense and cost reductions) whether positive
or negative attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale, as the case may be, during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction Date, as if
such Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the
preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such Person had
directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated
Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on such Indebtedness in
effect on the Transaction Date; and (2) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Swap Obligations, shall
be deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements. For purposes of this definition, whenever pro
forma effect is to be given to an Asset Acquisition, the amount of
Consolidated Net Income relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness incurred in connection
therewith, the pro forma calculations shall be determined in good faith by a
responsible financial or accounting officer of the Company.
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"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on
any series of Preferred Stock of such Person or its Subsidiaries (other than
dividends paid in Qualified Capital Stock) paid or accrued during such period
times (y) a fraction, the numerator of which is one and the denominator of
which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or
write-off of deferred financing costs, (b) the net costs under Interest Swap
Obligations, and (c) the interest portion of any deferred payment obligation;
and (ii) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Restricted Subsidiary of the referent Person or is
merged or consolidated with the referent Person or any Restricted Subsidiary
of the referent Person, (d) the net income (but not loss) of any Restricted
Subsidiary of the referent Person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that
income is restricted by a contract or operation of law, (e) the net income of
any Person, other than a Restricted Subsidiary of the referent Person, except,
for purposes of the covenant described under "Certain Covenants--Limitation on
Restricted Payments," to the extent of cash dividends or distributions paid to
the referent Person or to a Wholly Owned Restricted Subsidiary of the referent
Person by such Person, (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, and (g)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued).
"Consolidated Non-Cash Charges" means, with respect to any Person,
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges for any future period).
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of May 1, 1998, by and among Millbrook Distribution Services Inc.,
The B. Manischewitz Company, LLC, The Chase Manhattan Bank, as agent, and
NationsBank, N.A., as co-agent, and the lenders party thereto in their
capacities as lenders thereunder, together with the related agreements entered
into in connection therewith (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the "Limitation on Incurrence of
Additional Indebtedness and Issuance of Disqualified Capital Stock" covenant
above) or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all
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or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, co-agent,
lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the New Company Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto and the rules and regulations
promulgated thereunder.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company
acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, which are in
effect as of the Issue Date.
"Guarantor" means (i) each of the Company's Restricted Subsidiaries
existing on the Issue Date and (ii) each of the Company's Subsidiaries that in
the future executes a supplemental indenture in which such domestic Subsidiary
agrees to be bound by the terms of the Company Notes Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall
cease to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of the Company Notes Indenture.
"Holdings" means R.A.B. Holdings, Inc., a Delaware corporation.
"Holdings Notes" means the 13% Senior Notes due 2008 of R.A.B.
Holdings, Inc.
"Holdings Notes Indenture" means the indenture dated May 1, 1998,
between Holdings and the Trustee relating to the Holdings Notes.
"incur" means, with respect to any Indebtedness, to create, issue,
incur (including by conversion, exchange or otherwise), assume, guarantee or
otherwise become liable in respect of such Indebtedness (and "incurrence,"
"incurred" and "incurring" shall have meanings correlative to the foregoing).
Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary or is merged or consolidated with or into the Company or any
Restricted Subsidiary shall be deemed to be incurred at such time. The accrual
of interest or the accretion of original issue discount shall not be deemed to
be an incurrence.
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"Indebtedness" means with respect to any Person, without duplication,
(i) the principal amount of all indebtedness of such Person for borrowed
money, (ii) the principal amount of all indebtedness of such Person evidenced
by bonds, debentures, New Company Notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all indebtedness of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith), (v) reimbursement obligations of
such Person on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other similar contingent obligations in
respect of indebtedness or obligations referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all obligations of any other Person of
the type referred to in clauses (i) through (vi) which are secured by any lien
on any property or asset of such Person, the amount of such obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the obligation so secured and (viii) all obligations of such
Person under Currency Agreements and Interest Swap Obligations.
"Indentures" means the Company Notes Indenture and the Holdings Notes
Indenture.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company (excluding an interest consisting
solely of monies owed for services rendered) and (ii) which, in the judgment
of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
other Person calculated by applying a fixed or a floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition by such Person of
any Capital Stock, bonds, New Company Notes, debentures or other securities or
evidences of Indebtedness issued by, any other Person. "Investment" shall
exclude extensions of trade credit and
advances to customers by the Company and its Restricted Subsidiaries in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant, (i) "Investment" shall include and be valued at
the fair market value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
and shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by the Company or any of its Restricted Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or
any Restricted Subsidiary sells or otherwise disposes of any Common Stock of
any direct or indirect Restricted Subsidiary such that, after giving effect to
any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such
Restricted
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Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Old Company
Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, 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).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
aggregate proceeds in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations when received in the form of cash
or Cash Equivalents (other than the portion of any such deferred payment
constituting interest) and cash and Cash Equivalents received upon the
disposition of non-cash consideration received in any Asset Sale received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees incurred in connection with
such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable
after taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with
such Asset Sale and (d) appropriate amounts to be provided by the Company or
any Restricted Subsidiary, as the case may be, as a reserve, in accordance
with GAAP, against any liabilities associated with such Asset Sale and
retained by the Company or any Restricted Subsidiary, as the case may be,
after such Asset Sale.
"Obligations" means, with respect to any Indebtedness, all
obligations for principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any such Indebtedness.
"Pari Passu Indebtedness" means any Indebtedness of the Company
ranking pari passu in right of payment with the New Company Notes.
"Permitted Business" means the business of food manufacturing and
processing, food distribution and other businesses similar thereto or
reasonably related thereto, including without limitation, providing
merchandising services.
"Permitted Holders" means (i) Mr. Richard A. Bernstein, (ii) trusts
for the benefit of Mr. Bernstein and/or members of his immediate family and
(iii) in the event of the incompetence or death of Mr. Bernstein, his estate,
executor, administrator or other personal representative.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the New Company Notes, the Guarantees and the
Holdings Notes; and Permitted Refinancings thereof;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount, at any time outstanding, not to exceed the greater
of (x) $55 million and (y) the Borrowing Base Amount, in each case, less
mandatory, permanent repayments (excluding amounts refinanced as permitted
under the definition of Credit Agreement) actually made in respect of any
Indebtedness thereunder (which are accompanied by a permanent reduction in
commitment in the case of the Revolving Credit Facility);
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(iii) Permitted Refinancings of (x) other Indebtedness of the Company
or any Restricted Subsidiary to the extent outstanding on the Issue Date
reduced by the amount of any scheduled amortization payments or mandatory
prepayments when actually paid or permanent reductions thereon and (y)
Indebtedness incurred under the Consolidated Fixed Charge Coverage Ratio test
of the "Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock" covenant;
(iv) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any Restricted Subsidiary and Interest Swap Obligations of
any Restricted Subsidiary covering Indebtedness of such Restricted Subsidiary;
provided, however, that such Interest Swap Obligations are entered into to
protect the Company and its Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Indenture to
the extent the notional principal amount of such Interest Swap Obligation does
not exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency Agreements
are designed to protect the Company or any Restricted Subsidiary against
fluctuations in currency values and do not increase the Indebtedness of the
Company and its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary to the
Company or to a Wholly Owned Restricted Subsidiary for so long as such
Indebtedness is held by the Company or a Wholly Owned Restricted Subsidiary,
in each case subject to no Lien being held by a Person other than the Company
or a Wholly Owned Restricted Subsidiary; provided that if as of any date any
Person other than the Company or a Wholly Owned Restricted Subsidiary owns or
holds any such Indebtedness or holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary, in each case subject to no Lien; provided that (a) any
Indebtedness of the Company to any Wholly Owned Restricted Subsidiary is
unsecured and subordinated, pursuant to a written agreement, to the Company's
obligations under the Indenture and the New Company Notes and (b) if as of any
date any Person other than a Wholly Owned Restricted Subsidiary owns or holds
any such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Indebtedness permitted by this clause (vii);
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds
in the ordinary course of business; provided, however, that such Indebtedness
is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any Restricted Subsidiary (a)
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business and
(b) in respect of performance, surety or appeal bonds incurred in the ordinary
course of business;
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(x) Indebtedness of the Company or any Restricted Subsidiary (other
than for borrowed money) pursuant to agreements providing for indemnification,
purchase price adjustments and similar obligations that is incurred in the
ordinary course of business or in connection with the sale of a business,
assets or a Subsidiary;
(xi) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of the Company and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed $2.0 million at any
one time outstanding; and
(xii) Additional Indebtedness of the Company or any Restricted
Subsidiary in an amount not to exceed $25.0 million at any one time
outstanding; provided that such amount is incurred on or before the nine month
anniversary of the Issue Date; and provided further that, on or prior to the
nine month anniversary of the Issue Date, such amount is used to consummate
the acquisition of one or more Permitted Businesses that becomes, upon the
closing of such acquisition, a Restricted Subsidiary of the Company.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary or that will merge or consolidate into
the Company or a Restricted Subsidiary; (ii) Investments in the Company by any
Restricted Subsidiary; provided that any Indebtedness evidencing such
Investment is unsecured and subordinated, pursuant to a written agreement, to
the Company's obligations under the New Company Notes and the Company Notes
Indenture; (iii) investments in cash and Cash Equivalents; (iv) loans and
advances to employees and officers of the Company and its Restricted
Subsidiaries (other than to Permitted Holders) in the ordinary course of
business for bona fide business purposes not in excess of $250,000 at any one
time outstanding; (v) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Company's or its Restricted
Subsidiaries' businesses and otherwise in compliance with the Company Notes
Indenture; (vi) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers; (vii)
Investments made by the Company or its Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance
with the "Limitation on Asset Sales" covenant and (viii) Investments existing
on the Issue Date.
"Permitted Liens" means (a) Liens securing Acquired Indebtedness;
provided, however, that such Liens were in existence prior to the
contemplation of such acquisition, merger or consolidation and do not secure
any property or assets of the Company or any Restricted Subsidiary of the
Company other than the property or assets subject to the Liens prior to such
acquisition, merger or consolidation; (b) Liens imposed by law such as
carriers', warehousemen's and mechanic's Liens and other similar Liens arising
in the ordinary course of business which secure payment of obligations not
more than 30 days past due or which are being contested in good faith and by
appropriate proceedings; (c) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith; provided, however, that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(d) easements, reservation of rights of way, licenses of intellectual property
in the ordinary course and other similar restrictions on the use of properties
or assets, or minor imperfections of title that in the aggregate are not
material in amount and do not in any case materially detract from the
properties subject thereto or interfere with the ordinary conduct of the
business of the Company and its Restricted Subsidiaries; (e) Liens resulting
from the deposit of cash or New Company Notes in connection with contracts,
tenders or expropriation proceedings, or to secure workers' compensation,
surety or appeal bonds, costs of litigation when required by law and public
and statutory obligations or obligations under franchise arrangements entered
into in the ordinary course of business; (f) Liens securing Indebtedness
incurred pursuant to clause (xii) of the definition of "Permitted
Indebtedness" in an aggregate amount not to exceed $15 million at any one time
outstanding; and (g) Liens securing Indebtedness consisting of Capitalized
Lease Obligations or industrial revenue bonds, in each case incurred solely
for the
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purpose of financing all or any part of the purchase price or cost of
construction or installation of assets used in the business of the Company or
its Restricted Subsidiaries, or repairs, additions or improvements to such
assets; provided, however, that (1) such Liens secure Indebtedness in an
amount not in excess of the original purchase price or the original cost of
any such assets or repairs, additions or improvements thereto (plus an amount
equal to the reasonable fees and expenses, including attorneys fees and
expenses, incurred in connection with the incurrence of such Indebtedness),
(2) such Liens do not extend to any other assets of the Company or its
Restricted Subsidiaries (and, in the case of repairs, additions or
improvements to any such assets, such Lien extends only to the assets
repaired, added to or improved), (3) the Incurrence of such Indebtedness is
permitted under the Indenture and (4) such Liens attach within 60 days of such
purchase, construction, installation, repair, addition or improvement.
"Permitted Refinancing" means, with respect to any Indebtedness of
any Person, any Refinancing of such Indebtedness; provided, however, that (i)
such Refinancing shall not result in an increase in the aggregate principal
amount of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the
terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such
Refinancing), (ii) such Indebtedness shall not have a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or a final maturity earlier than the final
maturity of the Indebtedness being Refinanced, (iii) if the Indebtedness being
Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and (iv) if the Indebtedness being
Refinanced is subordinate or junior to the New Company Notes, then such
Refinancing Indebtedness shall be subordinate to the Company Notes at least to
the same extent and in the same manner as the Indebtedness being Refinanced.
"Person" means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust or joint
venture, or a governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock pursuant to a registration statement filed with the
Commission in accordance with the Securities Act generating gross cash
proceeds of at least $50.0 million.
"Purchase Money Indebtedness" means Indebtedness of the Company and
its Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property, equipment or other
assets; provided, however, (A) the Indebtedness shall not exceed the cost of
such property, equipment or assets and shall not be secured by any property,
equipment or assets of the Company or any Restricted Subsidiary other than the
property, equipment and assets so acquired or constructed and (B) the Lien
securing such Indebtedness shall be created within 180 days of such
acquisition or construction or, in the case of a refinancing of any Purchase
Money Indebtedness, within 180 days of such refinancing.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"redeem" means redeem, repurchase, defease or otherwise acquire or
retire for value; and "redemption" and "redeemed" have correlative meanings.
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"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Replacement Assets" means (i) properties and assets that replace the
properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in a Permitted Business or (ii) all of
the Capital Stock of a Person whose assets are of the type described in clause
(i), provided that such Person becomes a Restricted Subsidiary of the Company.
"Restricted Subsidiary" means any Subsidiary of the Company which at
the time of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means one or more revolving credit
facilities under the Credit Agreement.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company
or such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.
"Securities Act" means the Securities Act of 1933, as amended, and
any other successor statute or statutes thereto and the rules and regulations
promulgated thereunder.
"Significant Subsidiary," with respect to any Person, means any
Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Securities Act.
"Subsidiary," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under
ordinary circumstances is at the time, directly or indirectly, owned by such
Person.
"Term Loan Facility" means one or more term loan facilities under the
Credit Agreement.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b) the
sum of the total of the products obtained by multiplying (i) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-twelfth)
which will elapse between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors'
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qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by such Person or any
Wholly Owned Restricted Subsidiary of such Person.
DESCRIPTION OF THE NEW HOLDINGS NOTES
The New Holdings Notes will be issued under the Holdings Notes
Indenture, dated as of May 1, 1998 by and between Holdings and the Trustee.
The following summary of certain provisions of the Holdings Notes Indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to the TIA, and to all of the provisions of the Holdings
Notes Indenture, including the definitions of certain terms therein and those
terms made a part of the Holdings Notes Indenture by reference to the TIA as
in effect on the date of the Holdings Notes Indenture. A copy of the Holdings
Notes Indenture may be obtained from Holdings or the Initial Purchaser. The
definitions of certain capitalized terms used in this section are set forth
below under "--Certain Definitions."
Principal, Maturity and Interest
The New Holdings Notes are unsecured senior obligations of Holdings.
The New Holdings Notes are limited in aggregate principal amount to $48.0
million at maturity, and will mature on May 1, 2008. Interest on the New
Holdings Notes will accrue at a rate of 13% per annum and will be payable
semi-annually in arrears on May 1 and November 1 of each year, commencing on
November 1, 1998 to the holder of record of New Holdings Notes at the close of
business on April 15 and October 15, respectively, immediately preceding such
interest payment date. Interest on the New Holdings Notes will accrue from the
most recent interest payment date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The New Holdings Notes will be issued in fully registered form only,
without coupons, in denominations of $1,000 and integral multiples thereof.
Initially, the Trustee will act as Paying Agent and Registrar for the New
Holdings Notes. The New Holdings Notes may be presented for registration of
transfer and exchange at the offices of the Registrar, which initially will be
the Trustee's corporate trust operations office. Holdings may change any
Paying Agent and Registrar without notice to holders of the New Holdings Notes
(the "Holders"). Holdings will pay principal (and premium, if any) on the New
Holdings Notes at the Trustee's corporate trust operations office in
Pittsburgh, Pennsylvania. Holdings will maintain an office in New York, New
York and will also pay principal (and premium, if any) on the New Holdings
Notes at Holdings' office in New York, New York. At Holdings' option, interest
(and premium, if any) may be paid at the Trustee's corporate trust operations
office or by check mailed to the registered address of Holders. Any Old
Holdings Notes that remain outstanding after the completion of the Exchange
Offer, together with the New Holdings Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Holdings Notes Indenture.
Approximately $17.0 million (depending upon the date of the Holdings
Exchange Offer) of the net proceeds from the sale of the Old Holdings Notes
(the "Initial Escrow Amount"), representing funds sufficient to pay interest
on the New Holdings Notes for the first six scheduled interest payment dates,
will be placed into an escrow account (the "Interest Escrow Account") for the
benefit of the holders of the New Holdings Notes.
The New Holdings Notes will not be entitled to the benefit of any
mandatory sinking fund.
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Redemption
The New Holdings Notes will be redeemable, at Holdings option, in
whole or in part at any time, on and after May 1, 2003, upon not less than 30
nor more than 60 days notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the
twelve-month period commencing on May 1 of the year set forth below, plus, in
each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
Year Percentage
- ---- ----------
2003 ..................................................... 106.500%
2004 ..................................................... 104.333%
2005 ..................................................... 102.167%
2006 and thereafter....................................... 100.000%
Selection and Notice of Redemption
In the event that less than all of the New Holdings Notes are to be
redeemed at any time, selection of such New Holdings Notes for redemption will
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which such New Holdings Notes are
listed or, if such New Holdings Notes are not then listed on a national
securities exchange, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided, however, that no New
Holdings Notes of a principal amount of $1,000 or less shall be redeemed in
part; provided, further, that if a partial redemption is made with the
proceeds of a Public Equity Offering, selection of the New Holdings Notes or
portions thereof for redemption shall be made by the Trustee only on a pro
rata basis or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice of redemption
shall be mailed by first-class mail at least 30 but not more than 60 days
before the redemption date to each Holder of New Holdings Notes to be redeemed
at its registered address. If any New Holdings Note is to be redeemed in part
only, the notice of redemption that relates to such New Holdings Note shall
state the portion of the principal amount thereof to be redeemed. A new note
in a principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original New
Holdings Note. On and after the redemption date, interest will cease to accrue
on New Holdings Notes or portions thereof called for redemption as long as
Holdings has deposited with the Paying Agent funds in satisfaction of the
applicable redemption price pursuant to the Holdings Notes Indenture.
Guarantees
The New Holdings Notes will not be guaranteed by any present or
future Subsidiaries of Holdings.
Change of Control
The Holdings Notes Indenture will provide that upon the occurrence of
a Change of Control, each Holder will have the right to require that Holdings
purchase all or a portion of such Holder's New Holdings Notes pursuant to the
offer described below (the "Change of Control Offer"), at a purchase price
equal to 101% of the principal amount plus accrued and unpaid interest, if
any, to the date of purchase.
Within 30 days following the date upon which the Change of Control
occurred, Holdings shall send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change
of Control Offer. Such notice shall state, among other things, the purchase
date, which shall be a business day no earlier than 30 days nor later than 60
days from the date such notice is mailed, other than as may be
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required by applicable law (the "Change of Control Payment Date"). Holders
electing to have a New Holdings Note purchased pursuant to a Change of Control
Offer will be required to surrender the New Holdings Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the New
Holdings Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third business day prior to the
Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that
Holdings will have available funds sufficient to pay the Change of Control
purchase price for all the Holdings Notes that might be delivered by Holders
seeking to accept the Change of Control Offer. In the event Holdings is
required to purchase outstanding New Holdings Notes pursuant to a Change of
Control Offer, Holdings expects that it would seek third party financing to
the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that Holdings would be able to obtain such
financing. Neither the Board of Directors of Holdings nor the Trustee may
waive the covenant relating to a Holder's right to redemption upon a Change of
Control.
Restrictions in the Holdings Notes Indenture described herein on the
ability of Holdings and its Restricted Subsidiaries to incur additional
Indebtedness, to grant liens on its property, to make Restricted Payments and
to make Asset Sales may also make more difficult or discourage a takeover of
Holdings, whether favored or opposed by the management of Holdings.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the New Holdings Notes, and there can be no
assurance that Holdings or the acquiring party will have sufficient financial
resources to effect such redemption or repurchase. Such restrictions and the
restrictions on transactions with Affiliates may, in certain circumstances,
make more difficult or discourage any leveraged buyout of Holdings or any of
its Subsidiaries by the management of Holdings. While such restrictions cover
a wide variety of arrangements which have traditionally been used to effect
highly leveraged transactions, the Holdings Notes Indenture may not afford the
Holders of New Holdings Notes protection in all circumstances from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring,
merger or similar transaction.
The Credit Agreement provides that certain change of control events
with respect to Holdings (including a Change of Control) would constitute a
default thereunder. Any Permitted Refinancings of the Credit Agreement to
which Holdings becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when Holdings is
prohibited from purchasing New Holdings Notes, Holdings could seek the consent
of its lenders to the purchase of New Holdings Notes or could attempt to repay
the borrowings that contain such prohibition. If Holdings does not obtain such
a consent or repay such borrowings, Holdings will remain prohibited from
purchasing New Holdings Notes. In such case, Holdings' failure to purchase
tendered New Holdings Notes would constitute an Event of Default under the
Holdings Notes Indenture which would, in turn, constitute a default under the
Credit Agreement.
The meaning of the phrase "all or substantially all" as used in the
definition of "Change of Control" with respect to a sale of assets varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree
of uncertainty in ascertaining whether a particular transaction would involve
a disposition of "all or substantially all" of the assets of Holdings, and
therefore it may be unclear whether a Change of Control has occurred and
whether the New Holdings Notes are subject to a Change of Control Offer.
Holdings will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of New Holdings Notes pursuant to a Change of Control Offer. To the
extent that the provisions of any securities laws or regulations conflict with
the "Change of Control" provisions of the Indenture,
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Holdings shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the "Change of
Control" provisions of the Indenture by virtue thereof.
Certain Covenants
The Holdings Notes Indenture will contain, among others, the
following covenants:
Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock. Holdings will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (other
than Permitted Indebtedness) and Holdings will not issue any Disqualified
Capital Stock and will not permit its Restricted Subsidiaries to issue any
Preferred Stock except Preferred Stock of a Restricted Subsidiary issued to
(and as long as it is held by) Holdings or a Wholly Owned Restricted
Subsidiary of Holdings; provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, Holdings may incur
Indebtedness (including, without limitation, Acquired Indebtedness) and
Holdings may issue Disqualified Capital Stock of Holdings, if, in either case,
at the time of and immediately after giving pro forma effect to such
incurrence of such Indebtedness or the issuance of such Disqualified Capital
Stock, as the case may be, and the use of proceeds therefrom, Holdings'
Consolidated Fixed Charge Coverage Ratio is greater than 2.0 to 1.0.
Holdings will not incur any Indebtedness that purports to be by its
terms (or by the terms of any agreement governing such Indebtedness)
subordinated to any other Indebtedness of Holdings unless such Indebtedness is
also by its terms (or by the terms of any agreement governing such
Indebtedness) made expressly subordinated to the New Holdings Notes to the
same extent and in the same manner as such Indebtedness is subordinated to
such other Indebtedness.
For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described in the various clauses of the definition of
Permitted Indebtedness, Holdings, in its sole discretion, shall classify such
item of Indebtedness and shall only be required to include the amount and type
of such Indebtedness in one of such clauses.
Limitation on Restricted Payments. Holdings will not, and will not
cause or permit any Restricted Subsidiary to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of Holdings) on or in respect
of shares of Holdings' Capital Stock, (b) redeem any Capital Stock of Holdings
or any warrants, rights or options to purchase or acquire shares of any class
of such Capital Stock, or (c) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b), and
(c) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default
shall have occurred and be continuing or (ii) Holdings is not able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness and
Issuance of Disqualified Capital Stock" covenant or (iii) the aggregate amount
of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of Holdings) shall
exceed the sum (the "Basket"), without duplication, of: (v) 50% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of Holdings earned subsequent to the
Issue Date and on or prior to the date the Restricted Payment occurs (the
"Reference Date") (treating such period as a single accounting period); plus
(w) 100% of the aggregate net cash proceeds received by Holdings from any
Person (other than a Restricted Subsidiary of
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Holdings) from the issuance and sale subsequent to the Issue Date and on or
prior to the Reference Date of Qualified Capital Stock of Holdings (other than
Qualified Capital Stock, the proceeds of which are to be used to redeem
Company Notes pursuant to the provisions described under "Description of the
Company Notes--Redemption--Optional Redemption Upon Public Equity Offerings");
plus (x) 100% of the net cash proceeds received by Holdings from any Person
(other than a Restricted Subsidiary of Holdings) from the issuance subsequent
to the Issue Date of Indebtedness convertible or exchangeable into Qualified
Capital Stock of Holdings that has actually been so converted or exchanged,
together with the aggregate net cash proceeds received by Holdings (other than
from a Restricted Subsidiary of Holdings) at the time of such conversion or
exchange; plus (y) without duplication of any amounts included in clause (iii)
(x) above, 100% of the aggregate net cash proceeds of any equity contribution
received by Holdings from a holder of Capital Stock; plus (z) the amount equal
to the net reduction in Investments (other than Permitted Investments) made by
Holdings or any of its Restricted Subsidiaries in any Person resulting from,
and without duplication, (i) repurchases or redemptions of such Investments by
such Person, proceeds realized upon the sale of such Investment to an
unaffiliated purchaser and repayments of loans or advances or other transfers
of assets by such Person to Holdings or any Restricted Subsidiary of Holdings
or (ii) the redesignation of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investment") not to exceed, in the case of any Restricted Subsidiary, the
amount of Investments previously made by Holdings or any Restricted Subsidiary
in such Unrestricted Subsidiary, which amount was included in the calculation
of Restricted Payments; provided, however, that no amount shall be included
under this clause (z) to the extent it is already included in Consolidated Net
Income.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; (2) if no
Default shall have occurred and be continuing, (i) the acquisition of any
shares of Capital Stock of Holdings solely in exchange for shares of Qualified
Capital Stock of Holdings or (ii) the making of any Restricted Payment from
the net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of Holdings) of shares of Qualified Capital Stock of Holdings; (3)
so long as no Default shall have occurred and be continuing, repurchases by
Holdings of Common Stock of Holdings from employees of Holdings or any of its
Subsidiaries or their authorized representatives (other than Permitted
Holders) upon the death, disability or termination of employment of such
employees, in an aggregate amount not to exceed 5% of the cumulative
Consolidated Net Income of the Company earned subsequent to the Issue Date and
on or prior to the date such repurchase occurs; and (4) any repurchase of
equity interests deemed to occur upon the exercise of stock options if such
equity interest represents a portion of the exercise price of such option. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2)(ii), (3) and (4)
shall be included in such calculation and amounts expended pursuant to clause
(2)(i) shall not be included in such calculation.
The amount of any non-cash Restricted Payment shall be the fair
market value, on the date such Restricted Payment is made, of the assets or
securities proposed to be transferred or issued by Holdings or such Restricted
Subsidiary, as the case may be, pursuant to such Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the
Board of Directors of Holdings whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $1.5 million. Not later
than 60 days after the end of any fiscal quarter (100 days in the case of the
last fiscal quarter of the fiscal year) during which any Restricted Payment is
made, Holdings shall deliver to the Trustee an Officers' Certificate stating
that all Restricted Payments made during such fiscal quarter were permitted
and setting forth the basis upon which the calculations required by this
covenant were computed, together with a copy of any opinion or appraisal
required by the Indenture.
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Limitation on Asset Sales. Holdings will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i)
Holdings or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Board of Directors of Holdings or such Restricted Subsidiary), (ii) at
least 80% of the consideration received by Holdings or the Restricted
Subsidiary, as the case may be, from such Asset Sale shall be in the form of
(x) cash or Cash Equivalents, (y) Replacement Assets or (z) any combination of
the foregoing and is received at the time of such disposition; and (iii) upon
the consummation of an Asset Sale, Holdings shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 270 days of receipt thereof either (A) to prepay any Indebtedness
incurred pursuant to clause (ii) or clause (xii) of the definition of
"Permitted Indebtedness" (other than subordinated Indebtedness) or any
Indebtedness for borrowed money of any Restricted Subsidiary and effect a
permanent reduction thereunder, (B) to make an investment in Replacement
Assets or (C) a combination of prepayment and investment permitted by the
foregoing clauses (iii)(A) and (iii)(B). On the 271st day after an Asset Sale
or such earlier date, if any, as the Board of Directors of Holdings or of such
Restricted Subsidiary determines, as the case may be, not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (iii)(A),
(iii)(B) and (iii)(C) of the next preceding sentence (each, a "Net Proceeds
Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have
not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding
sentence (each a "Net Proceeds Offer Amount") shall be applied by Holdings or
such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds
Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor
more than 45 days following the applicable Net Proceeds Offer Trigger Date,
from all holders of New Holdings Notes and Pari Passu Indebtedness (to the
extent required by the terms of such Pari Passu Indebtedness) on a pro rata
basis based on the aggregate outstanding amount of New Holdings Notes and Pari
Passu Indebtedness, that amount of New Holdings Notes and Pari Passu
Indebtedness in the aggregate equal to the Net Proceeds Offer Amount at a
price equal to, with respect to the New Holdings Notes, 100% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date
of purchase, and with respect to any Pari Passu Indebtedness, an amount not
greater than 100% of the principal amount or accreted value of such Pari Passu
Indebtedness; provided, however, that if at any time any non-cash
consideration received by Holdings or any Restricted Subsidiary, as the case
may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to
any such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. Holdings may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5,000,000 resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5,000,000, shall be applied as required pursuant
to this paragraph). Pending the final application of such Net Cash Proceeds,
Holdings may temporarily cause the Company to cause the Guarantors to reduce
Indebtedness under the Revolving Credit Facility or invest such Net Cash
Proceeds in Cash Equivalents.
For purposes of clause (ii)(x) of the immediately preceding
paragraph, the term "cash" shall include the amount of any Indebtedness for
borrowed money or any Capitalized Lease Obligations (A) that is assumed by the
transferee of any assets or property which constitutes the Asset Sale or (B)
with respect to the sale or disposition of all of the Capital Stock of a
Restricted Subsidiary, that remains the liability of such Restricted
Subsidiary subsequent to such sale or other disposition, in each case provided
that there is no further recourse to Holdings or any of its Restricted
Subsidiaries with respect to such Indebtedness.
In the event of the transfer of substantially all (but not all) of
the property and assets of Holdings and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold
the properties and assets of Holdings
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and its Restricted Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect
to such deemed sale as if it were an Asset Sale. In addition, the fair market
value of such properties and assets of Holdings or its Restricted Subsidiaries
deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this
covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown
on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in the Holdings Notes Indenture. Upon receiving notice of the Net
Proceeds Offer, Holders may elect to tender their New Holdings Notes in whole
or in part in integral multiples of $1,000 in exchange for cash. To the extent
Holders properly tender New Holdings Notes in an amount exceeding the Net
Proceeds Offer Amount, New Holdings Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds
Offer shall remain open for a period of 20 business days or such longer period
as may be required by applicable law.
Holdings will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of New Holdings Notes pursuant to a Net Proceeds Offer. To the
extent that the provisions of any securities laws or regulations conflict with
the "Asset Sale" provisions of the Holdings Notes Indenture, Holdings shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached or violated any of its obligations under the "Asset
Sale" provisions of the Holdings Notes Indenture by virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. Holdings will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to Holdings or
any other Restricted Subsidiary; or (c) transfer any of its property or assets
to Holdings or any other Restricted Subsidiary, except for such encumbrances
or restrictions existing under or by reason of: (1) applicable law; (2) the
Indentures; (3) customary non-assignment provisions of any contract or any
lease governing a leasehold interest of any Restricted Subsidiary; (4) any
instrument governing Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person or the properties or assets of the Person so acquired;
(5) agreements existing on the Issue Date, including, without limitation, the
Credit Agreement, to the extent and in the manner such agreements are in
effect on the Issue Date; (6) an agreement governing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4) or (5) above; provided, however, that
the provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less favorable, taken as a whole, to Holdings in any
material respect as determined by the Board of Directors of Holdings in their
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (4), (5); or (7) restrictions imposed by any agreement to sell, or
otherwise dispose of, assets pending the closing of such sale.
Limitation on Liens. Holdings will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of Holdings or any of its Restricted Subsidiaries whether
owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or
profits therefrom unless (i) in the case of Liens securing Indebtedness that
is expressly subordinate or junior in right of payment to the New Holdings
Notes, the New Holdings Notes are secured by a Lien on such
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property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the New Holdings Notes are equally and ratably secured,
except for (1) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date; (2) Indebtedness incurred
pursuant to clause (ii) of the definition of "Permitted Indebtedness"; (3)
Liens securing the New Holdings Notes, the Company Notes and the Guarantees;
(4) Liens of Holdings or a Wholly Owned Restricted Subsidiary on assets of any
Restricted Subsidiary; (5) Liens securing Refinancing Indebtedness which is
incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indentures and which has been incurred in accordance with
the provisions of the Indentures; provided, however, that such Liens (x) are
no less favorable, taken as a whole, to the Holders and are not more favorable
to the lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced and (y) do not extend to or cover any property
or assets of Holdings or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced; and (6) Permitted Liens.
Merger, Consolidation and Sale of Assets. Holdings will not, in a
single transaction or series of related transactions, consolidate or merge
with or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of
Holdings' assets (determined on a consolidated basis for Holdings and
Holdings' Restricted Subsidiaries) whether as an entirety or substantially as
an entirety to any Person unless: (i) either (1) Holdings shall be the
surviving or continuing corporation or (2) the Person (if other than Holdings)
formed by such consolidation or into which Holdings is merged or the Person
which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of Holdings and of Holdings' Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall
be a corporation organized and validly existing under the laws of the United
States or any state thereof or the District of Columbia and (y) shall
expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due
and punctual payment of the principal of, and premium, if any, and interest on
all of the New Holdings Notes and the performance of every covenant of the New
Holdings Notes and the Holdings Notes Indenture on the part of Holdings to be
performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
such transaction), Holdings or such Surviving Entity, as the case may be,
shall be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the "--Limitation on Incurrence of
Additional Indebtedness and Issuance of Disqualified Capital Stock" covenant;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) Holdings or the
Surviving Entity shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture, comply with the applicable provisions of the Holdings
Notes Indenture and that all conditions precedent in the Holdings Notes
Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all
or substantially all of the properties or assets of one or more Restricted
Subsidiaries of Holdings the Capital Stock of which constitutes all or
substantially all of the properties and assets of Holdings, shall be deemed to
be the transfer of all or substantially all of the properties and assets of
Holdings.
The Holdings Notes Indenture will provide that upon any
consolidation, combination or merger or any transfer of all or substantially
all of the assets of Holdings in accordance with the foregoing, in which
Holdings
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is not the continuing corporation, the successor Person formed by such
consolidation or into which Holdings is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right, power and privilege of, Holdings under the Holdings
Notes Indenture and the New Holdings Notes with the same effect as if such
surviving entity had been named as such.
Limitations on Transactions with Affiliates. (a) Holdings will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable, taken as a whole,
than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of Holdings or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other
property with a fair market value in excess of $500,000 shall be approved by
the Board of Directors of Holdings or such Restricted Subsidiary, as the case
may be, such approval to be evidenced by a Board Resolution stating that such
Board of Directors has determined that such transaction complies with the
foregoing provisions. If Holdings or any Restricted Subsidiary enters into an
Affiliate Transaction (or a series of related Affiliate Transactions related
to a common plan) that involves an aggregate fair market value of more than
$1,500,000, Holdings or such Restricted Subsidiary, as the case may be, shall,
prior to the consummation thereof, obtain a favorable opinion as to the
fairness of such transaction or series of related transactions to Holdings or
the relevant Restricted Subsidiary, as the case may be, from a financial point
of view, from an Independent Financial Advisor and file the same with the
Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of Holdings or any Restricted
Subsidiary in the ordinary course as determined in good faith by the Board of
Directors of Holdings or such Restricted Subsidiary; (ii) transactions
exclusively between or among Holdings and any of its Wholly Owned Restricted
Subsidiaries or exclusively between or among such Wholly Owned Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by the
Indentures; (iii) any written agreement as in effect as of the Issue Date or
any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto so long as any such amendment is not more
disadvantageous to the Holders in any material respect than the agreement as
in effect on the Issue Date); (iv) loans or advances to employees of Holdings
or any Restricted Subsidiary (other than Permitted Holders) in the ordinary
course and in an aggregate amount not to exceed $250,000 at any one time
outstanding; (v) payments (A) to P&E Properties or any of its Affiliates in an
aggregate amount not to exceed $600,000 in any fiscal year to pay management
fees and (B) to reimburse P&E Properties or any of its Affiliates for
reasonable services and out-of-pocket and other costs and expenses actually
incurred in connection with such services; and (vi) payments permitted by the
"Limitation on Restricted Payments" covenant.
Subsidiaries. Holdings shall not have any Subsidiaries except Wholly
Owned Restricted Subsidiaries and Unrestricted Subsidiaries.
Designation of Unrestricted Subsidiaries. Holdings may designate
after the Issue Date any Subsidiary of Holdings as an "Unrestricted
Subsidiary" under the Holdings Notes Indenture (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation; and
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(ii) Holdings would be permitted to make an Investment (other than a
Permitted Investment) at the time of such Designation (assuming the
effectiveness of such Designation) pursuant to the "Limitation on Restricted
Payments" covenant in an amount (the "Designation Amount") equal to the fair
market value of Holdings' proportionate interest in the net worth of such
Subsidiary on such date calculated in accordance with GAAP.
Neither Holdings nor any Restricted Subsidiary shall at any time (x)
provide credit support for or guarantee any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness); provided, that Holdings may pledge equity interests or
Indebtedness of any Unrestricted Subsidiary on a nonrecourse basis such that
the pledgee has no claim whatsoever against Holdings other than to obtain such
pledged property, (y) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the
occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary, except for any nonrecourse guarantee given solely to support the
pledge by Holdings of the capital Stock of any Unrestricted Subsidiary. For
purposes of the foregoing, the Designation of a Subsidiary of Holdings as an
Unrestricted Subsidiary shall be deemed to include the Designation of all of
the Subsidiaries of such Subsidiary.
Any such Designation by Holdings shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of a Board Resolution of Holdings
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
Conduct of Business. Holdings and its Restricted Subsidiaries will
not engage in any businesses other than Permitted Businesses.
Reports to Holders. Holdings will deliver to the Trustee within 15
days after the filing of the same with the Commission, copies of the quarterly
and annual reports and of the information, documents and other reports, if
any, which Holdings is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. The Holdings Notes Indenture further
provides that, notwithstanding that Holdings may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, Holdings
will file with the Commission, to the extent permitted, and provide the
Trustee and Holders with such annual reports and such information, documents
and other reports specified in Sections 13 and 15(d) of the Exchange Act.
Holdings will also comply with the other provisions of TIA Section 314(a). In
addition, for so long as any New Holdings Notes remain outstanding, Holdings
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act, and, to any beneficial
holder of New Holdings Notes, if not obtainable from the SEC, information of
the type that would be filed with the SEC pursuant to the foregoing
provisions, upon the request of any such holder.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee or stockholder, as such, of Holdings
or any of its Affiliates, or any of their respective heirs, estates or
personal representatives, shall have any liability for any obligations of
Holdings under the New Holdings Notes or the Holdings Notes Indenture or for
any claim based on, or in respect of, or by reason of, such obligations or
their creation. Each Holder of Holdings Notes by accepting a Holdings Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the New Holdings Notes.
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Events of Default
The following events are defined in the Holdings Notes Indenture as
"Events of Default":
(i) the failure to pay interest on any New Holdings Notes when the
same becomes due and payable and the default continues for a period of 30
days;
(ii) the failure to pay the principal on any New Holdings Notes, when
such principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase New Holdings
Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer);
(iii) a default in the observance or performance of any other
covenant or agreement contained in the Holdings Notes Indenture which default
continues for a period of 30 days after Holdings receives written notice
specifying the default (and demanding that such default be remedied) from the
Trustee or the Holders of at least 25% of the outstanding principal amount of
the New Holdings Notes (except in the case of a default with respect to the
"Merger, Consolidation and Sale of Assets" covenant, which will constitute an
Event of Default with such notice requirement but without such passage of time
requirement);
(iv) a default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of Holdings or any of its Restricted
Subsidiaries having an outstanding principal amount of $2,000,000 or more
individually or in the aggregate that has resulted in the acceleration of the
payment of such Indebtedness or failure by Holdings or any such Restricted
Subsidiary to pay principal when due at the stated maturity of any such
Indebtedness and such default or defaults shall have continued after any
applicable grace period and shall not have been cured or waived;
(v) one or more judgments in an aggregate amount in excess of
$2,000,000 shall have been rendered against Holdings or any of its Restricted
Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a
period of 60 days after such judgment or judgments become final and
non-appealable;
(vi) certain events of bankruptcy affecting Holdings or any of its
Restricted Subsidiaries; or
(vii) the Holdings Escrow Agreement ceases to be in full force and
effect (other than pursuant to its terms), or is declared by a court of
competent jurisdiction to be null and void, or Holdings shall deny in writing
or fail to perform any of its obligations under the Holdings Escrow Agreement,
which failure shall continue for a period of 30 days after Holdings receives
written notice of failure from the escrow agent.
If an Event of Default (other than an Event of Default specified in
clause (vi) above with respect to Holdings) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding New
Holdings Notes may declare the principal of and accrued interest on all the
New Holdings Notes to be due and payable by notice in writing to Holdings and
the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same shall
become immediately due and payable. If an Event of Default specified in clause
(vi) above with respect to Holdings occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of
the outstanding New Holdings Notes shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the
Trustee or any Holder.
The Holdings Notes Indenture provides that, at any time after a
declaration of acceleration with respect to the New Holdings Notes as
described in the preceding paragraph, the Holders of a majority in principal
amount
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of the New Holdings Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any outstanding
judgment or judicial decree, (ii) if all existing Events of Default have been
cured or waived except nonpayment of principal or interest that has become due
solely because of the acceleration, (iii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if Holdings has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the New Holdings
Notes may waive any existing Default or Event of Default under the Holdings
Notes Indenture, and its consequences, except a default in the payment of the
principal of or interest on any New Holdings Notes.
Holders of the New Holdings Notes may not enforce the Holdings Notes
Indenture or the New Holdings Notes except as provided in the Holdings Notes
Indenture and under the TIA. Subject to the provisions of the Holdings Notes
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Holdings Notes
Indenture at the request, order or direction of any of the Holders, unless
such Holders have offered to the Trustee reasonable indemnity. Subject to all
provisions of the Holdings Notes Indenture and applicable law, the Holders of
a majority in aggregate principal amount of the then outstanding New Holdings
Notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee.
Under the Holdings Notes Indenture, Holdings is required to provide
an officers' certificate to the Trustee promptly upon any such officer
obtaining knowledge of the occurrence of any Default or Event of Default
(provided that such officers shall provide such certification at least
annually whether or not they know of any Default or Event of Default) that has
occurred and, if applicable, describe such Default or Event of Default and the
status thereof.
Legal Defeasance and Covenant Defeasance
Holdings may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding New Holdings Notes
("Legal Defeasance"). Such Legal Defeasance means that Holdings shall be
deemed to have paid and discharged the entire indebtedness represented by the
outstanding New Holdings Notes, except for (i) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the New Holdings Notes when such payments are due, (ii) Holdings'
obligations with respect to the New Holdings Notes concerning issuing
temporary New Holdings Notes, registration of New Holdings Notes, mutilated,
destroyed, lost or stolen New Holdings Notes and the maintenance of an office
or agency for payments, (iii) the rights, powers, trust, duties and immunities
of the Trustee and Holdings' obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Holdings Notes Indenture. In addition,
Holdings may, at its option and at any time, elect to have the obligations of
Holdings released with respect to certain covenants that are described in the
Holdings Notes Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the New Holdings Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the New
Holdings Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) Holdings must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the New
Holdings Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be; (ii) in the case of Legal Defeasance,
Holdings shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (A)
Holdings has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Holdings Notes
Indenture, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of counsel
shall confirm that, the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, Holdings shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under the Holdings Notes
Indenture or any other material agreement or instrument to which Holdings or
any of its Restricted Subsidiaries is a party or by which Holdings or any of
its Restricted Subsidiaries is bound; (vi) Holdings shall have delivered to
the Trustee an officers' certificate stating that the deposit was not made by
Holdings with the intent of preferring the Holders over any other creditors of
Holdings or with the intent of defeating, hindering, delaying or defrauding
any other creditors of Holdings or others; and (vii) Holdings shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided for or relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
Notwithstanding the foregoing, the opinion of counsel required by clause (ii)
above with respect to a Legal Defeasance need not be delivered if all New
Holdings Notes not therefore delivered to the Trustee for cancellation (x)
have become due and payable, (y) will become due and payable on the maturity
date within one year or (z) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and a the expense, of Holdings.
Satisfaction and Discharge
The Holdings Notes Indenture will be discharged and will cease to be
of further effect (except as to surviving rights or registration of transfer
or exchange of the New Holdings Notes, as expressly provided for in the
Holdings Notes Indenture) as to all outstanding New Holdings Notes when (i)
either (a) all the New Holdings Notes theretofore authenticated and delivered
(except lost, stolen or destroyed New Holdings Notes which have been replaced
or paid and New Holdings Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by Holdings and thereafter
repaid to Holdings or discharged from such trust) have been delivered to the
Trustee for cancellation or (b) all New Holdings Notes not theretofore
delivered to the Trustee for cancellation have become due and payable and
Holdings has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire Indebtedness on
the New Holdings Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the New
Holdings Notes to the date of deposit together with irrevocable instructions
from Holdings directing the Trustee to apply such funds to the payment thereof
at maturity or redemption, as the case may be; (ii) Holdings has paid all
other sums payable under the Holdings Notes Indenture by Holdings; and (iii)
Holdings
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has delivered to the Trustee an officers' certificate and an opinion of
counsel stating that all conditions precedent under the Holdings Notes
Indenture relating to the satisfaction and discharge of the Holdings Notes
Indenture have been complied with.
Modification of the Holdings Notes Indenture
From time to time, Holdings and the Trustee, without the consent of
the Holders, may amend the Holdings Notes Indenture for certain specified
purposes, including curing ambiguities, defects or inconsistencies, so long as
such change does not, in the opinion of the Trustee, adversely affect the
rights of any of the Holders in any material respect. In formulating its
opinion on such matters, the Trustee will be entitled to rely on such evidence
as it deems appropriate, including, without limitation, solely on an opinion
of counsel. Other modifications and amendments of the Holdings Notes Indenture
may be made with the consent of the Holders of a majority in principal amount
of the then outstanding New Holdings Notes issued under the Holdings Notes
Indenture, except that, without the consent of each Holder affected thereby,
no amendment may: (i) reduce the amount of New Holdings Notes whose Holders
must consent to an amendment; (ii) reduce the rate of or change or have the
effect of changing the time for payment of interest, including defaulted
interest, on any New Holdings Notes; (iii) reduce the principal of or change
or have the effect of changing the fixed maturity of any New Holdings Notes,
or change the date on which any New Holdings Notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase price
therefor; (iv) make any New Holdings Notes payable in money other than that
stated in the New Holdings Notes; (v) make any change in provisions of the
Holdings Notes Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of New Holdings Notes to waive Defaults or Events
of Default; (vi) amend, change or modify in any material respect the
obligation of Holdings to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate a Net Proceeds Offer with
respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto; or (vii) subordinate the Notes
to any other obligation of Holdings.
Governing Law
The Holdings Notes Indenture provides that it and the New Holdings
Notes will be governed by, and construed in accordance with, the laws of the
State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
The Trustee
The Holdings Notes Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties
as are specifically set forth in the Holdings Notes Indenture. During the
existence of an Event of Default, the Trustee will exercise such rights and
powers vested in it by the Holdings Notes Indenture, and use the same degree
of care and skill in its exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
The Holdings Notes Indenture and the provisions of the TIA contain
certain limitations on the rights of the Trustee, should it become a creditor
of Holdings, to obtain payments of claims in certain cases or to realize on
certain property received in respect of any such claim as security or
otherwise. Subject to the TIA, the Trustee will be permitted to engage in
other transactions; provided that if the Trustee acquires any conflicting
interest as described in the TIA, it must eliminate such conflict within 30
days, obtain permission within 30 days from the Commission to continue as
Trustee or resign.
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PNC and Chase have entered into the PNC/Chase Agreement pursuant to
which PNC's corporate trust and escrow business will be purchased by Chase
upon the satisfaction of certain pre-closing conditions and the issuance of
appropriate regulatory approvals. Accordingly, if the PNC/Chase Agreement is
consummated, Chase will become the Holdings Exchange Agent, the Company
Exchange Agent, and the Trustee under the Holdings Notes Indenture.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in
the Holdings Notes Indenture. Reference is made to the Holdings Notes
Indenture for the full definition of all such terms, as well as any other
terms used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with Holdings or any of its
Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming
a Restricted Subsidiary or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other
Person who, directly or indirectly, through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or by contract; and
the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"amend" means amend, modify, supplement, restate or amend and
restate, including successively; and "amending" and "amended"have correlative
meanings.
"Asset Acquisition" means (a) an Investment by Holdings or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into Holdings or
any Restricted Subsidiary, or (b) the acquisition by Holdings or any
Restricted Subsidiary of the assets of any Person (other than a Restricted
Subsidiary) which constitutes all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any
other properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer by Holdings or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than Holdings or a Restricted Subsidiary of (a) any Capital Stock
of any Restricted Subsidiary; or (b) any other property or assets of Holdings
or any Restricted Subsidiary other than in the ordinary course of business;
provided, however, that Asset Sales shall not include (i) the sale or
disposition of inventory in the ordinary course of business, (ii) the sale or
other disposition of obsolete, worn out, damaged or otherwise unsuitable or
unnecessary equipment or other obsolete assets, (iii) the exchange of assets
for other non-cash assets that are (a) useful in the Permitted Business and
(b) have a fair market value at least equal to the fair market value of the
assets being exchanged (as determined by the Board of Directors in good
faith), (iv) the sale or other disposition of Cash Equivalents, (v) the grant
of any license of intellectual property rights in the ordinary course of
business, (vi) any transaction or series of related transactions in any fiscal
year for which Holdings or its Restricted Subsidiaries receive aggregate
consideration of less than $1.0 million and (vii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of
Holdings as permitted under "Merger, Consolidation and Sale of Assets."
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"Board of Directors" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be
in full force and effect on the date of such certification, and delivered to
the Trustee.
"Borrowing Base Amount" means, as of the date of determination, an
amount equal to the sum, without duplication, of (i) 80% of the book value of
the accounts receivable and (ii) 55% of the book value of the inventories of
Holdings and its Restricted Subsidiaries, taken as a whole, as set forth in
the most recent monthly consolidated financial statements of Holdings prepared
and determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, equity interests, participations or other
equivalents (however designated and whether or not voting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified
and accounted for as capital lease obligations under GAAP and, for purposes of
this definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or 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 one of the two highest ratings
obtainable from either Standard & Poor's Corporation or any successor thereto
("S&P") or Moody's Investors Service, Inc. or any successor thereto
("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 (or the equivalent successor rating) from S&P or at least P-1 (or
the equivalent successor rating) from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States of
America or any state thereof or the District of Columbia or any U.S. branch of
a foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; (v) repurchase obligations with a term
of not more than seven days for underlying securities of the types described
in clause (i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
of the assets of Holdings to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of the Indenture) other than to the Permitted Holders; (ii) the approval by
the holders of Capital Stock of Holdings of any plan or proposal for the
liquidation or dissolution of Holdings (whether or not otherwise in compliance
with the provisions of the Holdings Notes Indenture); (iii) any Person or
Group (other than the Permitted Holders) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of Holdings; or (iv)
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the replacement of a majority of the Board of Directors of Holdings over a
two-year period from the directors who constituted the Board of Directors of
Holdings at the beginning of such period, and such replacement shall not have
been approved by a vote of at least a majority of the Board of Directors of
Holdings then still in office who either were members of such Board of
Directors at the beginning of such period or whose election as a member of
such Board of Directors was previously so approved.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Company Notes" means the 10 1/2% Senior Notes due 2005 of R.A.B.
Enterprises, Inc.
"Company Notes Indenture" means the indenture dated May 1, 1998,
between R.A.B. Enterprises, Inc., the Guarantors named therein and the Trustee
relating to the Company Notes.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii)
to the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable
to sales or dispositions outside the ordinary course of business), (B)
Consolidated Interest Expense and (C) Consolidated Non-Cash Charges less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or the repayment, repurchase, defeasance or other discharge of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment
of Indebtedness in the ordinary course of business for working capital
purposes pursuant to working capital facilities, occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four Quarter
Period and on or prior to the Transaction Date, as if such incurrence or the
repayment, repurchase, defeasance or other discharge, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the
Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including or excluding, as applicable, any Consolidated
EBITDA (including any pro forma expense and cost reductions), whether positive
or negative, attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale, as the case may be, during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction Date, as if
such Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. If such
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Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (2)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such agreements.
For purposes of this definition, whenever pro forma effect is to be given to
an Asset Acquisition, the amount of Consolidated Net Income relating thereto
and the amount of Consolidated Interest Expense associated with any
Indebtedness incurred in connection therewith, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
Officer of Holdings.
"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on
any series of Preferred Stock of such Person or its Subsidiaries (other than
dividends paid in Qualified Capital Stock) paid or accrued during such period
times (y) a fraction, the numerator of which is one and the denominator of
which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or
write-off of deferred financing costs, (b) the net costs under Interest Swap
Obligations, and (c) the interest portion of any deferred payment obligation;
and (ii) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Restricted Subsidiary of the referent Person or is
merged or consolidated with the referent Person or any Restricted Subsidiary
of the referent Person, (d) the net income (but not loss) of any Restricted
Subsidiary of the referent Person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that
income is restricted by a contract or operation of law, (e) the net income of
any Person, other than a Restricted Subsidiary of the referent Person, except,
for purposes of the covenant described under "Certain Covenants--Limitation on
Restricted Payments," to the extent of cash dividends or distributions paid to
the referent Person or to a Wholly Owned Restricted Subsidiary of the referent
Person by such Person, (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, and (g)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued).
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"Consolidated Non-Cash Charges" means, with respect to any Person,
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges for any future period).
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of May 1, 1998, by and among Millbrook Distribution Services Inc.,
The B. Manischewitz Company, LLC, The Chase Manhattan Bank, as agent, and
NationsBank, N.A., as co-agent, and the lenders party thereto in their
capacities as lenders thereunder, together with the related agreements entered
into in connection therewith (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the "Limitation on Incurrence of
Additional Indebtedness and Issuance of Disqualified Capital Stock" covenant
above) or adding Restricted Subsidiaries of Holdings as additional borrowers
or guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, co-agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the New Holdings Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto and the rules and regulations
promulgated thereunder.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of Holdings acting
reasonably and in good faith and shall be evidenced by a Board Resolution of
the Board of Directors of Holdings delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, which are in
effect as of the Issue Date.
"Guarantees" means the guarantees of Millbrook and Manischewitz of
the Company Notes in accordance with the Company Notes Indenture.
"Holdings" means R.A.B. Holdings, Inc., a Delaware corporation.
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"Holdings Escrow Agreement" means the escrow agreement dated as of
May 1, 1998, among Holdings, PNC Bank, National Association, as escrow agent
and collateral agent, and PNC Bank, National Association as trustee under the
Holdings Notes Indenture.
"incur" means, with respect to any Indebtedness, to create, issue,
incur (including by conversion, exchange or otherwise), assume, guarantee or
otherwise become liable in respect of such Indebtedness (and "incurrence,"
"incurred" and "incurring" shall have meanings correlative to the foregoing).
Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary or is merged or consolidated with or into Holdings or any
Restricted Subsidiary shall be deemed to be incurred at such time. The accrual
of interest or the accretion of original issue discount shall not be deemed to
be an incurrence.
"Indentures" means the Company Notes Indenture and the Holdings Notes
Indenture.
"Indebtedness" means with respect to any Person, without duplication,
(i) the principal amount of all indebtedness of such Person for borrowed
money; (ii) the principal amount of all indebtedness of such Person evidenced
by bonds, debentures, New Holdings Notes or other similar instruments; (iii)
all Capitalized Lease Obligations of such Person; (iv) all indebtedness of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith); (v) reimbursement obligations of
such Person on any letter of credit, banker's acceptance or similar credit
transaction; (vi) guarantees and other similar contingent obligations in
respect of indebtedness or obligations referred to in clauses (i) through (v)
above and clause (viii) below; (vii) all obligations of any other Person of
the type referred to in clauses (i) through (vi) which are secured by any lien
on any property or asset of such Person, the amount of such obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the obligation so secured; and (viii) all obligations of such
Person under Currency Agreements and Interest Swap Obligations.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in Holdings (excluding an interest consisting
solely of monies owed for services rendered) and (ii) which, in the judgment
of the Board of Directors of Holdings, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
other Person calculated by applying a fixed or a floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition by such Person of
any Capital Stock, bonds, New Holdings Notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person. "Investment" shall
exclude extensions of trade credit and advances to customers by Holdings and
its Restricted Subsidiaries in accordance with normal trade practices of
Holdings or such Restricted Subsidiary, as the case may be. For the purposes
of the "Limitation on Restricted Payments" covenant, (i) "Investment" shall
include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is
designated an Unrestricted Subsidiary and
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shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by Holdings or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If Holdings or any
Restricted Subsidiary sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary such that, after giving effect to any
such sale or disposition, Holdings no longer owns, directly or indirectly,
greater than 50% of the outstanding Common Stock of such Restricted
Subsidiary, Holdings shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Common
Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Old Holdings
Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, 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).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
aggregate proceeds in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations when received in the form of cash
or Cash Equivalents (other than the portion of any such deferred payment
constituting interest) and cash and Cash Equivalents received upon the
disposition of non-cash consideration received in any Asset Sale received by
Holdings or any of its Restricted Subsidiaries from such Asset Sale net of (a)
reasonable out-of-pocket expenses and fees incurred in connection with such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking
into account any reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by Holdings or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by Holdings or
any Restricted Subsidiary, as the case may be, after such Asset Sale.
"Obligations" means, with respect to any Indebtedness, all
obligations for principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any such Indebtedness.
"Pari Passu Indebtedness" means any Indebtedness of Holdings ranking
pari passu in right of payment with the New Holdings Notes.
"Permitted Business" means the business of food manufacturing and
processing, food distribution and other businesses similar thereto or
reasonably related thereto, including without limitation, providing
merchandising services.
"Permitted Holders" means (i) Mr. Richard A. Bernstein, (ii) trusts
for the benefit of Mr. Bernstein and/or members of his immediate family and
(iii) in the event of the incompetence or death of Mr. Bernstein, his estate,
executor, administrator or other personal representative.
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"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the New Holdings Notes, the Company Notes and
the Guarantees and Permitted Refinancings thereof;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount, at any time outstanding, not to exceed the greater
of (x) $55 million and (y) the Borrowing Base Amount, in each case, less
mandatory, permanent repayments (excluding amounts refinanced as permitted
under the definition of Credit Agreement) actually made in respect of any
Indebtedness thereunder (which are accompanied by a permanent reduction in
commitment in the case of the Revolving Credit Facility);
(iii) Permitted Refinancings of (x) other Indebtedness of Holdings or
any Restricted Subsidiary to the extent outstanding on the Issue Date reduced
by the amount of any scheduled amortization payments or mandatory prepayments
when actually paid or permanent reductions thereon and (y) Indebtedness
incurred under the Consolidated Fixed Charge Coverage Ratio test of the
"--Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock" covenant;
(iv) Interest Swap Obligations of Holdings covering Indebtedness of
Holdings or any Restricted Subsidiary and Interest Swap Obligations of any
Restricted Subsidiary covering Indebtedness of such Restricted Subsidiary;
provided, however, that such Interest Swap Obligations are entered into to
protect Holdings and/or its Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Indentures to
the extent the notional principal amount of such Interest Swap Obligation does
not exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency Agreements
are designed to protect Holdings or any Restricted Subsidiary against
fluctuations in currency values and do not increase the Indebtedness of
Holdings and its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary to Holdings
or to a Wholly Owned Restricted Subsidiary for so long as such Indebtedness is
held by Holdings or a Wholly Owned Restricted Subsidiary, in each case subject
to no Lien being held by a Person other than Holdings or a Wholly Owned
Restricted Subsidiary; provided that if as of any date any Person other than
Holdings or a Wholly Owned Restricted Subsidiary owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such date shall
be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of Holdings to a Wholly Owned Restricted
Subsidiary for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary, in each case subject to no Lien; provided that (a) any
Indebtedness of Holdings to any Wholly Owned Restricted Subsidiary is
unsecured and subordinated, pursuant to a written agreement, to Holdings'
obligations under the Holdings Notes Indenture and the New Holdings Notes and
(b) if as of any date any Person other than a Wholly Owned Restricted
Subsidiary owns or holds any such Indebtedness or any Person holds a Lien in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Indebtedness permitted by this clause (vii);
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds
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in the ordinary course of business; provided, however, that such Indebtedness
is extinguished within two business days of incurrence;
(ix) Indebtedness of Holdings or any Restricted Subsidiary (a)
represented by letters of credit for the account of Holdings or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business and
(b) in respect of performance, surety or appeal bonds incurred in the ordinary
course of business;
(x) Indebtedness of Holdings or any Restricted Subsidiary (other than
for borrowed money) pursuant to agreements providing for indemnification,
purchase price adjustments and similar obligations that is incurred in the
ordinary course of business or in connection with the sale of a business,
assets or a Subsidiary;
(xi) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of Holdings and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed $2.0 million at any
one time outstanding; and
(xii) Additional Indebtedness of Holdings or any Restricted
Subsidiary in an amount not to exceed $25.0 million at any one time
outstanding; provided that such amount is incurred on or before the nine month
anniversary of the Issue Date; and provided further that, on or prior to the
nine month anniversary of the Issue Date, such amount is used to consummate
the acquisition of one or more Permitted Businesses that becomes upon the
closing of such acquisition a Restricted Subsidiary of Holdings or any
Restricted Subsidiary.
"Permitted Investments" means (i) Investments by Holdings or any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary or that will merge or consolidate into
Holdings or a Restricted Subsidiary; (ii) Investments in Holdings by any
Restricted Subsidiary; provided that any Indebtedness evidencing such
Investment is unsecured and subordinated, pursuant to a written agreement, to
Holdings' obligations under the New Holdings Notes and the Holdings Notes
Indenture; (iii) investments in cash and Cash Equivalents; (iv) loans and
advances to employees and officers of Holdings and its Restricted Subsidiaries
(other than to Permitted Holders) in the ordinary course of business for bona
fide business purposes not in excess of $250,000 at any one time outstanding;
(v) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of Holdings' or its Restricted Subsidiaries' businesses and
otherwise in compliance with the Indentures; (vi) Investments in securities of
trade creditors or customers received pursuant to any plan of reorganization
or similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers; (vii) Investments made by Holdings or its Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with the "Limitation on Asset Sales" covenant and
(viii) Investments existing on the Issue Date.
"Permitted Liens" means (a) Liens securing Acquired Indebtedness;
provided, however, that such Liens were in existence prior to the
contemplation of such acquisition, merger or consolidation and do not secure
any property or assets of Holdings or any Restricted Subsidiary of Holdings
other than the property or assets subject to the Liens prior to such
acquisition, merger or consolidation; (b) Liens imposed by law such as
carriers', warehousemen's and mechanic's Liens and other similar Liens arising
in the ordinary course of business which secure payment of obligations not
more than 30 days past due or which are being contested in good faith and by
appropriate proceedings; (c) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings; provided, however, that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (d) easements, reservation of rights of way, licenses
of intellectual property in the ordinary course and
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other similar restrictions on the use of properties or assets, or minor
imperfections of title that in the aggregate are not material in amount and do
not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of Holdings and its
Restricted Subsidiaries; (e) Liens resulting from the deposit of cash or New
Holdings Notes in connection with contracts, tenders or expropriation
proceedings, or to secure workers' compensation, surety or appeal bonds, costs
of litigation when required by law and public and statutory obligations or
obligations under franchise arrangements entered into in the ordinary course
of business; (f) Liens securing Indebtedness incurred pursuant to clause (xii)
of the definition of "Permitted Indebtedness" in an aggregate amount not to
exceed $15 million at any one time outstanding; and (g) Liens securing
Indebtedness consisting of Capitalized Lease Obligations or industrial revenue
bonds, in each case incurred solely for the purpose of financing all or any
part of the purchase price or cost of construction or installation of assets
used in the business of Holdings or its Restricted Subsidiaries, or repairs,
additions or improvements to such assets; provided, however, that (i) such
Liens secure Indebtedness in an amount not in excess of the original purchase
price or the original cost of any such assets or repairs, additions or
improvements thereto (plus an amount equal to the reasonable fees and
expenses, including attorneys fees and expenses, incurred in connection with
the incurrence of such Indebtedness), (ii) such Liens do not extend to any
other assets of Holdings or its Restricted Subsidiaries (and, in the case of
repairs, additions or improvements to any such assets, such Lien extends only
to the assets repaired, added to or improved), (iii) the Incurrence of such
Indebtedness is permitted under the Indenture and (iv) such Liens attach
within 60 days of such purchase, construction, installation, repair, addition
or improvement.
"Permitted Refinancing" means, with respect to any Indebtedness of
any Person, any Refinancing of such Indebtedness; provided, however, that (i)
such Refinancing shall not result in an increase in the aggregate principal
amount of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the
terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by Holdings in connection with such Refinancing),
(ii) such Indebtedness shall not have a Weighted Average Life to Maturity that
is less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or a final maturity earlier than the final maturity of the
Indebtedness being Refinanced, (iii) if the Indebtedness being Refinanced is
Indebtedness of Holdings, then such Refinancing Indebtedness shall be
Indebtedness solely of Holdings and (iv) if the Indebtedness being Refinanced
is subordinate or junior to the Holdings Notes, then such Refinancing
Indebtedness shall be subordinate to the New Holdings Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"Person" means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust or joint
venture, or a governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"Public Equity Offering" means an underwritten public offering of
Qualified Capital Stock pursuant to a registration statement filed with the
Commission in accordance with the Securities Act generating gross cash
proceeds of at least $50 million.
"Purchase Money Indebtedness" means Indebtedness of Holdings and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property, equipment or other
assets; provided, however, (A) the Indebtedness shall not exceed the cost of
such property, equipment or assets and shall not be secured by any property,
equipment or assets of Holdings or any Restricted Subsidiary other than the
property, equipment and assets so acquired or constructed and (B) the Lien
securing such Indebtedness shall be created within 180 days
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of such acquisition or construction or, in the case of a refinancing of any
Purchase Money Indebtedness, within 180 days of such refinancing.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"redeem" means redeem, repurchase, defease or otherwise acquire or
retire for value; and "redemption" and "redeemed" have correlative meanings.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Replacement Assets" means (i) properties and assets that replace the
properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in a Permitted Business or (ii) all of
the Capital Stock of a Person whose assets are of the type described in clause
(i), provided that such Person becomes a Restricted Subsidiary of Holdings.
"Restricted Subsidiary" means any Subsidiary of Holdings which at the
time of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means one or more revolving credit
facilities under the Credit Agreement.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to Holdings or a Restricted Subsidiary of any property,
whether owned by Holdings or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by Holdings or
such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.
"Securities Act" means the Securities Act of 1933, as amended, and
any other successor statute or statutes thereto and the rules and regulations
promulgated thereunder.
"Subsidiary," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under
ordinary circumstances is at the time, directly or indirectly, owned by such
Person.
"Term Loan Facility" means one or more term loan facilities under the
Credit Agreement.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b) the
sum of the total of the products obtained by multiplying (i) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in
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respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the making of such
payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
DESCRIPTION OF CREDIT AGREEMENT
The Credit Agreement among Millbrook, Manischewitz, the several lenders
from time to time parties thereto (collectively, the "Lenders"), The Chase
Manhattan Bank, as administrative agent and collateral agent (the "Agent"),
and NationsBank, N.A., as co-agent, provides for revolving credit loans of up
to $90.2 million and a term loan of $9.31 million. The following is a summary
description of the principal terms of the Credit Agreement, as amended,
currently in effect and is subject to and qualified in its entirety by
reference to the definitive Credit Agreement, as amended, and the other loan
documents.
At June 30, 1998, $10.3 million was outstanding under the Credit
Agreement, consisting of revolving credit borrowings of $1.2 million and a $9.1
million term loan, and approximately $54.3 million of additional borrowing
capacity was available under the Credit Agreement.
Security. The obligations of Millbrook and Manischewitz under the
Credit Agreement will be secured by (i) substantially all the assets of
Millbrook and (ii) the accounts receivable, inventory and intellectual
property of Manischewitz. The obligations of Millbrook and Manischewitz under
the Credit Agreement will also be secured by a non-recourse pledge by the
Company of all the capital stock of Millbrook.
Interest; Maturity. Interest on the revolving credit loans and the
term loan under the Credit Agreement, at the borrower's option, bear interest
at a rate per annum equal to the Adjusted LIBO Rate or an Alternate Base Rate,
in each case, plus an interest margin based on Millbrook's and Manischewitz's
combined borrowing base availability. The revolving credit portion of the
Credit Agreement matures on March 31, 2002 and the term loan portion of the
Credit Agreement matures on March 31, 2003.
Interest Rate Protection. Millbrook is a party to an interest rate
protection agreement with Bank of Montreal covering a notional principal
amount of $50 million.
Covenants. The Credit Agreement contains a number of covenants that,
among other things, restrict the ability of Millbrook, Manischewitz and their
respective subsidiaries to dispose of assets, incur additional indebtedness,
prepay other indebtedness or amend certain other debt instruments, pay
dividends, create liens on assets, enter into sale and leaseback transactions,
make investments, loans or advances, make acquisitions, engage in mergers or
consolidations, materially change the business conducted by Millbrook,
Manischewitz or their respective subsidiaries or engage in certain
transactions with affiliates and otherwise restrict certain corporate
activities; however, certain of these covenants are subject to a number of
qualifications and exceptions. In addition, under the Credit Agreement,
Millbrook and Manischewitz will be required to meet certain financial
covenants, including, without limitation, debt service coverage ratios,
leverage ratios and annual capital expenditure limitations.
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Events of Default. The Credit Agreement contains customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, cross-defaults and cross-acceleration to certain other
indebtedness, certain events of bankruptcy and insolvency, ERISA, judgment
defaults, actual or asserted invalidity of any security interest and Change of
Control (as defined in the Credit Agreement) of the Company, Millbrook or
Manischewitz in certain circumstances as set forth therein.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, both the New Holdings
Notes and the New Company Notes initially will be represented by one or more
permanent global certificates in definitive, duly registered from
(collectively, the "Global Notes"). The Global Notes will be deposited on
their date of issue with, or on behalf of, the DTC and registered in the name
of a nominee of DTC.
The Global Notes. The Issuers expect that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit on its internal system, the principal amount of New
Notes of the individual beneficial interests represented by such Global Notes
to the respective accounts of persons who have accounts with such depositary
and (ii) ownership of beneficial interest in the Global Notes will be shown
on, and the transfer of such ownership will be effective only through, records
maintained by DTC or its nominee (with respect to interest of participants)
and the records of participants (with respect to interest of person other than
participants). Ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants.
So long as DTC, or its nominee, is the registered owner or holder of
the New Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the New Notes represented by such Global Notes for all
purposes under the Indentures. No beneficial owner of an interest in the
Global Notes will be able to transfer that interest except in accordance with
DTC's procedures.
Payments of the principal of, premium (if any) and interest on, the
Global Notes will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, Holdings, the Trustees or any
Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.
The Issuers expect that DTC or its nominee, upon receipt of any
payment of principal, premium, if any, and interest on the Global Notes, will
credit participants' accounts with payments in amounts proportionate to their
beneficial interests in the principal amount of the Global Notes as shown on
the records of DTC or its nominee. The Issuers also expect that payments by
participants to owners of beneficial owners in the Global Notes held through
such participants will be governed by standing instructions and customary
practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the
ordinary way through DTC's same-day funds system in accordance with DTC rules
and will be settled in same-day funds. if a holder requires physical delivery
of a certificated New Note for any reason, including to sell New Notes to
persons in states in which require physical delivery of the New Notes, or to
pledge such securities, such holder must transfer its interest in a Global
Note, in accordance with the normal procedures of DTC.
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DTC has advised the Issuers that it will take any action permitted to
be taken by a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in the Global Notes are credited and only
in respect of such portion of the aggregate principal amount of New Notes as
to which such participant or participants has or have given such direction.
DTC has advised the Issuers as follows: DTC is a limited purpose
trust company organized under the laws of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of
DTC, it is under no obligation to perform such procedures, and such procedures
may be discontinued at any time. Neither of the Issuers nor the Trustee will
have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Certificated Notes. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and a successor depositary is
not appointed by the Issuer within 90 days, certificated notes will be issued
in exchange for the Global Notes.
PLAN OF DISTRIBUTION
Based on an interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by holders thereof (other
than any such holder which is an "affiliate" of Holders of the Company or the
guarantors within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such New Notes. See "Morgan
Stanley & Co. Inc." SEC No-Action Letter (available June 5, 1991), "Exxon
Capital Holdings Corporation" SEC No-Action Letter (available May 13, 1988)
and "Shearman & Sterling" SEC No-Action Letter (available July 2, 1993).
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Issuers have agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until _______ 1999, all dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
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The Issuers will not receive any proceeds from any sale of New Notes
by broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account and any broker or dealer that participates in a such New Notes may be
deemed to be an "underwriter" within the Securities Act, and any profit on any
such resale of New Notes, commissions or concessions received by any such
persons may be underwriting compensation under the Securities Act. The Letter
of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the applicable Letter of Transmittal. The Issuers have agreed to
pay all expenses incident to the Exchange Offers (including the expenses of
one counsel for the holders of the Old Notes) other than commissions or
concessions of any broker-dealers and will indemnify holders of the Old Notes
(including any broker-dealers) against certain liabilities, including certain
liabilities under the Securities Act.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain Federal income tax
consequences of the exchange of the Notes under existing Federal income tax
law, which is subject to change, possibly retroactively. This summary does not
discuss all aspects of Federal income taxation which may be relevant to a
particular investor in light of his personal investment circumstances or to
certain types of investors subject to special treatment under the Federal
income tax laws (for example, financial institutions, insurance companies,
tax-exempt organizations, broker-dealers, and foreign taxpayers) and it does
not discuss any aspects of other federal taxes or state, local, or foreign tax
law. This summary assumes that investors hold and will continue to hold their
Notes as "capital assets" (generally, property held for investment) under the
Internal Revenue Code of 1986, as amended (the "Code"). Each holder is advised
to consult its tax advisors as to the specific tax consequences of exchanging
the Notes, including the application and effect of Federal, state, local and
foreign income and other tax laws.
An exchange of an Old Note for a New Note (the "Exchange") should not
be treated as an event in which gain or loss, if any, is realized for Federal
income tax purposes, because the terms of the New Notes do not differ
materially in kind or extent from the terms of the Old Notes. As a result, the
holder should not recognize any gain or loss for Federal income tax purposes
on account of the Exchange, and the New Note received in the Exchange should
be treated as a continuation of the Old Note surrendered in the Exchange. The
holder should have the same basis and holding period in its New Note as it
had in the Old Note.
LEGAL MATTERS
Certain legal matters with respect to the validity of the New Notes
offered hereby will be passed upon for the Issuers by Parker Chapin Flattau &
Klimpl, LLP, New York, New York. Martin Eric Weisberg, Esq., a
-133-
<PAGE>
partner of Parker Chapin Flattau & Klimpl, LLP, owns shares of Common Stock
and Series A Preferred Stock of Holdings.
EXPERTS
The consolidated financial statements of R.A.B. Holdings, Inc. and
R.A.B. Enterprises, Inc., each as of March 31, 1997 and 1998 and for the
fiscal year ended March 31, 1998 included in this prospectus and the related
financial statement schedules included elsewhere in the registration statement
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the registration statement,
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The statements of operations of Millbrook Distribution Services Inc.
included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The combined financial statements of MANO Holdings Corporation and
KBMC Acquisition Company, L.P. as of July 31, 1997 and 1996 and for each of
the three years in the period ended July 31, 1997 included in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
-134-
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF R.A.B. HOLDINGS, INC.
AND SUBSIDIARIES
Independent Auditors' Report ......................................................................... F-3
Consolidated Balance Sheets as of March 31, 1998 and 1997 ............................................ F-4
Consolidated Statement of Operations for the fiscal year ended March 31, 1998 ........................ F-5
Consolidated Statements of Stockholders' Equity for the period from May 6, 1996 (date of inception) to
March 31, 1997 and for the fiscal year ended March 31, 1998 ...................................... F-6
Consolidated Statement of Cash Flows for the fiscal year ended March 31, 1998 ........................ F-7
Notes to Consolidated Financial Statements ........................................................... F-8
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets as of June 30, 1998 and March 31, 1998 ......................... F-16
Condensed Consolidated Statements of Operations for the three month periods ended June 30, 1998
and 1997 ......................................................................................... F-17
Condensed Consolidated Statement of Stockholders' Equity for the three month period ended
June 30, 1998 .................................................................................... F-18
Condensed Consolidated Statements of Cash Flows for the three month periods ended June 30, 1998
and 1997 ......................................................................................... F-19
Notes to Condensed Consolidated Financial Statements ................................................. F-20
CONSOLIDATED FINANCIAL STATEMENTS OF R.A.B. ENTERPRISES, INC.
AND SUBSIDIARIES
Independent Auditors' Report ......................................................................... F-22
Consolidated Balance Sheets as of March 31, 1998 and 1997 ............................................ F-23
Consolidated Statement of Operations for the fiscal year ended March 31, 1998 ........................ F-24
Consolidated Statement of Stockholder's Equity for the fiscal year ended March 31, 1998 .............. F-25
Consolidated Statement of Cash Flows for the fiscal year ended March 31, 1998 ........................ F-26
Notes to Consolidated Financial Statements ........................................................... F-27
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets as of June 30, 1998 and March 31, 1998 ......................... F-35
Condensed Consolidated Statements of Operations for the three month periods ended
June 30, 1998 and 1997 ........................................................................... F-36
Condensed Consolidated Statements of Stockholder's Equity for the three month period ended
June 30, 1998 .................................................................................... F-37
Condensed Consolidated Statements of Cash Flows for the three month periods ended
June 30, 1998 and 1997 ........................................................................... F-38
Notes to Condensed Consolidated Financial Statements ................................................. F-39
</TABLE>
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
COMBINED FINANCIAL STATEMENTS OF MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
Report of Independent Public Accountants ............................................................. F-41
Combined Balance Sheets as of July 31, 1997 and 1996 ................................................. F-42
Combined Statements of Operations for the years ended July 31, 1997, 1996 and 1995 ................... F-43
Combined Statements of Changes in Equity for the years ended July 31, 1997, 1996 and 1995 ........... F-44
Combined Statements of Cash Flows for the years ended July 31, 1997, 1996 and 1995 .................. F-45
Notes to Combined Financial Statements .............................................................. F-46
UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS OF MANO HOLDINGS
CORPORATION AND KBMC ACQUISITION COMPANY, L.P.
Condensed Combined Balance Sheets as of April 30, 1998 and July 31, 1997............................. F-58
Condensed Combined Statements of Operations for the nine month periods ended
April 30, 1998 and 1997 ......................................................................... F-59
Condensed Combined Statement of Changes in Equity for the nine month period
ended April 30, 1998 ............................................................................ F-60
Condensed Combined Statements of Cash Flows for the nine month periods
ended April 30, 1998 and 1997 ................................................................... F-61
Notes to Condensed Combined Financial Statements .................................................... F-62
FINANCIAL STATEMENTS OF MILLBROOK DISTRIBUTION SERVICES INC.
Independent Auditors' Report ........................................................................ F-64
Statements of Operations for the fiscal years ended March 31, 1997 and 1996 ......................... F-65
Notes to Statements of Operations ................................................................... F-66
</TABLE>
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
R.A.B. Holdings, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of R.A.B. Holdings,
Inc. and subsidiaries as of March 31, 1998 and March 31, 1997, and the related
consolidated statements of operations and cash flows for the fiscal year ended
March 31, 1998 and the consolidated statements of stockholders' equity for the
period from May 6, 1996 (date of inception) to March 31, 1997 and for the fiscal
year ended March 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of R.A.B. Holdings, Inc. and
subsidiaries as of March 31, 1998 and March 31, 1997, and the results of their
operations and their cash flows for the fiscal year ended March 31, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
July 10, 1998
New York, New York
F-3
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and 1997
(In thousands except for share and per share data)
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 2,623 $ 2,637
Accounts receivable 27,942 29,892
Inventories 41,814 52,271
Other current assets 5,707 9,480
--------------- ----------------
Total current assets 78,086 94,280
Other assets 7,291 6,784
Property, plant and equipment, net 23,395 25,235
--------------- ----------------
$ 108,772 $ 126,299
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 815 $ 490
Accounts payable 31,035 29,083
Other current liabilities 16,233 12,504
--------------- ----------------
Total current liabilities 48,083 42,077
Noncurrent liabilities:
Long-term debt 37,295 61,310
Deferred compensation 7,801 7,668
Deferred income taxes 982 1,536
Other liabilities 3,434 3,704
--------------- ----------------
Total noncurrent liabilities 49,512 74,218
Commitments and contingencies
Stockholders' equity:
Preferred stock, $500 par value, 100,000 shares authorized,
20,000 shares of Series A issued and outstanding 9,906 9,906
Common stock, $.01 par value, 100,000 shares authorized,
100,000 and 99,000 shares issued 1 1
Additional paid-in capital 98 97
Retained earnings 1,174 -
--------------- ----------------
11,179 10,004
Less cost of common stock in treasury-1,600 shares 2 -
--------------- ----------------
Total stockholders' equity 11,177 10,004
--------------- ----------------
$ 108,772 $ 126,299
=============== ================
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended March 31, 1998
(In thousands)
Revenues $ 470,201
Costs and expenses:
Cost of sales 360,162
Selling 43,766
Distribution and warehousing 37,339
General and administrative 21,559
-------------
Total costs and expenses 462,826
-------------
Operating income 7,375
Interest expense, net 5,079
-------------
Income before provision for income taxes 2,296
Provision for income taxes 1,122
-------------
Net income $ 1,174
=============
See notes to consolidated financial statements.
F-5
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except for share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Treasury Stock
----------------- ---------------- Paid-In Retained ---------------
Shares Amount Shares Amount Capital Earnings Shares Amount
------ ------ ------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 6, 1996 - $ - - $ - $ - $ - - $ -
Issuance of stock 20,000 9,906 99,000 1 97
-------- --------- -------- ------- -------- -------- ----- -------
Balance at March 31, 1997 20,000 9,906 99,000 1 97 - - -
Issuance of common stock 1,000 1
Repurchase of common stock 1,600 2
Net income 1,174
-------- --------- -------- ------- -------- -------- ----- -------
Balance at March 31, 1998 20,000 $ 9,906 100,000 $ 1 $ 98 $ 1,174 1,600 $ 2
======== ========= ======== ======= ======== ======== ===== =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Fiscal Year Ended March 31, 1998
(In thousands)
Cash flows from operating activities:
Net income $ 1,174
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,471
Gain on disposition of equipment (20)
Deferred income taxes (106)
Changes in assets and liabilities:
Accounts receivable 1,950
Inventories 10,457
Other current assets 3,773
Accounts payable 1,952
Other current liabilities 3,729
Other assets and liabilities (1,477)
--------------
Net cash provided by operating activities 25,903
Cash flows from investing activities:
Acquisitions of equipment (2,309)
Proceeds from disposition of equipment 83
--------------
Net cash used in investing activities (2,226)
Cash flows from financing activities:
Repayments under Credit Agreement (23,690)
Proceeds from issuance of common stock 1
Purchase of treasury stock (2)
--------------
Net cash used in financing activities (23,691)
Net decrease in cash (14)
Cash, beginning of year 2,637
--------------
Cash, end of year $ 2,623
==============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 4,054
Income taxes $ 1,392
See notes to consolidated financial statements.
F-7
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary Of Significant Accounting Policies
Principles of Consolidation - The consolidated financial
statements include the accounts of R.A.B. Holdings, Inc. and its
wholly-owned subsidiaries, Millbrook Distribution Services Inc.
("Millbrook") and R.A.B. Enterprises, Inc. ("Enterprises"),
Millbrook's parent (collectively, the "Company"). Millbrook is one of
the nation's largest independent value-added distributors of health
and beauty care, general merchandise and specialty and natural food
products. All significant intercompany transactions and balances are
eliminated in consolidation.
Use of Estimates - The preparation of financial statements,
in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Concentration of Credit Risk - Trade accounts receivable
potentially subject the Company to credit risk. The Company extends
credit to its customers, principally in the U.S. supermarket industry,
based upon an evaluation of the customer's financial condition and
credit history and generally does not require collateral. The
Company's allowance for doubtful accounts is based upon the expected
collectability of its trade accounts receivable.
Fiscal Year - The Company's fiscal year ends on March 31.
Inventories - Inventories are stated at the lower of cost or
market. Cost is determined by the last-in, first-out ("LIFO") method.
At March 31, 1998, the replacement cost of inventories valued using
the LIFO method exceeded the net carrying amount of such inventories
by approximately $255,000.
Property, Plant and Equipment - Property, plant and equipment
are recorded at cost. For financial reporting purposes, depreciation is
provided on the straight-line method over the following estimated
useful lives:
Buildings and improvements..................... 5-35 years
Machinery and equipment........................ 2-15 years
Rolling stock.................................. 3- 8 years
Expenditures which significantly increase value or extend
useful lives are capitalized, while ordinary maintenance and repairs
are expensed as incurred. The cost and related accumulated
depreciation of assets replaced, retired or disposed of are removed
from the accounts and any related gains or losses are reflected in
operations.
F-8
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1. Summary Of Significant Accounting Policies (Continued)
Long-Lived Assets - The Company reviews its long-lived assets
and certain related intangibles for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
fully recoverable. Such changes in circumstances may include, among
other factors, a significant change in technology that may render an
asset obsolete or noncompetitive or a significant change in the extent
or manner in which an asset is used. The assessment for potential
impairment is based upon the Company's ability to recover the
unamortized balance of its long-lived assets from expected future cash
flows on an undiscounted basis (without interest charges). If such
expected future cash flows are less than the carrying amount of the
asset, an impairment loss would be recorded.
Income Taxes - Deferred income taxes result primarily from
temporary differences between financial and tax reporting and
acquisition basis differences.
Business Segment Information - Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information" was issued in June 1997 and is
effective for financial statements for periods beginning after
December 15, 1997. This statement establishes standards for the manner
in which operating segments of public reporting entities are presented
in interim and annual financial statements. The Company believes its
current reporting systems will enable it to comply with the
requirements of SFAS No. 131.
2. Formation And Acquisition
On May 6, 1996, R.A.B. Holdings, Inc., a Delaware
corporation, was formed. On March 31, 1997, R.A.B. Holdings, Inc.
acquired Millbrook for a purchase price of approximately $67 million,
including transaction costs, through the sale of stock (see Note 7)
and borrowings under the Company's Credit Agreement. The acquisition
was accounted for as a purchase and, accordingly, the purchase price
was allocated to the assets and liabilities of Millbrook based upon
their estimated fair values at the date of acquisition. The fair
values of assets acquired (approximately $129 million) and liabilities
assumed (approximately $53 million) were based upon third party
appraisals and other valuation analyses. The fair value of the net
assets acquired exceeded the purchase price by approximately $9
million. The resulting negative goodwill reduced the fair value
assigned to Millbrook's property, plant and equipment.
R.A.B. Holdings, Inc. had no operations prior to April 1,
1997. A statement of cash flows from May 6, 1996 (date of inception)
to March 31, 1997 has not been presented as the relevant information
has been included herein.
F-9
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
3. Accounts Receivable
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Accounts receivable........................................... $ 30,383 $ 32,143
Allowance for doubtful accounts............................... (2,441) (2,251)
------------- -------------
$ 27,942 $ 29,892
============= =============
</TABLE>
4. Property, Plant & Equipment
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Land.......................................................... $ 1,561 $ 1,561
Buildings and improvements.................................... 9,393 9,371
Machinery and equipment....................................... 12,902 10,884
Rolling stock................................................. 3,398 3,419
Work in progress.............................................. 201 -
------------- -------------
27,455 25,235
Less accumulated depreciation and amortization................ 4,060 -
------------- -------------
$ 23,395 $ 25,235
============= =============
</TABLE>
5. Other Current Liabilities
Other current liabilities consisted of the following:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Accrued compensation and fringe benefits...................... $ 7,417 $ 4,569
Deferred income taxes......................................... 795 347
Accrued liabilities........................................... 8,021 7,588
------------- -------------
$ 16,233 $ 12,504
============= =============
</TABLE>
F-10
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Long-term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
Range of March 31, March 31,
Interest 1998 1997
-------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Revolving bank line of credit............... 7.86-9.00% $ 28,800 $ 52,000
Term loan................................... 8.11-9.25 9,310 9,800
------------- -----------
38,110 61,800
Less current maturities..................... 815 490
------------- -----------
$ 37,295 $ 61,310
============= ===========
</TABLE>
On March 31, 1997, Millbrook entered into an agreement, as
amended, with a group of commercial lending institutions providing for
a credit facility in the aggregate amount of $100 million consisting
of revolving credit loans up to $90.2 million and a term loan of $9.8
million (the "Credit Agreement"). Borrowings under this long-term
facility, which principally expires March 31, 2002, are supported by
specified assets in accordance with a formula, as defined in the
Credit Agreement (see Note 12). Substantially all of the Company's
assets and Millbrook's stock are pledged under the terms of the Credit
Agreement. Additionally, the Credit Agreement requires the maintenance
of a minimum level of cash flow, as defined and imposes restrictions
on investments, capital expenditures, cash dividends, management fees
and advances to the parent and other indebtedness. At March 31, 1998,
substantially all of the assets of the Company's subsidiaries are
unavailable for dividends. At March 31, 1998, Millbrook had available,
under the Credit Agreement, unused borrowing capacity of approximately
$24 million, net of outstanding letters of credit of approximately
$885,000.
Interest rates under the Credit Agreement vary, as Millbrook
may choose from certain variable interest rate options. On May 1,
1997, Millbrook entered into a three-year interest rate protection
agreement that effectively caps rates on up to $50 million of
Millbrook's debt. At March 31, 1998, Millbrook's outstanding debt
under the Credit Agreement and the interest rate protection agreement
approximate fair value.
Future maturities of the term loan at March 31, 1998 were as
follows (in thousands):
1999......................................... $ 815
2000......................................... 1,305
2001......................................... 1,960
2002......................................... 1,960
2003......................................... 3,270
-----------
$ 9,310
===========
F-11
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. Stockholders' Equity
In conjunction with its acquisition of Millbrook in 1997, the
Company sold 20,000 shares of Series A Preferred Stock at $500 per
share and 100,000 shares of Common Stock at $1.00 per share.
The holders of the Series A Preferred Stock are entitled to
cumulative preferential cash dividends of $50 per year (10%), per
share. At March 31, 1998, the amount of accumulated unpaid dividends
on the Series A Preferred Stock was $50.00 per share. Unless all
accumulated and unpaid dividends on the Series A Preferred Stock are
paid, no dividends shall be declared or paid on the Company's Common
Stock. The Preferred Stock is subject to an optional redemption by the
Company at any time, in whole or in part, at the redemption price per
share of $500 plus an amount equal to all accumulated and unpaid
dividends.
8. Commitments And Contingencies
Leases
The Company leases certain facilities, machinery and vehicles
under various non-cancelable operating lease agreements. The Company
is required to pay property taxes, insurance and normal maintenance
costs for certain of its facilities. Future minimum lease payments
required under such leases in effect at March 31, 1998 were as follows
(in thousands):
1999......................................... $ 2,671
2000......................................... 2,310
2001......................................... 2,084
2002......................................... 1,977
2003......................................... 1,621
Thereafter................................... 4,216
-----------
$ 14,879
===========
Total rent expense for all operating leases was $4.3 million
for the fiscal year ended March 31, 1998.
Contingencies
The Company is subject to pending claims and legal
proceedings in the normal course of its business. While it is not
feasible to predict or determine the outcome of these claims and
proceedings, it is the opinion of management that their outcome, to
the extent not provided for through insurance or otherwise, will not
have a materially adverse effect on the Company's financial position
or results of future operations.
F-12
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9. Income Taxes
The provision for income taxes for the fiscal year ended
March 31, 1998 consisted of the following (in thousands):
<TABLE>
<S> <C>
Currently payable:
Federal..................................................................... $ 1,075
State....................................................................... 153
-----------
1,228
-----------
Deferred:
Federal..................................................................... (93)
State....................................................................... (13)
-----------
(106)
-----------
$ 1,122
===========
</TABLE>
A reconciliation of the statutory United States Federal income
tax rate to the Company's effective income tax rate for the fiscal year
ended March 31, 1998 follows:
<TABLE>
<S> <C>
Statutory rate................................................................. 35.0%
State income taxes, net of Federal benefit..................................... 4.6
Other, principally meals and entertainment disallowance........................ 9.2
----
48.8%
====
</TABLE>
The income tax effects of temporary differences that give rise
to significant portions of the deferred tax assets and liabilities were
as follows:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
--------- ---------
(In thousands)
<S> <C> <C>
Deferred Tax Assets:
Accounts receivable, principally due to
allowance for doubtful accounts................................... $ 993 $ 1,086
Deferred compensation............................................... 3,279 3,005
Liability accruals.................................................. 3,771 4,787
Other, net.......................................................... 359 417
Deferred Tax Liabilities:
Inventories, principally due to acquisition basis
differences and financial statement allowances.................... (5,612) (6,210)
Property, plant & equipment, principally
due to basis differences.......................................... (4,567) (4,968)
------------- -------------
Net deferred tax liabilities $ (1,777) $ (1,883)
============= =============
</TABLE>
F-13
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10. Employee Benefit Plans
Retirement and Savings Plan
The Company has a retirement and savings plan ("401(k) Plan")
covering substantially all of its employees. The 401(k) Plan provides
for matching contributions by the Company which amounted to
approximately $1.2 million for the fiscal year ended March 31, 1998.
In addition, the Company may make annual discretionary contributions
to employee accounts based, in part, on the Company's financial
performance. For the fiscal year ended March 31, 1998, the Company's
discretionary contributions were approximately $1.1 million.
Other Benefit Plans
In 1984, a predecessor of Millbrook implemented a deferred
compensation plan in the form of a non-qualified defined benefit plan
and a supplemental retirement plan which permitted former officers and
certain management employees, at the time, to defer portions of their
compensation and to earn specified benefits upon retirement. These
plans do not allow new participants.
In an effort to provide for the benefits associated with
these plans, the Company purchased whole-life insurance contracts on
the plan participants. The value of these policies is included in
other assets. At March 31, 1998, future payment obligations under the
deferred compensation and supplemental retirement plans were $395,000,
$395,000, $395,000, $390,000 and $390,000 in fiscal years ended March
31, 1999, 2000, 2001, 2002 and 2003, respectively.
11. Related Party Transactions
Concurrent with Millbrook's acquisition by R.A.B. Holdings,
Inc., Millbrook entered into an arrangement with an entity owned by
its majority shareholder whereby the Company agreed (i) to pay a
quarterly management fee of $100,000; and (ii) to reimburse the entity
for reasonable services provided and out-of-pocket and other expenses
incurred on its behalf. For the fiscal year ended March 31, 1998,
Millbrook paid management fees of $400,000 to this entity and $800,000
for reasonable services provided to the Company pursuant to the
aforementioned arrangement. The Company believes that the terms of the
arrangement with this entity were no less favorable than could have
been obtained from unaffiliated third parties on an arm's length
basis.
F-14
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
12. Subsequent Event (Unaudited)
Effective March 3, 1998, Enterprises, a wholly-owned
subsidiary of R.A.B. Holdings, Inc., formed on January 26, 1998,
entered into a purchase agreement with MANO Holdings I, LLC, KBMC
Acquisition Company, L.P., MANO Holdings Corporation ("MANO") and the
stockholders of MANO to acquire all of the outstanding membership
interests of The B. Manischewitz Company, LLC ("Manischewitz"). As of
and for the fiscal year ended July 31, 1997, Manischewitz had total
assets, revenues and operating income of approximately $59.6 million,
$54.8 million and $9.8 million, respectively. On May 1, 1998,
Enterprises acquired all of the outstanding interests of Manischewitz
for approximately $124 million less outstanding long-term debt and
certain other specified deductions, through the issuance of $120
million Senior Notes due 2005 bearing interest at 10 1/2% ("10 1/2%
Senior Notes") and the Company's issuance of $48 million Senior Notes
due 2008 bearing interest at 13% ("13% Senior Notes") (collectively
"Senior Notes"). The 13% Senior Notes will pay interest for the first
three years, semiannually from an escrow account which was established
upon their issuance ("Interest Escrow Account"). Concurrent with the
acquisition, the Company contributed all of the capital stock of
Millbrook to Enterprises.
The gross proceeds of $168 million from the issuance of the
Senior Notes were used to: (i) pay the purchase price for Manischewitz
of $124 million, (ii) reduce outstanding borrowings by approximately
$22 million under the revolving credit portion of Millbrook's Credit
Agreement, (iii) fund the Interest Escrow Account with approximately
$17 million and (iv) pay fees and expenses relating to the acquisition
of Manischewitz and offering of the Senior Notes.
Also concurrent with the acquisition, the Credit Agreement
was amended to provide for, among other things, Millbrook and
Manischewitz to be co-borrowers under the Credit Agreement and certain
assets of Manischewitz to be included in determining borrowing
capacity resulting in future additional availability under the credit
facility.
F-15
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except for share and per share data)
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 2,731 $ 2,623
Accounts receivable 39,147 27,942
Inventories 50,973 41,814
Other current assets 13,626 5,707
--------- ---------
Total current assets 106,477 78,086
Other assets 25,803 7,291
Property, plant and equipment, net 40,186 23,395
Excess of cost over fair value of net assets acquired, net 96,892 --
--------- ---------
Total assets $ 269,358 $ 108,772
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 924 $ 815
Accounts payable 39,327 31,035
Other current liabilities 24,861 16,233
--------- ---------
Total current liabilities 65,112 48,083
--------- ---------
Noncurrent liabilities:
Long-term debt 177,397 37,295
Deferred compensation 7,867 7,801
Other liabilities 9,991 4,416
--------- ---------
Total noncurrent liabilities 195,255 49,512
Stockholders' equity:
Preferred stock, $500 par value, 100,000
shares authorized, 20,000 shares of
Series A issued and outstanding 9,906 9,906
Common stock, $.01 par value, 100,000 shares
authorized and issued 1 1
Additional paid-in capital 98 98
Retained earnings (deficit) (1,010) 1,174
--------- ---------
8,995 11,179
Less common stock in treasury - 2,600 and 1,600 shares 4 2
--------- ---------
Total stockholders' equity 8,991 11,177
--------- ---------
Total liabilities and stockholders' equity $ 269,358 $ 108,772
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-16
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
June 30, June 30,
1998 1997
(Unaudited)
<S> <C> <C>
Revenues $ 116,571 $ 113,522
Costs and expenses:
Cost of sales 88,915 87,282
Selling 11,994 10,450
Distribution and warehousing 9,102 8,970
General and administrative 5,935 5,236
Amortization of excess of cost over fair value
of net assets acquired 400 --
--------- ---------
Total costs and expenses 116,346 111,938
--------- ---------
Operating income 225 1,584
Interest expense, net 3,863 1,439
--------- ---------
Income (loss) before provision (benefit) for income taxes (3,638) 145
Provision (benefit) for income taxes (1,454) 97
--------- ---------
Net income (loss) $ (2,184) $ 48
========= =========
See notes to condensed consolidated financial statements.
F-17
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands except for share data)
</TABLE>
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Retained Treasury Stock
--------------- ------------ Paid-In Earnings --------------
Shares Amount Shares Amount Capital (deficit) Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1998 20,000 $ 9,906 100,000 $ 1 $ 98 $ 1,174 1,600 $ 2
Repurchase of common stock 1,000 2
Net loss (2,184)
------ ------- ------- ------- ------- ------- ------- -------
Balance at June 30, 1998 20,000 $ 9,906 100,000 $ 1 $ 98 $(1,010) 2,600 $ 4
====== ======= ======= ======= ======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
F-18
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
June 30, June 30,
1998 1997
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,184) $ 48
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,461 782
Amortization of excess of cost over fair value
of net assets acquired 400 --
Changes in assets and liabilities:
Accounts receivable 5,381 (1,611)
Inventories (2,662) 7,182
Accounts payable 5,792 11,461
Other assets and liabilities (127) 3,976
--------- ---------
Net cash provided by operating activities 8,061 21,838
--------- ---------
Cash flows from investing activities:
Purchase of The B. Manischewitz Company, LLC,
net of cash acquired (124,255) --
Acquisitions of plant and equipment (941) (148)
--------- ---------
Net cash used in investing activities (125,196) (148)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 168,000 --
Payment of debt issuance costs (5,975) --
Funding of Interest Escrow Account (16,991) --
Repayments under Credit Agreement (27,789) (20,115)
Purchase of treasury stock (2) (2)
--------- ---------
Net cash provided by (used in)
financing activities 117,243 (20,117)
--------- ---------
Net increase in cash 108 1,573
Cash, beginning of period 2,623 2,637
--------- ---------
Cash, end of period $ 2,731 $ 4,210
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 499 $ 1,265
Income Taxes $ 745 $ --
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------------------------------------------------------------------
NOTE A - Basis of Presentation
The consolidated financial statements include the accounts of R.A.B. Holdings,
Inc. and its wholly-owned subsidiary, R.A.B. Enterprises, Inc. and its
wholly-owned subsidiaries ("Enterprises") (collectively, the "Company").
These financial statements should be read in conjunction with the Company's
summary of significant accounting policies included in its consolidated
financial statements as of March 31, 1998 and 1997, included elsewhere herein.
Effective March 3, 1998, Enterprises entered into a purchase agreement with
MANO Holdings I, LLC, KBMC Acquisition Company, L.P., MANO Holdings
Corporation ("MANO") and the stockholders of MANO to acquire all of the
outstanding membership interests of The B. Manischewitz Company, LLC
("Manischewitz"). On May 1, 1998, Enterprises acquired all of the outstanding
interests of Manischewitz for approximately $124.7 million through the
issuance of $120 million Senior Notes due 2005 bearing interest at 10 1/2%
("10 1/2% Senior Notes") and the Company's issuance of $48 million Senior
Notes due 2008 bearing interest at 13% ("13% Senior Notes"). The 10 1/2%
Senior Notes are jointly and severally guaranteed on an unsecured basis by
Millbrook Distribution Services Inc. and Manischewitz. The 13% Senior Notes
will pay interest for the first three years, semiannually from a $17 million
interest escrow account which was established upon their issuance.
The acquisition of Manischewitz was accounted for as a purchase and,
accordingly, the purchase price was allocated to the assets and liabilities of
Manischewitz based upon their estimated fair values at the date of
acquisition, which are subject to adjustment. The fair values of assets
acquired and liabilities assumed were based upon preliminary third party
appraisals and other valuation analyses. The excess of cost over the fair
value of net assets acquired represents goodwill which is being amortized on a
straight-line basis over its estimated useful life of forty years. The
statements of operations include the operating results of Manischewitz since
its date of acquisition. The pro forma combined historical results, as if the
Manischewitz business had been acquired at the beginning of each of the
periods presented are as follows:
Three Months Ended
June 30, June 30,
1998 1997
-------- --------
Revenues $118,738 $120,436
Net loss $ (4,063) $ (2,872)
All significant intercompany transactions and balances are eliminated in
consolidation. The results of operations for any interim period are not
necessarily indicative of the results to be expected for the full fiscal year.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present
fairly the financial position as of June 30, 1998, and the results of
operations and cash flows for the periods ended June 30, 1998 and 1997.
F-20
<PAGE>
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
(Unaudited)
- ------------------------------------------------------------------------------
NOTE B - Inventories
Inventories are valued at the lower of cost or market. Cost is determined by
the last-in, first-out ("LIFO") method. Inventories at June 30, 1998 consisted
of the following (in thousands):
Raw materials $ 1,944
Finished goods 49,029
----------
$ 50,973
==========
NOTE C - Income Taxes
The results of operations of the Company are included in the consolidated
Federal income tax return of Holdings. Holdings income tax provision (benefit)
is based upon its anticipated effective income tax rate for the fiscal years
ending March 31, 1999 and 1998.
NOTE D- Related Party Transactions
For the three month periods ended June 30, 1998 and 1997, the Company paid
$300,000 in each period to an affiliated entity for management fees,
reasonable services provided and expenses incurred on its behalf.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
R.A.B. Enterprises, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of R.A.B.
Enterprises, Inc. (a wholly-owned subsidiary of R.A.B. Holdings, Inc.) and
subsidiary as of March 31, 1998 and March 31, 1997, and the related
consolidated statements of operations, stockholder's equity and cash flows for
the fiscal year ended March 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of R.A.B. Enterprises, Inc. and
subsidiary as of March 31, 1998 and March 31, 1997, and the results of their
operations and their cash flows for the fiscal year ended March 31, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
July 10, 1998
New York, New York
F-22
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and 1997
(In thousands except for share and per share data)
<TABLE>
<CAPTION>
1998 1997
-------------- ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 2,623 $ 1,903
Accounts receivable 27,942 29,892
Inventories 41,814 52,271
Other current assets 5,810 9,248
-------------- ---------------
Total current assets 78,189 93,314
Other assets 7,291 6,784
Property, plant and equipment, net 23,395 25,235
-------------- ---------------
$ 108,875 $ 125,333
============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 815 $ 490
Accounts payable 31,035 29,083
Other current liabilities 16,231 11,442
-------------- ---------------
Total current liabilities 48,081 41,015
Noncurrent liabilities:
Long-term debt 37,295 61,310
Deferred compensation 7,801 7,668
Deferred income taxes 982 1,536
Other liabilities 3,434 3,704
-------------- ---------------
Total noncurrent liabilities 49,512 74,218
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, 200 shares,
authorized and issued - -
Additional paid-in capital 10,100 10,100
Retained earnings 1,182 -
-------------- ---------------
Total stockholder's equity 11,282 10,100
-------------- ---------------
$ 108,875 $ 125,333
============== ===============
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended March 31, 1998
(In thousands)
Revenues $ 470,201
Costs and expenses:
Cost of sales 360,162
Selling 43,766
Distribution and warehousing 37,339
General and administrative 21,551
---------------
Total costs and expenses 462,818
---------------
Operating income 7,383
Interest expense, net 5,079
---------------
Income before provision for income taxes 2,304
Provision for income taxes 1,122
---------------
Net income $ 1,182
===============
See notes to consolidated financial statements.
F-24
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(In thousands except for share data)
<TABLE>
<CAPTION>
Common Stock Additional
------------------- Paid-In Retained
Shares Amount Capital Earnings
------ ------ ------- --------
<S> <C> <C> <C> <C>
Balance at April 1, 1997 200 $ - $ 10,100 $ -
Net income 1,182
------------- -------------- ------------- -------------
Balance at March 31, 1998 200 $ - $ 10,100 $ 1,182
============= ============== ============= =============
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Fiscal Year Ended March 31, 1998
(In thousands)
Cash flows from operating activities:
Net income $ 1,182
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,471
Gain on disposition of equipment (20)
Deferred income taxes (106)
Changes in assets and liabilities:
Accounts receivable 1,950
Inventories 10,457
Other current assets 3,438
Accounts payable 1,952
Other current liabilities 4,789
Other assets and liabilities (1,477)
---------------
Net cash provided by operating activities 26,636
Cash flows from investing activities:
Acquisitions of equipment (2,309)
Proceeds from disposition of equipment 83
---------------
Net cash used in investing activities (2,226)
Cash flows from financing activities:
Repayments under Credit Agreement (23,690)
---------------
Net cash used in financing activities (23,690)
Net increase in cash 720
Cash, beginning of year 1,903
---------------
Cash, end of year $ 2,623
===============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 4,054
Income taxes $ 1,392
See notes to consolidated financial statements.
F-26
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary Of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation -
R.A.B. Enterprises, Inc. (the "Company") is a wholly-owned subsidiary
of R.A.B. Holdings, Inc. ("Holdings"). On January 26, 1998, Holdings
formed the Company and on May 1, 1998 contributed to the Company its
wholly-owned subsidiary Millbrook Distribution Services Inc.
("Millbrook"), which contribution has been accounted for as an "as if"
pooling of interests. Millbrook is one of the nation's largest
independent value-added distributors of health and beauty care,
general merchandise and specialty and natural food products. All
significant intercompany transactions and balances are eliminated in
consolidation.
Use of Estimates - The preparation of financial statements,
in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Concentration of Credit Risk - Trade accounts receivable
potentially subject the Company to credit risk. The Company extends
credit to its customers, principally in the U.S. supermarket industry,
based upon an evaluation of the customer's financial condition and
credit history and generally does not require collateral. The
Company's allowance for doubtful accounts is based upon the expected
collectability of its trade accounts receivable.
Fiscal Year - The Company's fiscal year ends on March 31.
Inventories - Inventories are stated at the lower of cost or
market. Cost is determined by the last-in, first-out ("LIFO") method.
At March 31, 1998, the replacement cost of inventories valued using
the LIFO method exceeded the net carrying amount of such inventories
by approximately $255,000.
Property, Plant and Equipment - Property, plant and equipment
are recorded at cost. For financial reporting purposes, depreciation
is provided on the straight-line method over the following estimated
useful lives:
Buildings and improvements..................... 5-35 years
Machinery and equipment........................ 2-15 years
Rolling stock.................................. 3- 8 years
Expenditures which significantly increase value or extend
useful lives are capitalized, while ordinary maintenance and repairs
are expensed as incurred. The cost and related accumulated
depreciation of assets replaced, retired or disposed of are removed
from the accounts and any related gains or losses are reflected in
operations.
F-27
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary Of Significant Accounting Policies (Continued)
Long-Lived Assets - The Company reviews its long-lived assets
and certain related intangibles for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
fully recoverable. Such changes in circumstances may include, among
other factors, a significant change in technology that may render an
asset obsolete or noncompetitive or a significant change in the extent
or manner in which an asset is used. The assessment for potential
impairment is based upon the Company's ability to recover the
unamortized balance of its long-lived assets from expected future cash
flows on an undiscounted basis (without interest charges). If such
expected future cash flows are less than the carrying amount of the
asset, an impairment loss would be recorded.
Income Taxes - The Company is included in the consolidated
Federal income tax return of Holdings and its annual Federal income
tax liability is determined as if the Company had filed a separate
consolidated Federal income tax return. Deferred income taxes result
primarily from temporary differences between financial and tax
reporting and acquisition basis differences.
Business Segment Information - Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information" was issued in June 1997 and is
effective for financial statements for periods beginning after
December 15, 1997. This statement establishes standards for the manner
in which operating segments of public reporting entities are presented
in interim and annual financial statements. The Company believes its
current reporting systems will enable it to comply with the
requirements of SFAS No. 131.
2. Formation And Acquisition
On March 31, 1997, Holdings acquired Millbrook for a purchase
price of approximately $67 million, including transaction costs,
through the sale of stock and borrowings under Millbrook's Credit
Agreement. The acquisition was accounted for as a purchase and,
accordingly, the purchase price was allocated to the assets and
liabilities of Millbrook based upon their estimated fair values at the
date of acquisition. The fair values of assets acquired (approximately
$129 million) and liabilities assumed (approximately $53 million) were
based upon third party appraisals and other valuation analyses. The
fair value of the net assets acquired exceeded the purchase price by
approximately $9 million. The resulting negative goodwill reduced the
fair value assigned to Millbrook's property, plant and equipment.
F-28
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Accounts Receivable
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
------------- -------------
(In thousands)
<S> <C> <C>
Accounts receivable........................................... $ 30,383 $ 32,143
Allowance for doubtful accounts............................... (2,441) (2,251)
------------- -------------
$ 27,942 $ 29,892
============= =============
</TABLE>
4. Property, Plant & Equipment
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
------------- --------------
(In thousands)
<S> <C> <C>
Land.......................................................... $ 1,561 $ 1,561
Buildings and improvements.................................... 9,393 9,371
Machinery and equipment....................................... 12,902 10,884
Rolling stock................................................. 3,398 3,419
Work in progress.............................................. 201 -
------------- --------------
27,455 25,235
Less accumulated depreciation and amortization................ 4,060 -
------------- --------------
$ 23,395 $ 25,235
============= ==============
</TABLE>
5. Other Current Liabilities
Other current liabilities consisted of the following:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
------------- -------------
(In thousands)
<S> <C> <C>
Accrued compensation and fringe benefits...................... $ 7,417 $ 4,569
Deferred income taxes......................................... 795 347
Accrued liabilities........................................... 8,019 6,526
------------- -------------
$ 16,231 $ 11,442
============= =============
</TABLE>
F-29
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Long-term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
Range of March 31, March 31,
Interest 1998 1997
------------- ------------- -----------
(In thousands)
<S> <C> <C> <C>
Revolving bank line of credit............... 7.86-9.00% $ 28,800 $ 52,000
Term loan................................... 8.11-9.25 9,310 9,800
------------- ---------------
38,110 61,800
Less current maturities..................... 815 490
------------- ---------------
$ 37,295 $ 61,310
============= ===============
</TABLE>
On March 31, 1997, Millbrook entered into an agreement, as
amended, with a group of commercial lending institutions providing for
a credit facility in the aggregate amount of $100 million consisting
of revolving credit loans up to $90.2 million and a term loan of $9.8
million (the "Credit Agreement"). Borrowings under this long-term
facility, which principally expires March 31, 2002, are supported by
specified assets in accordance with a formula, as defined in the
Credit Agreement (see Note 11). Substantially all of the Company's
assets and Millbrook's stock are pledged under the terms of the Credit
Agreement. Additionally, the Credit Agreement requires the maintenance
of a minimum level of cash flow, as defined and imposes restrictions
on investments, capital expenditures, cash dividends, management fees
and advances to the parent and other indebtedness. At March 31, 1998,
substantially all of the assets of the Company's subsidiary are
unavailable for dividends. At March 31, 1998, Millbrook had available,
under the Credit Agreement, unused borrowing capacity of approximately
$24 million, net of outstanding letters of credit of approximately
$885,000.
Interest rates under the Credit Agreement vary, as Millbrook
may choose from certain variable interest rate options. On May 1,
1997, Millbrook entered into a three-year interest rate protection
agreement that effectively caps rates on up to $50 million of
Millbrook's debt. At March 31, 1998, Millbrook's outstanding debt
under the Credit Agreement and the interest rate protection agreement
approximate fair value.
Future maturities of the term loan at March 31, 1998 were as
follows (in thousands):
1999..................................... $ 815
2000..................................... 1,305
2001..................................... 1,960
2002..................................... 1,960
2003..................................... 3,270
---------------
$ 9,310
===============
F-30
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Commitments And Contingencies
Leases
The Company leases certain facilities, machinery and vehicles
under various non-cancelable operating lease agreements. The Company is
required to pay property taxes, insurance and normal maintenance costs
for certain of its facilities. Future minimum lease payments required
under such leases in effect at March 31, 1998 were as follows (in
thousands):
1999........................................ $ 2,671
2000........................................ 2,310
2001........................................ 2,084
2002........................................ 1,977
2003........................................ 1,621
Thereafter.................................. 4,216
--------------
$ 14,879
==============
Total rent expense for all operating leases was $4.3 million
for the fiscal year ended March 31, 1998.
Contingencies
The Company is subject to pending claims and legal
proceedings in the normal course of its business. While it is not
feasible to predict or determine the outcome of these claims and
proceedings, it is the opinion of management that their outcome, to
the extent not provided for through insurance or otherwise, will not
have a materially adverse effect on the Company's financial position
or results of future operations.
8. Income Taxes
The provision for income taxes for the fiscal year ended
March 31, 1998 consisted of the following (in thousands):
<TABLE>
<S> <C>
Currently payable:
Federal..................................................................... $ 1,075
State....................................................................... 153
--------------
1,228
--------------
Deferred:
Federal..................................................................... (93)
State....................................................................... (13)
--------------
(106)
--------------
$ 1,122
==============
</TABLE>
F-31
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Income Taxes (Continued)
A reconciliation of the statutory United States Federal income
tax rate to the Company's effective income tax rate for the fiscal year
ended March 31, 1998 follows:
<TABLE>
<S> <C>
Statutory rate................................................................. 35.0%
State income taxes, net of Federal benefit..................................... 4.6
Other, principally meals and entertainment disallowance........................ 9.1
----
48.7%
====
</TABLE>
The income tax effects of temporary differences that give rise
to significant portions of the deferred tax assets and liabilities were
as follows:
<TABLE>
<CAPTION>
March 31, March 31,
1998 1997
------------- -------------
(In thousands)
<S> <C> <C>
Deferred Tax Assets:
Accounts receivable, principally due to
allowance for doubtful accounts................................... $ 993 $ 1,086
Deferred compensation............................................... 3,279 3,005
Liability accruals.................................................. 3,771 4,787
Other, net.......................................................... 359 417
Deferred Tax Liabilities:
Inventories, principally due to acquisition basis
differences and financial statement allowances.................... (5,612) (6,210)
Property, plant and equipment, principally
due to basis differences.......................................... (4,567) (4,968)
------------- -------------
Net deferred tax liabilities ........................................ $ (1,777) $ (1,883)
============= =============
</TABLE>
9. Employee Benefit Plans
Retirement and Savings Plan
The Company has a retirement and savings plan ("401(k) Plan")
covering substantially all of its employees. The 401(k) Plan provides
for matching contributions by the Company which amounted to
approximately $1.2 million for the fiscal year ended March 31, 1998.
In addition, the Company may make annual discretionary contributions
to employee accounts based, in part, on the Company's financial
performance. For the fiscal year ended March 31, 1998, the Company's
discretionary contributions were approximately $1.1 million.
F-32
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9. Employee Benefit Plans (Continued)
Other Benefit Plans
In 1984, a predecessor of Millbrook implemented a deferred
compensation plan in the form of a non-qualified defined benefit plan
and a supplemental retirement plan which permitted former officers and
certain management employees, at the time, to defer portions of their
compensation and to earn specified benefits upon retirement. These
plans do not allow new participants.
In an effort to provide for the benefits associated with
these plans, the Company purchased whole-life insurance contracts on
the plan participants. The value of these policies is included in
other assets. At March 31, 1998, future payment obligations under the
deferred compensation and supplemental retirement plans were $395,000,
$395,000, $395,000, $390,000 and $390,000 in fiscal years ended March
31, 1999, 2000, 2001, 2002 and 2003, respectively.
10. Related Party Transactions
Concurrent with Millbrook's acquisition by Holdings,
Millbrook entered into an arrangement with an entity owned by its
majority shareholder whereby the Company agreed (i) to pay a quarterly
management fee of $100,000; and (ii) to reimburse the entity for
reasonable services provided and out-of-pocket and other expenses
incurred on its behalf. For the fiscal year ended March 31, 1998,
Millbrook paid management fees of $400,000 to this entity and $800,000
for reasonable services provided to the Company pursuant to the
aforementioned arrangement. The Company believes that the terms of the
arrangement with this entity were no less favorable than could have
been obtained from unaffiliated third parties on an arm's length
basis.
11. Subsequent Event (Unaudited)
Effective March 3, 1998, the Company entered into a purchase
agreement with MANO Holdings I, LLC, KBMC Acquisition Company, L.P.,
MANO Holdings Corporation ("MANO") and the stockholders of MANO to
acquire all of the outstanding membership interests of The B.
Manischewitz Company, LLC ("Manischewitz"). As of and for the fiscal
year ended July 31, 1997, Manischewitz had total assets, revenues and
operating income of approximately $59.6 million, $54.8 million and
$9.8 million, respectively. On May 1, 1998, the Company acquired all
of the outstanding interests of Manischewitz for approximately $124
million less outstanding long-term debt and certain other specified
deductions through the issuance of $120 million Senior Notes due 2005
bearing interest at 10 1/2% ("10 1/2% Senior Notes"). The 10 1/2%
Senior Notes are jointly and severally guaranteed on an unsecured
basis by Millbrook and Manischewitz.
F-33
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
11. Subsequent Event (Unaudited) (Continued)
Additionally, on May 1, 1998 Holdings issued $48 million
Senior Notes due 2008 bearing interest at 13% ("13% Senior Notes")
(collectively, "Senior Notes") and contributed the net proceeds, after
expenses and amounts deposited in an interest escrow account, to the
Company.
The gross proceeds of $168 million from the issuance of the
Senior Notes were used to: (i) pay the purchase price for Manischewitz
of $124 million, (ii) reduce outstanding borrowings by approximately
$22 million under the revolving credit portion of Millbrook's Credit
Agreement, (iii) fund the interest escrow account with approximately
$17 million, and (iv) pay fees and expenses relating to the acquisition
of Manischewitz and offering of the Senior Notes.
Also concurrent with the acquisition, the Credit Agreement
was amended to provide for, among other things, Millbrook and
Manischewitz to be co-borrowers under the Credit Agreement and certain
assets of Manischewitz to be included in determining the borrowing
base resulting in future additional availability under the credit
facility.
F-34
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except for share and per share data)
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 2,731 $ 2,623
Accounts receivable 39,147 27,942
Inventories 50,973 41,814
Other current assets 7,945 5,810
--------- ---------
Total current assets 100,796 78,189
Other assets 12,481 7,291
Property, plant and equipment, net 40,186 23,395
Excess of cost over fair value of net assets acquired, net 96,892 --
--------- ---------
Total assets $ 250,355 $ 108,875
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 924 $ 815
Accounts payable 39,327 31,035
Other current liabilities 23,831 16,231
--------- ---------
Total current liabilities 64,082 48,081
--------- ---------
Noncurrent liabilities:
Long-term debt 129,397 37,295
Deferred compensation 7,867 7,801
Other liabilities 9,991 4,416
--------- ---------
Total noncurrent liabilities 147,255 49,512
Stockholder's equity:
Common stock, $1.00 par value, 200 shares
authorized and issued -- --
Additional paid-in capital 39,482 10,100
Retained earnings (deficit) (464) 1,182
--------- ---------
Total stockholder's equity 39,018 11,282
--------- ---------
Total liabilities and stockholder's equity $ 250,355 $ 108,875
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-35
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
June 30, June 30,
1998 1997
(Unaudited)
<S> <C> <C>
Revenues $ 116,571 $ 113,522
Costs and expenses:
Cost of sales 88,915 87,282
Selling 11,994 10,450
Distribution and warehousing 9,102 8,970
General and administrative 5,935 5,236
Amortization of excess of cost over fair value
of net assets acquired 400 --
--------- ---------
Total costs and expenses 116,346 111,938
--------- ---------
Operating income 225 1,584
Interest expense, net 2,973 1,439
--------- ---------
Income (loss) before provision (benefit) for income taxes (2,748) 145
Provision (benefit) for income taxes (1,102) 97
--------- ---------
Net income (loss) $ (1,646) $ 48
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-36
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(In thousands except for share data)
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (deficit)
------ ------ ------- ---------
<S> <C> <C> <C> <C>
Balance at April 1, 1998 200 $ -- $10,100 $ 1,182
Additional equity investment from parent 29,382
Net loss (1,646)
------ ------ ------- ---------
Balance at June 30, 1998 200 $ -- $39,482 $ (464)
====== ====== ======= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-37
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
June 30, June 30,
1998 1997
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,646) $ 48
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,434 782
Amortization of excess of cost over fair value
of net assets acquired 400 --
Changes in assets and liabilities:
Accounts receivable 5,381 (1,611)
Inventories (2,662) 7,183
Accounts payable 5,792 11,461
Other assets and liabilities (640) 4,614
--------- ---------
Net cash provided by operating activities 8,059 22,476
--------- ---------
Cash flows from investing activities:
Purchase of The B. Manischewitz Company, LLC,
net of cash acquired (124,255) --
Acquisitions of plant and equipment (941) (148)
--------- ---------
Net cash used in investing activities (125,196) (148)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 120,000 --
Payment of debt issuance costs (4,348) --
Repayments under Credit Agreement (27,789) (20,115)
Additional equity investment from Parent 29,382 --
--------- ---------
Net cash provided by (used in)
financing activities 117,245 (20,115)
--------- ---------
Net increase in cash 108 2,213
Cash, beginning of period 2,623 1,903
--------- ---------
Cash, end of period $ 2,731 $ 4,116
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 499 $ 1,265
Income Taxes $ 745 $ --
</TABLE>
See notes to condensed consolidated financial statements.
F-38
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------------------------------------------------------------------
NOTE A - Basis of Presentation
R.A.B. Enterprises, Inc. (the "Company") is a wholly-owned subsidiary of
R.A.B. Holdings, Inc. ("Holdings"). On January 26, 1998, Holdings formed the
Company and on May 1, 1998 contributed to the Company its wholly-owned
subsidiary Millbrook Distribution Services Inc. ("Millbrook"), which
contribution has been accounted for as an "as if" pooling of interests.
These financial statements should be read in conjunction with the Company's
summary of significant accounting policies included in its consolidated
financial statements as of March 31, 1998 and 1997, included elsewhere herein.
Effective March 3, 1998, the Company entered into a purchase agreement with
Mano Holdings I, LLC, KBMC Acquisition Company, L.P., MANO Holdings
Corporation ("MANO") and the stockholders of MANO to acquire all of the
outstanding membership interests of the B. Manischewitz Company, LLC
("Manischewitz"). On May 1, 1998, the Company acquired all of the outstanding
interests of Manischewitz for approximately $124.7 million through the
issuance of $120 million Senior Notes due 2005 bearing interest at 10 1/2%
("10 1/2% Senior Notes"). The 10 1/2% Senior Notes are jointly and severally
guaranteed on an unsecured basis by Millbrook and Manischewitz. Concurrently,
on May 1, 1998, Holdings issued $48 million Senior Notes due 2008 bearing
interest at 13%, funded a $17 million interest escrow account and contributed
the remaining net proceeds to the Company.
The acquisition of Manischewitz was accounted for as a purchase and,
accordingly, the purchase price was allocated to the assets and liabilities of
Manischewitz based upon their estimated fair values at the date of
acquisition, which are subject to adjustment. The fair values of assets
acquired and liabilities assumed were based upon preliminary third party
appraisals and other valuation analyses. The excess of cost over the fair
value of net assets acquired represents goodwill which is being amortized on a
straight-line basis over its estimated useful life of forty years. The
statements of operations include the operating results of Manischewitz since
its date of acquisition. The pro forma combined historical results, as if the
Manischewitz business had been acquired at the beginning of each of the
periods presented are as follows:
Three Months Ended
June 30, June 30,
1998 1997
--------- ---------
Revenues $ 118,738 $ 120,436
Net loss $ (2,220) $ (1,555)
All significant intercompany transactions and balances are eliminated in
consolidation. The results of operations for any interim period are not
necessarily indicative of the results to be expected for the full fiscal year.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position as of June 30, 1998, and the results of operations and cash
flows for the periods ended June 30, 1998 and 1997.
F-39
<PAGE>
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(Unaudited)
- ------------------------------------------------------------------------------
NOTE B - Inventories
Inventories are valued at the lower of cost or market. Cost is determined by
the last-in, first-out ("LIFO") method. Inventories at June 30, 1998 consisted
of the following (in thousands):
Raw materials $ 1,944
Finished goods 49,029
----------
$ 50,973
==========
NOTE C - Income Taxes
The results of operations of the Company are included in the consolidated
Federal income tax return of Holdings. The Company's income tax provision
(benefit) is based upon its anticipated effective income tax rate for the
fiscal years ending March 31, 1999 and 1998.
NOTE D- Related Party Transactions
For the three month periods ended June 30, 1998 and 1997, the Company paid
$300,000 in each period to an affiliated entity for management fees,
reasonable services provided and expenses incurred on its behalf.
F-40
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
MANO Holdings Corporation and the
Partners of KBMC Acquisition Company, L.P.:
We have audited the accompanying combined balance sheets of MANO Holdings
Corporation (a Delaware Corporation) and KBMC Acquisition Company, L.P. (a
Delaware limited partnership) as of July 31, 1997 and 1996, and the related
combined statements of operations, changes in equity and cash flows for each
of the three years in the period ended July 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of MANO Holdings
Corporation and KBMC Acquisition Company, L.P. as of July 31, 1997 and 1996,
and the combined results of their operations and their cash flows for each of
the three years in the period ended July 31, 1997, in conformity with
generally accepted accounting principles.
As discussed in Note 8 to the financial statements, effective August 1, 1995,
the Company changed its method of accounting for postretirement benefits other
than pensions.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
September 24, 1997
F-41
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
COMBINED BALANCE SHEETS -- JULY 31, 1997 AND 1996
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ -------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,115 $ 1,811
Accounts receivable, net of allowance for doubtful accounts of $700
and $250, respectively 6,381 5,085
Inventories 9,217 10,018
Prepaid expenses and other current assets 898 706
-------- --------
Total current assets 19,611 17,620
PROPERTY, PLANT AND EQUIPMENT, net 12,202 12,647
INTANGIBLE ASSETS, net 27,611 28,926
OTHER ASSETS 139 144
-------- --------
Total assets $ 59,563 $ 59,337
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,157 $ 2,700
Accounts payable 2,424 1,930
Accrued liabilities 2,002 1,639
-------- --------
Total current liabilities 7,583 6,269
LONG-TERM DEBT 37,602 41,300
LONG-TERM LIABILITIES 4,434 4,318
-------- --------
Total liabilities 49,619 51,887
-------- --------
COMMITMENTS AND CONTINGENCIES
EQUITY:
Partners' equity 15,000 15,000
Common stock, $.01 par value per share, 5,457 shares outstanding -- --
Accumulated deficit (5,056) (7,550)
-------- --------
9,944 7,450
-------- --------
Total liabilities and equity $ 59,563 $ 59,337
======== ========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-42
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995
(dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
NET REVENUES $ 54,383 $ 52,003 $ 49,194
ROYALTIES 404 396 387
-------- -------- --------
Total revenues 54,787 52,399 49,581
COST OF SALES 33,558 33,068 31,199
-------- -------- --------
Gross profit 21,229 19,331 18,382
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, including amortization
of intangible assets of $1,434, $1,112 and
$1,175, respectively 11,422 11,120 11,034
-------- -------- --------
Operating income 9,807 8,211 7,348
INTEREST EXPENSE (4,486) (3,705) (2,946)
-------- -------- --------
Income before income taxes (benefit),
extraordinary item and cumulative effect of
change in accounting principle 5,321 4,506 4,402
PROVISION (BENEFIT) FOR INCOME TAXES -- (145) 2,135
-------- -------- --------
Income before extraordinary item and
cumulative effect of change in accounting
principle 5,321 4,651 2,267
EXTRAORDINARY ITEM, net of related income tax benefit of $1,310
-- (1,965) --
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, net of related income tax benefit of $502 -- (754) --
-------- -------- --------
Net income $ 5,321 $ 1,932 $ 2,267
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-43
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
COMBINED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995
(dollars in thousands, except share/unit data)
<TABLE>
<CAPTION>
Retained
Earnings
Shares/ Partners' (Accumulated
Units Equity Deficit) Total
-------- -------- ------------ --------
<S> <C> <C> <C> <C>
BALANCE AT AUGUST 1, 1994 19,863 $ -- $ (119) $ (119)
Net income -- -- 2,267 2,267
-------- -------- ------------ --------
BALANCE AT JULY 31, 1995 19,863 -- 2,148 2,148
Net income -- -- 1,932 1,932
Repurchase of common stock (14,406) -- -- --
Repurchase premium paid
to stockholders -- -- (11,630) (11,630)
Capital contribution -- 15,000 -- 15,000
-------- -------- ------------ --------
BALANCE AT JULY 31, 1996 5,457 15,000 (7,550) 7,450
Net income -- -- 5,321 5,321
Repurchase of units -- -- (82) (82)
Distributions to
members/partners -- -- (2,510) (2,510)
Adjustment of unfunded
pension liability -- -- (235) (235)
-------- -------- ------------ --------
BALANCE AT JULY 31, 1997 5,457 $ 15,000 $ (5,056) $ 9,944
======== ======== ============ ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-44
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995
(dollars in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,321 $ 1,932 $ 2,267
Adjustments to reconcile net income to net cash provided
by (used in) operating activities-
Extraordinary item -- 1,965 --
Cumulative effect of change in accounting principle -- 754 --
Depreciation and amortization 2,664 2,236 2,097
Benefit for deferred income taxes -- (2,420) (63)
Changes in assets and liabilities-
Accounts receivable (1,746) (1,374) 522
Inventories 251 (859) (1,439)
Prepaid expenses and other (187) (192) (269)
Intangible assets (800) (1,231) (1,541)
Accounts payable and accrued liabilities 857 (1,541) 717
Long-term liabilities 116 264 (154)
-------- -------- --------
Net cash provided by (used in) operating activities 6,476 (466) 2,137
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (339) (1,064) (516)
Net proceeds from Distributorship Agreement 1,000 -- --
-------- -------- --------
Net cash provided by (used in) investing activities 661 (1,064) (516)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Prepayment penalty on termination of debt $ -- ($ 1,300) $ --
Deferred financing costs -- (2,509) --
Distributions to members/partners (2,510) (28,630) --
Issuance (repurchase) of shares/units (82) 15,000 --
Proceeds from revolver borrowings 10,700 -- --
Repayments of revolver borrowings (10,700) -- --
Repayment of company notes -- (29,000) --
Term loan (repayments) borrowings (3,241) 44,000 --
-------- -------- --------
Net cash used in financing activities (5,833) (2,439) --
-------- -------- --------
Increase (decrease) in cash and cash equivalents 1,304 (3,969) 1,621
CASH AND CASH EQUIVALENTS, beginning of year 1,811 5,780 4,159
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year $ 3,115 $ 1,811 $ 5,780
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 4,131 $ 2,997 $ 2,624
Taxes $ -- $ 1,534 $ 2,338
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-45
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
(dollars in thousands, except share/unit amounts)
(1) FORMATION AND BUSINESS OPERATIONS:
Formation-
On April 26, 1996, The B. Manischewitz Company, LLC
(the Company) was formed and commenced operations as
of May 31, 1996. The Company is 99% owned by MANO
Holdings I, LLC and 1% owned by MANO Holdings II, LLC
(which is indirectly 100% owned by MANO Holdings I,
LLC). MANO Holdings I, LLC is 62% owned by KBMC
Acquisition Company, L.P. (KBMC) which was formed on
April 25, 1996 as a limited partnership, and 38%
owned by MANO Holdings Corporation (MANO).
Approximately 72% of KBMC is under the common control
and ownership of certain owners of MANO. Accordingly,
on a combined basis, the assets and liabilities of
the Company have been reflected on a carryover cost
basis from May 31, 1996.
Prior to its commencement of operations as a limited
liability company, the Company, which was organized
as a C corporation, was wholly-owned by MANO. The
combined financial statements included herein reflect
the operations of the Company as a C corporation
through May 31, 1996 and a limited liability company
subsequent to that date.
Business Operations-
The Company manufactures and distributes ethnic and
other foods including, among others, matzos, cakes,
cookies, soups, noodles and processed fish products.
The Company also licenses its name to third parties
for which it receives royalties.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
Principles of Combination-
The accompanying combined financial statements
include the accounts of KBMC and MANO and their
combined wholly-owned subsidiary, the Company. Both
KBMC and MANO are holding companies whose sole asset
is its respective investment in the Company.
Through May 31, 1996, the financial statements
include the consolidated accounts of The B.
Manischewitz Company and its subsidiaries. As of May
31, 1996, the subsidiaries of The B. Manischewitz
Company were effectively merged into the Company.
All significant intercompany accounts and
transactions have been eliminated.
F-46
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued):
Concentrations of Credit Risk-
Financial instruments, which potentially subject the
Company to significant concentrations of credit risk,
consist principally of cash and cash equivalents and
trade accounts receivable.
The Company's products are sold to approximately 50
independent distributors, two of which represented
approximately 31% and 25% of total revenues for the
years ended July 31, 1997 and 1996, respectively, and
one of which represented approximately 12% of total
revenues for the year ended July 31, 1995.
Inventories-
Substantially all inventories are accounted for using
the lower of the last-in, first-out (LIFO) cost
method or market.
Property, Plant and Equipment-
Property, plant and equipment is stated at cost and
is depreciated using the straight-line method for
financial reporting purposes and both straight-line
and accelerated methods for income tax purposes. The
estimated useful lives used in computing depreciation
and amortization for financial reporting purposes
are: buildings 20 years, machinery and equipment 10
years, furniture and fixtures 10 years.
Long-Lived Assets-
The Company reviews its long-lived assets and certain
related intangibles for impairment whenever changes
in circumstances indicate that the carrying amount of
an asset may not be fully recoverable. The assessment
for potential impairment is based upon the Company's
ability to recover the unamortized balance of its
long-lived assets from expected future cash flows on
an undiscounted basis.
Intangible Assets-
Intangible assets are being amortized over the
following periods: package design costs 4 years;
deferred financing costs 9 years; and other
intangibles 40 years.
F-47
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued):
Income Taxes-
MANO, a C corporation through July 31, 1996
recognized all of the tax attributes of its 100%
owned investment in MANO Holdings I, LLC through May
31, 1996 and approximately 40% from June 1, 1996 to
July 31, 1996. As MANO Holdings I, LLC's only
investment is its ownership in the Company, the
accompanying combined financial statements therefore
represent the tax attributes of the Company.
Effective August 1, 1996, MANO elected to be taxed as
an S Corporation for Federal income tax purposes.
KBMC is organized as a limited partnership.
Accordingly, no provision has been made for Federal
or state income taxes purposes in the accompanying
combined financial statements since August 1, 1996.
As the Company was organized as a C corporation until
May 31, 1996, income taxes were provided for these
periods based upon the taxes currently payable by the
Company. On May 31, 1996, the Company was reorganized
as a limited liability company. As a result of this
reorganization, future tax effects attributable to
net income as well as temporary differences between
the bases of assets and liabilities for financial
reporting purposes and income tax purposes will be
included in the income tax returns of the Company's
owners. Accordingly, no deferred income tax assets or
liabilities are reflected on the July 31, 1996 and
1997 balance sheets of the Company. Deferred income
tax assets or liabilities recognized through May 31,
1996, have been reversed through the income tax
benefit as of May 31, 1996.
Cash Equivalents-
The Company considers all highly liquid debt
instruments purchased with original maturities of
three months or less to be cash equivalents.
Use of Estimates-
The preparation of financial statements in accordance
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets,
liabilities, revenues and expenses during the
reporting period and disclosure of contingent assets
and liabilities at the date of the financial
statements. Actual results could differ from those
estimates.
F-48
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(3) INVENTORIES:
Inventories consists of the following at July 31-
1997 1996
------- -------
Raw materials $ 2,126 $ 2,042
Finished goods 7,091 7,976
------- -------
$ 9,217 $10,018
======= =======
Had the first-in, first-out (FIFO) method been used,
inventories would have been approximately $260 greater than
that reported under the LIFO method at July 31, 1997. At July
31, 1996, inventories valued by the FIFO cost method
approximated inventories valued by the LIFO method.
(4) PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following at
July 31-
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Land $ 897 $ 897
Buildings 4,549 4,444
Machinery and equipment 5,541 4,645
Furniture and fixtures 769 732
Assets under capital lease 6,077 6,077
Construction in progress 121 807
------- -------
17,954 17,602
Less- Accumulated depreciation and amortization 5,752 4,955
------- -------
$12,202 $12,647
======= =======
</TABLE>
Certain property and equipment of the Company is leased
through the Bay Street Urban Renewal Development Corporation,
an affiliate of the Company. The lease expires on August 31,
2000, and requires the Company to pay real estate taxes,
maintenance, insurance and incidental costs as its only
obligation under this lease. The Company has the option to
purchase the property at any time during the lease term for a
nominal value.
F-49
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(5) INTANGIBLE ASSETS:
Intangible assets consist of the following at July 31-
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Goodwill, net of accumulated amortization of $2,582 and $2,197,
respectively $13,492 $13,877
License and trademarks, net of accumulated amortization of
$2,041 and $1,736, respectively 10,159 10,464
Deferred financing costs, net of accumulated amortization of
$516 and $70, respectively (see Note 7) 1,993 2,439
Package design costs, net of accumulated amortization of $1,697
and $953, respectively 1,579 1,725
------- -------
$27,223 $28,505
======= =======
</TABLE>
In addition, intangible assets on the accompanying combined
balance sheets include an intangible pension asset of $388 and
$421 in 1997 and 1996, respectively (see Note 8).
(6) INCOME TAXES:
Income taxes, applicable to income before extraordinary item,
are comprised of the following at July 31, 1996 and 1995-
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Current-
Federal $ 1,481 $ 1,675
State and local taxes 794 523
------- -------
2,275 2,198
------- -------
Deferred-
Federal (1,936) (50)
State and local taxes (484) (13)
------- -------
(2,420) (63)
------- -------
Provision (benefit) for income taxes ($ 145) $ 2,135
======= =======
</TABLE>
F-50
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(6) INCOME TAXES (continued):
The provision (benefit) for income taxes differs from the
amount computed by applying the statutory Federal income tax
rate to the income before provision (benefit) for income taxes
for the following reasons for fiscal 1996 and 1995-
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Statutory tax provision $ 2,048 $ 1,497
Increase (decrease) in taxes resulting from-
State income taxes, net of Federal income tax benefit 204 337
Amortization of intangible assets 211 299
Reversal of deferred income taxes as a result of a
change in the tax status of the Company (2,420) --
Other (188) 2
------- -------
Provision (benefit) for income taxes $ (145) $ 2,135
======= =======
</TABLE>
(7) LONG-TERM DEBT:
On May 31, 1996, the Company (along with MANO, MANO Holdings
I, LLC and MANO Holdings II, LLC) entered into a credit
agreement with several financial institutions (the Credit
Agreement). The Credit Agreement provides for the following:
(1) $14,000 term loan A, due May 31, 2002, bearing interest at
the Base Rate (defined as the higher of the Federal Funds Rate
plus 1/2% or prime), plus 1 1/2% or LIBOR plus 2.5%; (2)
$19,000 term loan B, due May 31, 2004 bearing interest at the
Base Rate plus 2.0% or LIBOR plus 3.0%; (3) $11,000 term loan
C, due May 31, 2002, bearing interest at the Base Rate plus 1
1/2% or LIBOR plus 2.5%; and (4) $15,000 revolving loan
commitment based on eligible accounts receivable and
inventory, as defined, including up to $3,000 of letters of
credit due May 21, 2002, bearing interest at the Base Rate
plus 1 1/2%, or LIBOR plus 2.5%. As of July 31, 1997, $5,000
is available for borrowing under this facility based upon this
formula. Additionally, there is a commitment fee of 1/2% on
certain unused balances of the revolving loan commitment, as
defined. At July 31, 1997 and 1996, there were no outstanding
balances under the revolving loan commitment.
F-51
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(7) LONG-TERM DEBT (continued):
The Credit Agreement contains restrictions, all of which the
Company was in compliance with at July 31, 1997 relating to,
among others, material adverse changes in operations or
affairs, capital expenditures, the payment of dividends and
the maintenance of various financial requirements, including,
among others, interest coverage ratio, fixed charge coverage
ratio, leverage ratio and minimum EBITDA, each as defined in
the Credit Agreement.
Pursuant to entering into the Credit Agreement, the Company
incurred deferred financing costs of approximately $2,500
which are included in intangible assets in the accompanying
balance sheet. Additionally, approximately $1,109 of deferred
financing costs were written-off in fiscal 1996 pursuant to
the Agreement refinancing. Furthermore, the Company incurred a
prepayment penalty upon terminating the Agreement of
approximately $2,166. These amounts, net of related income tax
benefits of $1,310, are reflected as an extraordinary item in
the statements of operations.
The Credit Agreement is secured by substantially all of the
Company assets and guaranteed by both MANO and KBMC.
Aggregate amounts of long-term debt maturing each of the five
years subsequent to July 31, 1997, and thereafter are as
follows-
1998 $ 3,157
1999 3,650
2000 4,637
2001 5,623
2002 6,116
Thereafter 17,576
-------
$40,759
=======
F-52
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(8) EMPLOYEE BENEFITS:
Pension Plan-
The Company maintains a defined benefit pension plan
(the Plan) administered by a trust, which covers
substantially all employees who meet certain
eligibility requirements, and provides for pension,
death and disability benefits. Contributions are made
by the Company and contributing employees. The
Company's funding policy is to contribute amounts to
the Plan sufficient to meet the minimum funding
requirements set forth by the Employee Retirement
Income Security Act of 1974. In fiscal 1997, 1996 and
1995, the Company funded additional amounts to the
Plan. Accordingly, contributions for the year ended
July 31, 1997, 1996 and 1995 amounted to $605, $541
and $300, respectively. Benefits for salaried
employees are based on the highest five consecutive
years of compensation during the last fifteen years
of employment preceding retirement. Benefits for
hourly employees are based on various monthly amounts
for each year of credited service.
Net periodic pension expense for the years ended July
31, 1997, 1996 and 1995, and assumptions used were as
follows-
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost, benefits earned during the year $ 213 $ 237 $ 214
Interest cost on projected benefit obligations 889 893 877
Actual return on assets (1,159) (502) (1,151)
Net amortization and deferral 379 (250) 419
------- ------- -------
Net periodic pension cost $ 322 $ 378 $ 359
======= ======= =======
Assumed discount rate 7.50% 8.25% 8.25%
Assumed rate of compensation increases 4.00 5.00 5.00%
Expected long-term rate of return on assets 9.25 9.25 9.25%
</TABLE>
F-53
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(8) EMPLOYEE BENEFITS (continued):
Presented below is a reconciliation of the funded status of
the Plan to amounts recorded on the balance sheets at July 31-
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C> <C>
Actuarial present value of benefit obligations-
Accumulated benefit obligation, including vested benefits
of $11,332 and $10,672 in 1997 and 1996, respectively $ 11,660 $ 10,932
======== ========
Projected benefit obligation for services rendered to date ($12,264) ($11,553)
Plan assets at fair value 9,969 9,160
-------- --------
Projected benefit obligation in excess of plan assets (2,295) (2,393)
Unrecognized net loss 839 622
Prior service cost not yet recognized in net periodic pension cost 388 421
Adjustment required to recognize minimum liability (623) (421)
-------- --------
Net pension liability ($ 1,691) ($ 1,771)
======== ========
</TABLE>
At July 31, 1997 and 1996, the Company recorded an additional
liability of $623 and $421, respectively, representing the
minimum liability of the unfunded accumulated benefit
obligation with an offsetting intangible asset at July 31,
1997 and 1996 of $388 and $421, respectively, and a reduction
in equity at July 31, 1997 of $235.
Substantially all of the Plan assets are invested in
unallocated insurance contracts, U. S. Government obligations,
mutual funds and marketable debt securities.
Unit Option Plan-
Effective May 31, 1996, MANO Holdings I, LLC adopted a Unit Option Plan
(the Plan) for executives and other key employees. Under the terms of
the Plan, the purchase price of shares of units subject to each option
granted is based on the fair market value of the shares at the date of
grant. Vesting of options occurs on an annual basis and is dependent
upon the achievement of predetermined targets or the discretion of the
MANO Holdings I, LLC Board of Managers. Ultimately, all options will
vest on the seventh or ninth anniversary of the date of grant and must
be exercised no later than seven to ten years from the date of grant.
F-54
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(8) EMPLOYEE BENEFITS (continued):
At July 31, 1997 and 1996, 4,666 shares of units were
authorized for issuance and 3,217 and 2,977 shares of units,
respectively, were outstanding at amounts ranging from $800 to
$1,800 per share. At July 31, 1997 and 1996, 2,627 and 2,114
of such shares of units, respectively, were vested and are
exercisable.
Effective August 1, 1996, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation." As permitted by the
statement, the Company has elected to continue to account for
stock-based compensation using the intrinsic value method
under Accounting Principles Board Opinion No. 25. Accordingly,
no compensation expense has been recognized for stock-based
compensation, since the options granted were at prices that
equaled or exceeded their estimated fair market value at the
date of grant. If compensation expense for the Company's unit
options issued in 1996 had been determined based on the fair
value method of accounting, the Company's net income for the
year ended July 31, 1996 would have been reduced to the pro
forma amount indicated below-
Net income-
As reported $1,932
======
Pro forma $1,812
======
The fair value of issued unit options is estimated on the date
of grant using the minimum value method incorporating the
following assumptions for options granted in 1996: no dividend
yield or volatility factor; risk free interest rate of 7.0%
and an expected life of the options of seven years. The
Company did not issue options during 1997.
Postretirement Benefits Other Than Pensions-
Effective August 1, 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions."
The cumulative effect as of August 1, 1995 of adopting SFAS
No. 106 was a one-time charge of $754, after the related
income tax benefit of $502.
F-55
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands, except share/unit amounts)
(8) EMPLOYEE BENEFITS (continued):
The following table reconciles the Plan's funded status to the
accrued postretirement health care cost liability as of
July 31-
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation-
Retiree and beneficiaries $ 622 $ 397
Eligible actives 192 445
Ineligible actives 835 479
------ ------
Total 1,649 1,321
Unrecognized net loss 228 --
Plan assets at fair value -- --
------ ------
Net postretirement benefit liability $1,421 $1,321
====== ======
</TABLE>
Net periodic postretirement benefit cost for the years 1997
and 1996 included the following components-
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Service cost $ 71 $ 35
Interest cost 113 98
---- ----
Net postretirement benefit cost $184 $133
==== ====
</TABLE>
For purposes of calculating the accumulated postretirement
benefit obligation, the following assumptions were made. The
retiree medical trend rates range from a maximum of 8.5%
decreasing gradually to 5% by the year 2010. The weighted
average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%.
The health care cost trend rate assumption has an effect on
the amounts reported. To illustrate, increasing the assumed
health care cost trend rates by one percentage point in each
year would increase the accumulated postretirement benefit
obligation as of July 31, 1997 and 1996 by $219 and $170,
respectively, and the aggregate of the service and interest
cost components of the net periodic postretirement benefit
cost for the years 1997 and 1996 by $27 and $20, respectively.
F-56
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (concluded)
(dollars in thousands, except share/unit amounts)
(9) COMMITMENTS AND CONTINGENCIES:
Operating Leases-
The Company has noncancellable operating leases
expiring from February 1998 through September 2002.
Rental expense for the years ended July 31, 1997,
1996 and 1995, was approximately $195, $363 and $595,
respectively. The future minimum annual rental
commitment under all operating leases is not
material.
Purchase Commitments-
The Company enters into purchase contracts with
certain vendors. At July 31, 1996 and 1997, purchase
commitments related to these contracts were
approximately $2,100 and $850, respectively.
(10) ACCRUED LIABILITIES:
Included in accrued liabilities at July 31, 1997 and 1996 is
approximately $448 and $355, respectively, principally related
to a severance agreement covering a former owner of the
Company.
(11) DISTRIBUTORSHIP AGREEMENT:
In May 1997, the Company entered into a Distributorship
Agreement whereby it received cash, net of expenses, of $1,000
in exchange for providing exclusive territory rights to a
third-party distributor. The transaction had no effect on the
statement of operations. Concurrently, the Company and the
distributor entered into an Inventory Purchase Agreement which
provides for the purchase of goods by the distributor at
"replacement cost," as defined, and a royalty arrangement, as
defined.
(12) RELATED PARTY TRANSACTION:
The Company paid a management fee of approximately $410, $104
and $0 in 1997, 1996 and 1995, respectively, to a related
party.
F-57
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
CONDENSED COMBINED BALANCE SHEETS
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
April 30, July 31,
1998 1997
----------- ---------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,995 $ 3,115
Accounts receivable, net of allowance for doubtful accounts
of $324 and $700, respectively 17,361 6,381
Inventories 6,593 9,217
Prepaid expenses and other current assets 261 898
-------- --------
Total current assets 26,210 19,611
PROPERTY, PLANT AND EQUIPMENT, net 11,823 12,202
INTANGIBLE ASSETS, net 26,594 27,611
OTHER ASSETS 139 139
-------- --------
Total assets $ 64,766 $ 59,563
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,382 $ 3,157
Revolving line of credit 2,250 -
Accounts payable 2,500 2,424
Accrued liabilities 4,779 2,002
-------- --------
Total current liabilities 12,911 7,583
LONG-TERM DEBT 34,782 37,602
LONG-TERM LIABILITIES 4,380 4,434
-------- --------
Total liabilities 52,073 49,619
-------- --------
COMMITMENTS AND CONTINGENCIES
EQUITY:
Partners' equity 15,000 15,000
Common stock, $.01 par value per share, 5,457 shares
outstanding - -
Accumulated deficit (2,307) (5,056)
-------- --------
12,693 9,944
-------- --------
Total liabilities and equity $64,766 $ 59,563
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed combined
statements.
F-58
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIODS ENDED APRIL 30, 1998 AND 1997
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
NET REVENUES $ 43,816 $ 46,068
ROYALTIES 665 319
--------- ---------
Total revenues 44,481 46,387
COST OF SALES 27,442 28,450
--------- ---------
Gross profit 17,039 17,937
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES,
including amortization of intangible assets
of $1,094 in 1998 and $1,087 in 1997, respectively 7,658 8,492
--------- ---------
Operating income 9,381 9,445
INTEREST EXPENSE (3,090) (3,388)
--------- ---------
Net income $ 6,291 $ 6,057
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
combined statements.
F-59
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
CONDENSED COMBINED STATEMENT OF CHANGES IN EQUITY
FOR THE NINE MONTH PERIOD ENDED APRIL 30, 1998
(dollars in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Partners' Accumulated
Shares Equity Deficit Total
----------- ----------- ----------- -----------
BALANCE AT AUGUST 1, 1997 5,457 $ 15,000 $ (5,056) $ 9,944
Net income - - 6,291 6,291
Distributions to members/partners - - (3,542) (3,542)
----------- ----------- ----------- -----------
BALANCE AT APRIL 30, 1998 5,457 $ 15,000 $ (2,307) $ 12,693
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
combined statements.
F-60
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED APRIL 30, 1998 AND 1997
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,291 $ 6,057
Adjustments to reconcile net income to net cash used
in operating activities-
Depreciation and amortization 1,941 1,999
Gain on sale of equipment (150) -
Changes in assets and liabilities-
Accounts receivable (10,980) (14,964)
Inventories 2,624 332
Prepaid expenses and other current assets 637 267
Intangible assets (396) (551)
Accounts payable and accrued liabilities 2,853 1,240
Long-term liabilities (54) 755
--------- --------
Net cash provided by (used in) operating activities 2,766 (4,865)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (297) (189)
Proceeds on sale of equipment 298 -
--------- --------
Net cash provided by (used in) investing activities 1 (189)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to members/partners (3,542) (2,268)
Proceeds from revolving line of credit 2,250 9,800
Term loan repayments (2,595) (2,025)
--------- --------
Net cash (used in) provided by financing activities (3,887) 5,507
--------- --------
(Decrease) increase in cash and cash equivalents (1,120) 453
CASH AND CASH EQUIVALENTS, beginning of period 3,115 1,811
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 1,995 $ 2,264
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 3,161 $ 3,156
</TABLE>
The accompanying notes are an integral part of these condensed
combined statements.
F-61
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed combined financial statements
have been prepared in accordance with generally accepted accounting principles.
The condensed combined financial statements include the accounts of MANO
Holdings Corporation ("MANO") and KBMC Acquisition company, L.P. ("KBMC") and
their combined wholly-owned subsidiary, The B. Manischewitz Company, LLC (the
"Company"). Both MANO and KBMC are holding companies whose sole asset is its
respective investment in the Company.
In June 1997, the Company sold its Chicago distribution subsidiary.
The statement of operations for the nine months ended April 30, 1997 includes
revenues of $4.1 million and operating income of $300,000 from this subsidiary.
For a summary of the Company's accounting principles and other
footnote information, reference is made to the Company's July 31, 1997 combined
financial statements. All adjustments, consisting of a normal and recurring
nature, necessary for the fair presentation of the results of operations for
the interim periods covered by this report have been included. The results of
operations for the nine month period ended April 30, 1998 is not necessarily
indicative of the operating results for the full year.
2. Inventories
Inventories consisted of the following at April 30, 1998-
Raw materials $ 2,175
Finished goods 4,418
-----------
$ 6,593
===========
Substantially all inventories are accounted for using the lower of the
last-in, first-out ("LIFO") cost method or market. Had the first-in, first-out
(FIFO) method been used, inventories would have been approximately $241 greater
than that reported under the LIFO method at April 30, 1998.
3. Income Taxes
MANO has elected to be taxed as an S Corporation for Federal income
tax purposes. KBMC is organized as a limited liability partnership.
Accordingly, no provision has been made for Federal or state income tax
purposes on the accompanying condensed combined financial statements.
F-62
<PAGE>
MANO HOLDINGS CORPORATION
AND KBMC ACQUISITION COMPANY, L.P.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(CONCLUDED)
4. Related Party Transactions
The Company paid a management fee of $344 and $360 through the nine
months ended April 30, 1998 and 1997, respectively, to a related party.
5. Subsequent Event
Effective March 3, 1998, R.A.B. Enterprises, Inc., a wholly-owned
subsidiary of R.A.B. Holdings, Inc., entered into a purchase agreement with
MANO Holdings I, LLC, KBMC, MANO and the stockholders of MANO to acquire all of
the outstanding membership interests of the Company. On May 1, 1998, R.A.B.
Enterprises, Inc. acquired all of the outstanding interests of the Company for
approximately $124.7 million less outstanding long-term debt and certain other
specified deductions.
F-63
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
R.A.B. Holdings, Inc.
New York, New York
We have audited the accompanying statements of operations of Millbrook
Distribution Services Inc., (a then wholly-owned subsidiary of McKesson
Corporation), for the fiscal years ended March 31, 1997 and 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such statements of operations present fairly, in all material
respects, the results of operations of Millbrook Distribution Services Inc.
for the fiscal years ended March 31, 1997 and 1996 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
April 30, 1998
New York, New York
F-64
<PAGE>
MILLBROOK DISTRIBUTION SERVICES INC.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1997 AND 1996
(In thousands)
1997 1996
--------- ---------
Revenues $ 476,175 $ 563,099
Costs and expenses
Cost of sales 364,762 430,398
Selling 45,280 54,961
Distribution and warehousing 38,170 42,281
General and administrative 20,588 21,848
--------- ---------
Total costs and expenses 468,800 549,488
--------- ---------
Operating income 7,375 13,611
Interest expense, net 3,843 4,708
Non-operating income, other (69) (1,600)
--------- ---------
Income before provision for income taxes 3,601 10,503
Provision for income taxes 1,660 4,334
--------- ---------
Net income $ 1,941 $ 6,169
========= =========
See notes to statements of operations.
F-65
<PAGE>
MILLBROOK DISTRIBUTION SERVICES INC.
NOTES TO STATEMENTS OF OPERATIONS
1. Summary Of Significant Accounting Policies
Basis of Presentation - On March 31, 1997, R.A.B. Holdings, Inc.
acquired Millbrook Distribution Services Inc. (the "Company") from
McKesson Corporation (the "Former Parent"). The statements of operations
of the Company are based on historical results and, accordingly, do not
reflect purchase accounting adjustments or interest associated with debt
incurred to finance the acquisition. Additionally, the Company's Former
Parent managed cash and financing requirements centrally; as such the
interest expense and related intercompany borrowings were based on the
then existing capital structure. Additionally, the Former Parent provided
certain corporate and general and administrative services, including,
among other things, treasury, certain financial reporting, data
processing and legal services. Accordingly, the operations of the Company
include an allocation of expenses for such services. The results of
operations of the Company may differ from results that may have been
achieved had the Company operated as an independent entity.
Use of Estimates - The preparation of financial statements, in
conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Fiscal Year - The Company's fiscal year ends on March 31.
Inventories - Inventories are stated at the lower of cost or market.
Cost is determined by the last-in, first-out ("LIFO") method. At March
31, 1997 and 1996, the replacement cost of inventories valued using the
LIFO method exceeded the net carrying amount of such inventories by
approximately $8.0 million and $8.5 million, respectively.
Property, Plant and Equipment - Property, plant and equipment are
recorded at cost. For financial reporting purposes, depreciation is
provided on the straight-line method over the following estimated useful
lives:
Buildings and improvements........... 7-35 years
Machinery and equipment.............. 2-15 years
Rolling stock........................ 3- 8 years
F-66
<PAGE>
MILLBROOK DISTRIBUTION SERVICES INC.
NOTES TO STATEMENTS OF OPERATIONS (CONTINUED)
1. Summary Of Significant Accounting Policies (Continued)
Expenditures which significantly increase value or extend useful
lives are capitalized, while ordinary maintenance and repairs are
expensed as incurred. The cost and related accumulated depreciation of
assets replaced, retired or disposed of are removed from the accounts and
any related gains or losses are reflected in operations. Total
depreciation expense was $ 3.0 million and $ 3.1 million for the fiscal
years ended March 31, 1997 and 1996, respectively.
Long-Lived Assets - The Company reviews its long-lived assets and
certain related intangibles for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
fully recoverable. Such changes in circumstances may include, among other
factors, a significant change in technology that may render an asset
obsolete or noncompetitive or a significant change in the extent or
manner in which an asset is used. The assessment for potential impairment
is based upon the Company's ability to recover the unamortized balance of
its long-lived assets from expected future cash flows on an undiscounted
basis (without interest charges). If such expected future cash flows are
less than the carrying amount of the asset, an impairment loss would be
recorded.
Income Taxes - The results of operations of the Company were
included in the consolidated Federal income tax return of its Former
Parent. The provision for income taxes was determined as though the
Company filed a separate Federal income tax return without regard to any
tax attributes of other taxable years.
Business - The Company is one of the nation's largest independent
value-added distributors of health and beauty care, general merchandise
and specialty and natural food products.
2. Leases
The Company leases certain facilities, machinery and vehicles under
various non-cancelable operating lease agreements. The Company is
required to pay property taxes, insurance and normal maintenance costs
for certain of its facilities. Total rent expense for all operating
leases was $5.3 million and $6.4 million for the fiscal years ended March
31, 1997 and 1996, respectively.
3. Non-Operating Income, Other
During the fiscal year ended March 31, 1997, the Company sold a
distribution center facility in Lincoln, Nebraska resulting in a gain of
approximately $1.5 million.
F-67
<PAGE>
MILLBROOK DISTRIBUTION SERVICES INC.
NOTES TO STATEMENTS OF OPERATIONS (CONCLUDED)
4. Income Taxes
The provision for income taxes for the fiscal years ended March 31,
1997 and 1996 is based on income recognized for financial statement
purposes. A reconciliation of the statutory United States Federal income
tax rate to the Company's effective income tax rate for the fiscal years
ended March 31, 1997 and 1996 follows:
1997 1996
---- ----
Statutory rate.............................................. 35.0% 35.0%
State income taxes, net of Federal benefit.................. 4.6 4.6
Other, principally meals and entertainment disallowance..... 6.5 1.7
---- ----
46.1% 41.3%
==== ====
5. Employee Benefit Plans
Retirement and Savings Plan - The Company's Former Parent had a
retirement and savings plan ("401(k) Plan") covering substantially all of
its employees. The 401(k) Plan provided for matching contributions by the
Company which amounted to approximately $1.4 million for each of the
fiscal years ended March 31, 1997 and 1996.
Other Benefit Plans - In 1984, a predecessor of Millbrook
implemented a deferred compensation plan in the form of a non-qualified
defined benefit plan and a supplemental retirement plan which permitted
former officers and certain management employees, at the time, to defer
portions of their compensation and to earn specified benefits upon
retirement. These plans do not allow new participants.
6. Related Party Transactions
As described in Note 1, the Company's Former Parent provided certain
corporate and general and administrative services to the Company which
totaled approximately $2.5 million and $2.3 million for the fiscal years
ended March 31, 1997 and 1996, respectively.
F-68
<PAGE>
===============================================================================
THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE HEREUNDER SHALL NOT, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE SUCH DATE.
------------
TABLE OF CONTENTS
Page
Available Information ..............................3
Forward Looking Statements..........................4
Prospectus Summary..................................5
Summary Financial.Data.............................22
Risk Factors.......................................25
The Transactions...................................33
Use of Proceeds....................................33
Capitalization.....................................34
Unaudited Pro Forma Condensed
Consolidated Statements of Operations............35
Selected Historical Financial Data.................39
Management's Discussion and Analysis of
Financial Condition and Results of Operations....42
Business...........................................52
Management.........................................65
Certain Transactions...............................68
Securities Ownership of Certain
Beneficial Owners................................69
The Exchange Offers................................70
Description of the New Company Notes...............77
Description of the New Holdings Notes.............105
Description of Credit Agreement...................130
Book-Entry; Delivery and Form.....................131
Plan of Distribution..............................132
Certain Federal Income Tax Consequences...........133
Legal Matters.....................................133
Experts...........................................134
Index to Financial Statements.....................F-1
===============================================================================
R.A.B. HOLDINGS, INC.
OFFER TO EXCHANGE
10 1/2% SENIOR NOTES DUE 2005
FOR
10 1/2% SENIOR NOTES DUE 2005
AND
R.A.B. ENTERPRISES, INC.
OFFER TO EXCHANGE
13% SENIOR NOTES DUE 2008
FOR
13% SENIOR NOTES DUE 2008
PROSPECTUS
, 1998
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware law authorizes corporations to limit or to eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. The
certificate of incorporation, as amended, of each corporate Co-Registrant
limits the liability of each corporate Co-Registrant's directors to each
corporate Co-Registrant or its stockholders to the fullest extent permitted by
the Delaware law as in effect from time to time. Specifically, directors of
each corporate Co-Registrant will not be personally liable for monetary
damages for breach of a director's fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to each
corporate Co-Registrant or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in the Delaware law, or (iv) for any transaction from
which the director derived an improper personal benefit.
The certificate of incorporation, as amended, of each corporate
Co-Registrant provides that each corporate Co-Registrant shall indemnify its
officers and directors and former officers and directors to the fullest extent
permitted by the General Corporation Law of the State of Delaware (the
"DGCL"). Pursuant to the provisions of section 145 of the DGCL, each corporate
Co-Registrant has the power to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding (other than an action by or in the right of each
Issuer) by reason of the fact that he is or was a director, officer, employee,
or agent of each corporate Co-Registrant, against any and all expenses,
judgments, fines, and amounts paid in actually and reasonably incurred in
connection with such action, suit, or proceeding. The power to indemnify
applies only if such person acted in good faith and in a manner he reasonably
believed to be in the best interest or not opposed to the best interest, of
each corporate Co-Registrant and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of
each corporate Co-Registrant as well, but only to the extent of defense and
settlement expenses and not to any satisfaction of a judgment or settlement of
the claim itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of negligence
or misconduct unless the court, in its discretion, believes that in light of
all the circumstances indemnification should apply.
The DGCL further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreement, vote
of stockholders or disinterested directors, or otherwise.
The Co-Registrant The B. Manischewitz Company, LLC (the "LLC"), through
its Operating Agreement, is empowered by the Delaware Limited Liability
Company Act (the "Act"), to indemnify and hold harmless any member or manager
or other person from and against any and all claims and demands whatsoever.
Article II of the Operating Agreement provides as follows:
2.8 Limitation of Liability. Except as otherwise provided in
the Act, no Member of the LLC shall be obligated personally for any
debt, obligation or liability of the LLC or of any other Member
solely by reason of being a Member of the LLC. Except as otherwise
provided in the Act, by law or expressly in this Agreement, no Member
shall have any fiduciary or other duty to another Member with respect
to the
II-1
<PAGE>
business and affairs of the LLC. No member shall have any
responsibility to restore any negative balance in his capital account
or to contribute to or in respect of the liabilities or obligations
of the LLC except as required by the Act or other applicable law.
Article IV of the Operating Agreement provides as follows:
4.1 Right to Indemnification. Except as limited by law and
subject to the provisions of this Article, each Member, Officer and
Manager (an "Indemnitee") shall be entitled to be indemnified and
held harmless against any and all losses, liabilities and expenses,
including attorneys' fees, arising from proceedings in which the
Indemnitee may be involved, as a party or otherwise, by reason of its
being a Member or Manager of the LLC, or by reason of its involvement
in the management of the affairs of the LLC, whether or not it
continues to be such at the time any such loss, liability or expense
is paid or incurred. The rights of indemnification provided in this
Article will be in addition to any rights to which the Indemnitee may
otherwise be entitled by contract or as a matter of law and shall
extend to its successors and assigns. In particular, and without
limitation of the foregoing, the Indemnitee shall be entitled to
indemnification by the LLC against reasonable expenses (as incurred),
including attorneys' fees, incurred by the Indemnitee in connection
with the defense of any action to which the Indemnitee may be made a
party to the fullest extent permitted under the provisions of the Act
or any other applicable statute.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers or
persons controlling each co-registrant pursuant to the foregoing provisions,
each co-registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
Exhibit No. Description of Document
- ----------- -----------------------
2.1 Purchase Agreement dated as of March 3, 1998 among R.A.B. Food
Holdings, Inc., MANO Holdings I, LLC, KBMC Acquisition
Company, L.P., MANO Holdings Corporation and the stockholders
of MANO Holdings Corporation.*
3.1 Certificate of Incorporation of R.A.B. Holdings, Inc.*
3.2 Certificate of Amendment of Incorporation of R.A.B.
Holdings, Inc.*
3.3 Bylaws of R.A.B. Holdings, Inc.*
3.4 Certificate of Incorporation of R.A.B. Enterprises, Inc.*
3.5 Amendment of Certificate of Incorporation of R.A.B.
Enterprises, Inc.*
3.6 Bylaws of R.A.B. Enterprises, Inc.*
3.7 Certificate of Incorporation of Millbrook Distribution
Services Inc.*
3.8 Bylaws of Millbrook Distribution Services Inc.*
II-2
<PAGE>
3.9 Certificate of Formation of The B. Manischewitz Company,
LLC.*
3.10 Operating Agreement of The B. Manischewitz Company, LLC.*
4.1 Indenture, dated as of May 1, 1998, among R.A.B. Holdings,
Inc. and PNC Bank, National Association, as Trustee,
relating to the Holdings Notes.*
4.2 Form of Old Holdings Note (included as Exhibit A to Exhibit
4.1 hereto).
4.3 Form of New Holdings Note (included as Exhibit B to Exhibit
4.1 hereto).
4.4 Indenture, dated as of May 1, 1998, among R.A.B.
Enterprises, Inc. and PNC Bank, National Association, as
Trustee, relating to the Old Company Notes.*
4.5 Form of Old Company Note (included as Exhibit A to Exhibit
4.4 hereto).
4.6 Form of New Company Note (included as Exhibit B to Exhibit
4.4 hereto).
4.7 Exchange and Registration Rights Agreement, dated as of May
1, 1998 between Holdings and Chase Securities Inc. relating
to the Old Holdings Notes.*
4.8 Exchange and Registration Rights Agreement, dated as of May
1, 1998 among the Company, the Guarantors named therein and
Chase Securities Inc. relating to the Old Company Notes.*
4.9 Purchase Agreement, dated April 28, 1998 among Holdings, the
Company, Millbrook and Chase Securities, Inc. *
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP as to the
securities issued hereby.+
9.1 Voting Agreement.+
10.1 Credit Agreement, dated as of May 1, 1998 by and among
Millbrook, Manischewitz, the Lenders party thereto, The Chase
Manhattan Bank, as administrative and collateral agent for the
Lenders, and NationsBank, N.A., as Co-Agent and Documentation
Agent.*
10.2 Lease dated December 1, 1986 by and between Morton Sigel, as
Trustee of RDJ Realty Trust, and Millbrook Distributors,
Inc.+
10.3 Stock Purchase Agreement dated as of February 21, 1997 between
R.A.B. Holdings, Inc. and McKesson Corporation.+
12.1 Statement regarding Computation of Ratio of Earnings and Pro
Forma Ratio of Earnings to Fixed Charges.*
21.1 List of subsidiaries of the Co-Registrants.*
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP (to be
included as part of the Parker Chapin Flattau & Klimpl, LLP
opinion, filed as Exhibit 5.1 to this Registration
Statement).+
23.2 Consent and Report on schedules of Deloitte & Touche LLP.*
II-3
<PAGE>
23.3 Consent of Deloitte & Touche LLP.*
23.4 Report on schedule of Arthur Andersen LLP.*
23.5 Consent of Arthur Andersen LLP.*
24.1 Powers of Attorney for R.A.B. Holdings, Inc. (included on
its signature page to this Registration Statement).
24.2 Powers of Attorney for R.A.B. Enterprises, Inc. (included on
its signature page to this Registration Statement).
24.3 Powers of Attorney for Millbrook Distribution Services Inc.
(included on its signature page to this Registration
Statement).
24.4 Powers of Attorney for The B. Manischewitz Company, LLC
(included on its signature page to this Registration
Statement).
25.1 Statement on Form T-1 of eligibility of trustee for New
Holdings Notes.*
25.2 Statement on Form T-1 of eligibility of trustee for New
Company Notes.*
27.1 Financial Data Schedule of R.A.B. Holdings, Inc.*
27.2 Financial Data Schedule of R.A.B. Enterprises, Inc.*
99.1 Form of Letter of Transmittal for New Company Notes.+
99.2 Form of Notice of Guaranteed Delivery for New Company
Notes.+
99.3 Form of Letter of Transmittal for New Holdings Notes.+
99.4 Form of Notice of Guaranteed Delivery for New Holdings
Notes.+
- ---------------------------
*Filed herewith.
+ To be filed by amendment.
II-4
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES:
The following Financial Statement Schedules are included in this
Registration Statement.
R.A.B. Holdings, Inc. and R.A.B. Enterprises, Inc.
I - Condensed Financial Information of Registrants S-1 to S-8
II - Valuation and Qualifying Accounts S-9
MANO Holdings Corporation
and KBMC Acquisition Company, LP
II - Valuation and Qualifying Accounts S-10
All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions or are not applicable, and therefore have been omitted.
ITEM 22. UNDERTAKINGS
(a) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (l) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt
II-5
<PAGE>
means. This includes information contained in documents filed subsequent to
the effective date of the registration statement through the date of
responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, each of the co-registrants has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of New York, state of New York on the 27th day of
October, 1998.
R.A.B. HOLDINGS, INC.
/s/ Richard A. Bernstein
-------------------------------------------------
Richard A. Bernstein, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Richard A. Bernstein and Steven M. Grossman, and each of them
individually, each with full power to act without the other, his true and
lawful attorneys-in-fact and agents, each with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including any post-effective
amendments, to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, hereby ratifying and confirming all that each of those
attorneys-in-fact and agents and each substitute or substitutes thereof may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<S> <C> <C>
/s/ Richard A. Bernstein Chairman, President, Chief Executive Officer and October 27, 1998
- -------------------------- Director
Richard A. Bernstein (principal executive officer)
/s/ Steven M. Grossman Executive Vice President, Chief Financial Officer, October 27, 1998
- -------------------------- Treasurer and Director
Steven M. Grossman (principal financial and accounting officer)
/s/ Lewis J. Korman Vice Chairman and Director October 27, 1998
- --------------------------
Lewis J. Korman
/s/ Richard H. Hochman Director October 27, 1998
- --------------------------
Richard H. Hochman
/s/ Michael A. Pietrangelo Director October 27, 1998
- --------------------------
Michael A. Pietrangelo
/s/ Jenny Morgenthau Director October 27, 1998
- --------------------------
Jenny Morgenthau
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, each of the co-registrants has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of New York, state of New York on the 27th day of
October, 1998.
R.A.B. ENTERPRISES, INC.
/s/ Richard A. Bernstein
---------------------------------
Richard A. Bernstein, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Richard A. Bernstein and Steven M. Grossman, and each of them
individually, each with full power to act without the other, his true and
lawful attorneys-in-fact and agents, each with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including any post-effective
amendments, to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, hereby ratifying and confirming all that each of those
attorneys-in-fact and agents and each substitute or substitutes thereof may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<S> <C> <C>
/s/ Richard A. Bernstein Chairman, President, Chief Executive Officer and October 27, 1998
- ------------------------ Director
Richard A. Bernstein (principal executive officer)
/s/ Steven M. Grossman Executive Vice President, Chief Financial Officer, October 27, 1998
- ------------------------ Treasurer and Director
Steven M. Grossman (principal financial and accounting officer)
/s/ Lewis J. Korman Vice Chairman and Director October 27, 1998
- ------------------------
Lewis J. Korman
/s/ James A. Cohen Senior Vice President - Legal Affairs, Secretary October 27, 1998
- ------------------------ and Director
James A. Cohen
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, each of the co-registrants has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of New York, state of New York on the 27th day of
October, 1998.
MILLBROOK DISTRIBUTION SERVICES INC.
/s/ Robert A. Sigel
----------------------------------------
Robert A. Sigel, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Richard A. Bernstein and Steven M. Grossman, and each of them
individually, each with full power to act without the other, his true and
lawful attorneys-in-fact and agents, each with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including any post-effective
amendments, to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, hereby ratifying and confirming all that each of those
attorneys-in-fact and agents and each substitute or substitutes thereof may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<S> <C> <C>
/s/ Richard A. Bernstein Chairman and Director October 27, 1998
- ------------------------ (principal executive officer)
Richard A. Bernstein
/s/ Robert A. Sigel President, Chief Executive Officer and October 27, 1998
- ------------------------ Director
Robert A. Sigel
/s/ Steven M. Grossman Executive Vice President - Finance and October 27, 1998
- ------------------------ Administration, Treasurer and Director
Steven M. Grossman (principal financial officer)
/s/ James A. Cohen Senior Vice President - Legal Affairs, Secretary October 27, 1998
- ------------------------ and Director
James A. Cohen
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, each
of the co-registrants has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of
New York, state of New York on the 27th day of October, 1998.
THE B. MANISCHEWITZ COMPANY, LLC
/s/ Richard A. Bernstein
---------------------------------------
Richard A. Bernstein, Managing Member
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Richard A. Bernstein and Steven M. Grossman, and each of them individually,
each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including any post-effective
amendments, to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, hereby ratifying and confirming all that each of those
attorneys-in-fact and agents and each substitute or substitutes thereof may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated:
<TABLE>
<S> <C> <C>
/s/ Richard A. Bernstein Chairman, President, Chief Executive Officer October 27, 1998
- ------------------------ and Manager
Richard A. Bernstein (principal executive officer)
/s/ Steven M. Grossman Executive Vice President, Chief Financial October 27, 1998
- ----------------------
Steven M. Grossman Officer, Treasurer and Manager
(principal financial and accounting officer)
/s/ James A. Cohen Senior Vice President - Legal Affairs, Secretary October 27, 1998
- ------------------ and Manager
James A. Cohen
</TABLE>
II-10
<PAGE>
SCHEDULE I
R.A.B. HOLDINGS, INC. - PARENT ONLY
BALANCE SHEETS
MARCH 31, 1998 AND 1997
(In thousands)
<TABLE>
<CAPTION>
1998 1997
ASSETS
<S> <C> <C>
Current Assets:
Cash $ -- $ 734
Other current assets 4 231
------- -------
Total current assets 4 965
Investment in subsidiaries 11,282 10,100
------- -------
$11,286 $11,065
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 109 $ 1,061
Stockholders' equity:
Preferred stock, $500 par value, 100,000 shares authorized,
20,000 shares of Series A issued and outstanding 9,906 9,906
Common stock, $.01 par value, 100,000 shares
authorized, 100,000 and 99,000 shares issued 1 1
Additional paid-in capital 98 97
Retained earnings 1,174 --
------- -------
11,179 10,004
Less cost of common stock in treasury-1,600 shares 2 --
------- -------
Total stockholders' equity 11,177 10,004
------- -------
$11,286 $11,065
======= =======
</TABLE>
See notes to parent only financial statements.
S-1
<PAGE>
SCHEDULE I
R.A.B. HOLDINGS, INC. - PARENT ONLY
STATEMENT OF OPERATIONS
For the Fiscal Year Ended March 31, 1998
(In thousands)
General and administrative expenses $ (8)
Net income from subsidary operations 1,182
-------
Net income $ 1,174
=======
See notes to parent only financial statements.
S-2
<PAGE>
SCHEDULE I
R.A.B. HOLDINGS, INC. - PARENT ONLY
STATEMENT OF CASH FLOWS
For the Fiscal Year Ended March 31, 1998
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,174
Adjustments to reconcile net income to net cash
used in operating activities: (1,182)
Equity in net income of subsidary
Changes in assets and liabilities:
Other assets and liabilities (725)
-------
Net cash used in operating activities (733)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1
Purchase of treasury stock (2)
-------
Net cash used in financing activities (1)
Net decrease in cash and cash equivalents (734)
Cash, beginning of period 734
-------
Cash, end of period $ --
=======
See notes to parent only financial statements.
S-3
<PAGE>
SCHEDULE I
R.A.B. HOLDINGS, INC. PARENT ONLY
NOTES TO PARENT ONLY FINANCIAL STATEMENTS
Basis of Presentation
The accompanying financial statements are presented on the basis of
recording investments in subsidiaries on the equity method of accounting.
S-4
<PAGE>
SCHEDULE I
R.A.B. ENTERPRISES, INC. - PARENT ONLY
BALANCE SHEETS
MARCH 31, 1998 AND 1997
(In thousands)
1998 1997
ASSETS
Investment in subsidiary $ 11,282 $ 10,100
-------- --------
$ 11,282 $ 10,100
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Stockholder's equity:
Common stock, $1.00 par value, 200 shares
authorized and issued $ -- $ --
Additional paid-in capital 10,100 10,100
Retained earnings 1,182 --
======== ========
$ 11,282 $ 10,100
======== ========
See notes to parent only financial statements.
S-5
<PAGE>
SCHEDULE I
R.A.B. ENTERPRISES, INC. - PARENT ONLY
STATEMENT OF OPERATIONS
For the Fiscal Year Ended March 31, 1998
(In thousands)
Net income from subsidiary operation $ 1,182
-------
Net income $ 1,182
=======
See notes to parent only financial statements.
S-6
<PAGE>
SCHEDULE I
R.A.B. ENTERPRISES, INC. - PARENT ONLY
STATEMENT OF CASH FLOWS
For the Fiscal Year Ended March 31, 1998
(In thousands)
Cash flows from operating activities:
Net income $ 1,182
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in net income of subsidiary (1,182)
-------
Net cash from operating activities --
Net decrease in cash --
Cash, beginning of period --
-------
Cash, end of period --
=======
See notes to parent only financial statements.
S-7
<PAGE>
SCHEDULE I
R.A.B. ENTERPRISES, INC. - PARENT ONLY
NOTES TO PARENT ONLY FINANCIAL STATEMENTS
Basis of Presentation
R.A.B. Enterprises, Inc. (the "Company") is a wholly
owned-subsidiary of R.A.B. Holdings, Inc. ("Holdings"). On January 26,
1998, Holdings formed the Company and on May 1, 1998 contributed to the
Company its wholly-owned subsidiary Millbrook Distribution Services Inc.,
which contribution has been accounted for as an "as if" pooling of interests.
The accompanying financial statements are presented on the basis of
recording an investment in subsidiary on the equity method of accounting.
S-8
<PAGE>
R.A.B. HOLDINGS, INC.
R.A.B. ENTERPRISES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED MARCH 31, 1998 (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additions
---------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end
Description of period expenses accounts Deductions (1) of period
- ----------------------------------------- -------------- -------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 2,251 415 30 (255) $ 2,441
</TABLE>
(1) Amounts written off.
S-9
<PAGE>
MANO HOLDINGS CORPORATION AND KBMC ACQUISITION COMPANY, L.P.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED JULY 31, 1995, 1996 AND 1997 (IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additions
-------------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end
Description of period expenses accounts Deductions of period
- --------------------------------------------- ------------ --------------- -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended July 31, 1995
Allowance for doubtful accounts $ 325 6 - - $ 331
Fiscal year ended July 31, 1996
Allowance for doubtful accounts $ 331 (116) 35 - $ 250
Fiscal year ended July 31, 1997
Allowance for doubtful accounts $ 250 450 - - $ 700
</TABLE>
S-10
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Document
- ----------- -----------------------
2.1 Purchase Agreement dated as of March 3, 1998 among R.A.B. Food
Holdings, Inc., MANO Holdings I, LLC, KBMC Acquisition
Company, L.P., MANO Holdings Corporation and the stockholders
of MANO Holdings Corporation.*
3.1 Certificate of Incorporation of R.A.B. Holdings, Inc.*
3.2 Certificate of Amendment of Incorporation of R.A.B.
Holdings, Inc.*
3.3 Bylaws of R.A.B. Holdings, Inc.*
3.4 Certificate of Incorporation of R.A.B. Enterprises, Inc.*
3.5 Amendment of Certificate of Incorporation of R.A.B.
Enterprises, Inc.*
3.6 Bylaws of R.A.B. Enterprises, Inc.*
3.7 Certificate of Incorporation of Millbrook Distribution
Services Inc.*
3.8 Bylaws of Millbrook Distribution Services Inc.*
3.9 Certificate of Formation of The B. Manischewitz Company,
LLC.*
3.10 Operating Agreement of The B. Manischewitz Company, LLC.*
4.1 Indenture, dated as of May 1, 1998, among R.A.B. Holdings,
Inc. and PNC Bank, National Association, as Trustee,
relating to the Holdings Notes.*
4.2 Form of Old Holdings Note (included as Exhibit A to Exhibit
4.1 hereto).
4.3 Form of New Holdings Note (included as Exhibit B to Exhibit
4.1 hereto).
4.4 Indenture, dated as of May 1, 1998, among R.A.B.
Enterprises, Inc. and PNC Bank, National Association, as
Trustee, relating to the Old Company Notes.*
4.5 Form of Old Company Note (included as Exhibit A to Exhibit
4.4 hereto).
4.6 Form of New Company Note (included as Exhibit B to Exhibit
4.4 hereto).
4.7 Exchange and Registration Rights Agreement, dated as of May
1, 1998 between Holdings and Chase Securities Inc. relating
to the Old Holdings Notes.*
4.8 Exchange and Registration Rights Agreement, dated as of May
1, 1998 among the Company, the Guarantors named therein and
Chase Securities Inc. relating to the Old Company Notes.*
4.9 Purchase Agreement, dated April 28, 1998 among Holdings, the
Company, Millbrook and Chase Securities, Inc. *
<PAGE>
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP as to the
securities issued hereby.+
9.1 Voting Agreement.+
10.1 Credit Agreement, dated as of May 1, 1998 by and among
Millbrook, Manischewitz, the Lenders party thereto, The Chase
Manhattan Bank, as administrative and collateral agent for the
Lenders, and NationsBank, N.A., as Co-Agent and Documentation
Agent.*
10.2 Lease dated December 1, 1986 by and between Morton Sigel, as
Trustee of RDJ Realty Trust, and Millbrook Distributors,
Inc.+
10.3 Stock Purchase Agreement dated as of February 21, 1997 between
R.A.B. Holdings, Inc. and McKesson Corporation.+
12.1 Statement regarding Computation of Ratio of Earnings and Pro
Forma Ratio of Earnings to Fixed Charges.*
21.1 List of subsidiaries of the Co-Registrants.*
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP (to be
included as part of the Parker Chapin Flattau & Klimpl, LLP
opinion, filed as Exhibit 5.1 to this Registration
Statement).+
23.2 Consent and Report on schedules of Deloitte & Touche LLP.*
23.3 Consent of Deloitte & Touche LLP.*
23.4 Report on schedule of Arthur Andersen LLP.*
23.5 Consent of Arthur Andersen LLP.*
24.1 Powers of Attorney for R.A.B. Holdings, Inc. (included on
its signature page to this Registration Statement).
24.2 Powers of Attorney for R.A.B. Enterprises, Inc. (included on
its signature page to this Registration Statement).
24.3 Powers of Attorney for Millbrook Distribution Services Inc.
(included on its signature page to this Registration
Statement).
24.4 Powers of Attorney for The B. Manischewitz Company, LLC
(included on its signature page to this Registration
Statement).
<PAGE>
25.1 Statement on Form T-1 of eligibility of trustee for New
Holdings Notes.*
25.2 Statement on Form T-1 of eligibility of trustee for New
Company Notes.*
27.1 Financial Data Schedule of R.A.B. Holdings, Inc.*
27.2 Financial Data Schedule of R.A.B. Enterprises, Inc.*
99.1 Form of Letter of Transmittal for New Company Notes.+
99.2 Form of Notice of Guaranteed Delivery for New Company
Notes.+
99.3 Form of Letter of Transmittal for New Holdings Notes.+
99.4 Form of Notice of Guaranteed Delivery for New Holdings
Notes.+
- ---------------------------
*Filed herewith.
+ To be filed by amendment.
<PAGE>
EXECUTION COPY
PURCHASE AGREEMENT
BY AND
AMONG
R.A.B. FOOD HOLDINGS, INC.,
MANO HOLDINGS I, LLC,
KBMC ACQUISITION COMPANY, L.P.,
MANO HOLDINGS CORPORATION
AND
THE STOCKHOLDERS OF MANO HOLDINGS CORPORATION
DATED AS OF MARCH 3, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINED TERMS.........................................................2
Section 1.1 Definitions.........................................2
ARTICLE II
PURCHASE AND SALE.....................................................9
Section 2.1 Purchase and Sale...................................9
Section 2.2 Purchase Price......................................9
Section 2.3 Closing............................................10
Section 2.4 Deliveries at Closing..............................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MANO, MANO I AND KBMC..............11
Section 3.1 Organization and Qualification.....................11
Section 3.2 Authorization......................................11
Section 3.3 Financial Data.....................................12
Section 3.4 Absence of Undisclosed Liabilities.................12
Section 3.5 No Material Adverse Effect.........................13
Section 3.6 Capitalization; Ownership..........................13
Section 3.7 Consents and Authorizations........................14
Section 3.8 Litigation; Governmental Investigations; etc.......14
Section 3.9 Compliance with Law................................15
Section 3.10 Taxes..............................................15
Section 3.11 Employee Benefit Plans.............................18
Section 3.12 Intellectual Property Matters etc..................20
Section 3.13 Computer Software..................................20
Section 3.14 Real Property......................................20
Section 3.15 Environmental Matters..............................21
Section 3.16 Personal Property..................................23
Section 3.17 Material Contracts.................................24
Section 3.18 Employee Relations.................................25
Section 3.19 Brokers............................................26
Section 3.20 Affiliate Transactions.............................26
Section 3.21 Receivables, Inventory and Payables................26
Section 3.22 Letters of Credit..................................26
Section 3.23 Insurance..........................................26
Section 3.24 Conditions Affecting Manischewitz..................27
Section 3.25 Management Fees....................................27
Section 3.26 Disclaimer.........................................27
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS........................28
Section 4.1 Existence and Organization.........................28
Section 4.2 Authorization......................................28
Section 4.3 Consents and Authorizations........................28
Section 4.4 Ownership..........................................29
Section 4.5 Disclaimer.........................................29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................29
Section 5.1 Organization and Qualification.....................29
Section 5.2 Corporate Authorization............................30
Section 5.3 Consents and Authorizations........................30
Section 5.4 Financing..........................................31
Section 5.5 Litigation.........................................31
Section 5.6 Securities Laws....................................31
Section 5.7 Disclaimer.........................................31
ARTICLE VI
COVENANTS............................................................31
Section 6.1 Conduct of Business................................31
Section 6.2 Reasonable Best Efforts............................33
Section 6.3 Consents...........................................34
Section 6.4 HSR Filings........................................34
Section 6.5 Limitation on Fees.................................35
Section 6.6 Confidentiality; Access to Information.............35
Section 6.7 Public Announcements...............................35
Section 6.8 Further Assurances.................................35
Section 6.9 Supplements........................................35
Section 6.10 No Solicitation....................................36
Section 6.11 Tax Matters........................................36
Section 6.12 Indemnification for Taxes..........................38
Section 6.13 Risk of Loss.......................................42
Section 6.14 Cancellation of Options............................42
Section 6.15 Books and Records..................................42
Section 6.16 Manischewitz Officer Bonus Incentive Plan..........42
Section 6.17 Survival of Covenants..............................43
ARTICLE VII
CONDITIONS TO CLOSING................................................43
Section 7.1 Conditions to Each Party's Obligation..............43
Section 7.2 Conditions to Obligation of the Purchaser..........43
Section 7.3 Conditions to Obligation of the Sellers............45
ii
<PAGE>
ARTICLE VIII
TERMINATION..........................................................46
Section 8.1 Termination........................................46
Section 8.2 Effect of Termination..............................47
Section 8.3 Return of Documents................................47
ARTICLE IX
INDEMNIFICATION......................................................48
Section 9.1 Survival of Representations and Warranties.........48
Section 9.2 Indemnification by the Sellers.....................48
Section 9.3 Indemnification by Purchaser.......................49
Section 9.4 Indemnification Procedures - Third-Party Claims....49
Section 9.5 Procedure for Indemnification -- Other Claims,
Indemnification Generally..........................51
Section 9.6 Time Limitations...................................51
Section 9.7 Limitations on Amount..............................52
Section 9.8 Limitations on Application to Taxes................53
Section 9.9 Acknowledgment of Indemnification
Responsibility, etc................................53
Section 9.10 Escrow Agreement...................................53
Section 9.11 Additional Indemnification Matters.................54
Section 9.12 Claims in Excess of Indemnification Limit..........54
ARTICLE X
MISCELLANEOUS........................................................54
Section 10.1 Headings...........................................54
Section 10.2 Severability.......................................55
Section 10.3 Notices............................................55
Section 10.4 Governing Law......................................57
Section 10.5 Dispute Resolution.................................57
Section 10.6 JURISDICTION.......................................58
Section 10.7 Entire Agreement...................................58
Section 10.8 Amendment; Waiver, etc.............................58
Section 10.9 Assignability......................................59
Section 10.10 Binding Effect.....................................59
Section 10.11 Third-Party Beneficiaries..........................59
Section 10.12 Counterparts.......................................59
Section 10.13 Guarantee..........................................59
Section 10.14 Expenses...........................................59
Section 10.15 Termination of Securities Purchase Agreement
and Shareholders Agreement.........................59
iii
<PAGE>
SCHEDULES
Schedule A Stockholders
Schedule B Optionholders
Schedule C Permitted Liens
Schedule 3.1 Subsidiaries, Options
Schedule 3.3(a) Financial Statements; Changes to Accounting Practices
Schedule 3.3(b) Combined Statements
Schedule 3.4 Undisclosed Liabilities
Schedule 3.6 Subsidiary Capitalization
Schedule 3.7(a) Company Consents and Authorizations
Schedule 3.7(b) Sellers' Consents and Authorizations
Schedule 3.8 Litigation
Schedule 3.9 Compliance with Law
Schedule 3.10(a) Tax Matters
Schedule 3.10(e) Jurisdictions Requiring Tax Filing
Schedule 3.10(g) Tax Elections
Schedule 3.11 Employee Benefit Plans
Schedule 3.12 Intellectual Property
Schedule 3.14(a) Real Property
Schedule 3.14(b) Leases
Schedule 3.15 Environmental and Safety Matters
Schedule 3.16 Personal Property Leases
Schedule 3.17 Contracts
Schedule 3.18 Labor Matters
Schedule 3.19 Brokers
Schedule 3.20 Affiliate Transactions
Schedule 3.22 Letters of Credit
Schedule 3.23 Insurance
Schedule 3.24 Conditions Affecting Manischewitz
Schedule 3.25 Management Fees
Schedule 4.3(a) Sellers' Consents
Schedule 4.3(b) Filings
Schedule 5.3 Purchaser Consents and Authorizations
iv
<PAGE>
EXHIBITS
Exhibit 1 Estoppel Certificate
Exhibit 2 FIRPTA Affidavits
Exhibit 3 Opinion of Brownstein, Hyatt, Farber & Strickland, P.C.
Exhibit 4 Opinion of Parker Chapin Flattau & Klimpl, LLP
Exhibit 5 Escrow Agreement
Exhibit 6 Form of Optionholder Agreement
Exhibit 7 Form of Promissory Note
Exhibit 8 Officer Bonus Incentive Plan
v
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT dated as of March 3, 1998, by and among R.A.B.
Food Holdings, Inc., a Delaware corporation (the "Purchaser"), MANO Holdings
I, LLC, a Delaware limited liability company ("MANO I"), KBMC Acquisition
Company, L.P., a Delaware limited partnership ("KBMC"), MANO Holdings
Corporation, a Delaware corporation ("MANO"), and all of the stockholders of
MANO set forth on Schedule A attached hereto (the "Stockholders", and together
with KBMC, each a "Seller" and sometimes collectively, the "Sellers").
WHEREAS, KBMC owns 6,042.6 of the outstanding membership units of
MANO I (the "KBMC Interests"). MANO owns the remaining 3,957.4 of the
outstanding membership units of MANO I (the "MANO Interests", and together
with the KBMC Interests sometimes collectively referred to as, the "Membership
Interests"). Each of the persons set forth on Schedule B attached hereto
(collectively, the "Optionholders") has the right to acquire membership units
in MANO I (collectively, the "Options") set forth opposite their name on
Schedule B.
WHEREAS, the Stockholders are the legal and beneficial owners of
5,412.17334 shares of common stock, par value $.01 per share, of MANO, which
constitutes all of MANO's issued and outstanding capital stock (the "Capital
Stock").
WHEREAS, MANO I legally and beneficially owns, directly and
indirectly, all of the outstanding membership interests of The B. Manischewitz
Company, LLC, a Delaware limited liability company ("Manischewitz").
WHEREAS, pursuant to the Options, the Optionholders have the right to
acquire 2,161.4484 membership units of MANO I, which Options will be cancelled
by MANO I immediately prior to the Closing pursuant to the Optionholder
Agreements against issuance of the Promissory Notes to each of the
Optionholders.
WHEREAS, KBMC desires to sell to the Purchaser, and the Purchaser
desires to purchase from KBMC, the KBMC Interests, and the Stockholders desire
to sell to the Purchaser, and the Purchaser desires to purchase from the
Stockholders, all of the Capital Stock, each on the terms, provisions and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein, the parties agree
as follows:
1
<PAGE>
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions. For purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
"AAA" has the meaning given such term in Section 10.5(e).
"Acquisition Transaction" has the meaning given such term in Section
6.10.
"Adverse Tax Impact" has the meaning given such term in Section
6.12(e).
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person, or any director, executive officer or
manager of such specified Person or any Key Employee. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" means this Purchase Agreement, as it may be amended in
accordance with its terms, and shall include all of the Schedules and Exhibits
annexed hereto.
"Antitrust Law" shall mean the Sherman Act, as amended, the Clayton
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended,
and all other federal, state and foreign statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines, and other laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization, price fixing or restraint of trade or
fair dealing.
"Arbitrators" has the meaning given such term in Section 10.5(e).
"Authorizations" means licenses, permits, franchises, appraisals,
qualifications, concessions, permanent certificate of occupancy or the like,
granted by any federal, state, local or foreign Governmental Entity or
Regulatory Authority.
"Business Day" means a day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Closing" means the closing of the purchase and sale of the
Membership Interests and the Capital Stock as contemplated hereby.
"Closing Date" means the later of (i) April 1, 1998; (ii) the fifth
Business Day following the expiration of all applicable waiting periods under
the HSR Act or the early termination of such
2
<PAGE>
waiting periods thereunder; and (iii) such other date as is mutually
acceptable to the Purchaser and KBMC.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Statements" has the meaning given such term in Section
3.3(b).
"Confidentiality Agreement" shall mean that certain agreement dated
October 8, 1997.
"Contract" means any contract, lease, license or other instrument,
agreement or binding commitment, whether or not in written form.
"CPR" has the meaning given such term in Section 10.5(c).
"Credit Agreement" has the meaning given such term in Section 7.2(j).
"Dispute" has the meaning given such term in Section 10.5(a).
"Encumbrance" has the meaning given such term in Section 3.14(a).
"Environment" means all air, surface water, groundwater or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings or other
communications (written or oral), whether criminal or civil, pursuant to or
relating to any applicable Environmental Law by any Person (including, but not
limited to, any Governmental Entity or Regulatory Authority or citizens'
group) based upon, alleging, asserting, or claiming any actual or potential
(a) violation of or liability under any Environmental Law, (b) violation of
any Environmental Permit, or (c) liability for investigatory costs, cleanup
costs, removal costs, remedial costs, response costs, natural resource
damages, property damage, personal injury, fines or penalties arising out of,
based on, resulting from or related to the presence, Release or threatened
Release into the Environment of any Hazardous Substances at any location,
including, but not limited to, any off-Site location to which Hazardous
Substances or materials containing Hazardous Substances were sent for
handling, storage, treatment or disposal.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on
any similar state list of sites requiring investigation or cleanup, or which
is the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any alleged violation of any
Environmental Law, or at which there has been a Release, threatened or
suspected Release of a Hazardous Substance.
3
<PAGE>
"Environmental Law" means any and all current federal, state, local,
provincial and foreign, civil and criminal laws, statutes, ordinances, orders,
codes, rules, regulations, Environmental Permits, policies, guidance
documents, judgments, decrees, injunctions, or agreements with any
Governmental Entity or Regulatory Authority, relating to the protection of
health and the Environment, worker health and safety, and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Substance, including but not limited to: the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.; the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the
Hazardous Material Transportation Act 49, U.S.C. Section 1801 et seq.; the
Federal Insecticide Fungicide and Rodenticide Act 7, U.S.C. Section 136 et
seq.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
Section 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq.; the Occupational Safety & Health Act of 1970, 29 U.S.C. Section 651
et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; and
the state analogies thereto, as in effect on the date hereof; and any common
law doctrine, including but not limited to, negligence, nuisance, trespass,
personal injury, or property damage related to or arising out of the presence,
Release, or exposure to a Hazardous Substance.
"Environmental Permit" means any federal, state, local, provincial,
or foreign permits, licenses, Authorizations, consents or authorizations
required by any Governmental Entity or Regulatory Authority under or in
connection with any Environmental Law and includes any and all orders, consent
orders or binding agreements issued or entered into by a Governmental Entity
or Regulatory Authority under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"Escrow Agent" has the meaning given such term in Section 9.10.
"Escrow Agreement" has the meaning given such term in Section 9.10.
"Escrow Funds" has the meaning given such term in Section 9.10.
"Financial Statements" has the meaning given such term in Section
3.3(a).
"GAAP" means generally accepted accounting principles in effect in
the United States of America at the time of any determination, and which are
applied on a consistent basis. All accounting terms used in this Agreement
which are not expressly defined shall have the meanings given to those terms
by GAAP, unless otherwise defined herein or the context of this Agreement
otherwise requires.
"Governmental Entity or Regulatory Authority" means any court,
tribunal, arbitrator, legislative, executive or regulatory authority, Taxing
authority, agency, commission or other
4
<PAGE>
instrumentality of the United States of America, any foreign country or any
domestic or foreign state, county, city or other political subdivision.
"Governmental Permit" means any franchise, consent, license,
marketing right, permit, authorization, approval, qualification, concession or
other operating authority issued or granted by any Governmental Entity or
Regulatory Authority.
"Guarantee" has the meaning given such term in Section 10.13.
"Hazardous Substance" shall mean petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls,
and any other chemicals, materials, substances or wastes, in any amount or
concentration, which are defined or regulated as "hazardous substances,"
"hazardous materials," "hazardous wastes," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," "regulated substances," "solid wastes," or "contaminants" or
words of similar import under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income Tax" shall mean any federal, state, local or foreign Tax that
is (a) based upon, measured by or calculated with respect to income, profits,
capital stock, net worth or receipts, in each case whether gross, net or
adjusted (including, without limitation, capital gains Taxes and minimum
Taxes), or (b) based upon, measured by or calculated with respect to multiple
bases (including, without limitation, corporate franchise Taxes) if one or
more of the bases on which such Tax may be based, measured or calculated with
respect to, is described in clause (a), in each case together with any
interest, penalties or additions to tax in respect of any of the foregoing,
whether disputed or not, and any obligation to indemnify, assume or succeed to
the liability of any other Person in respect of the foregoing (including,
without limitation, as a transferee pursuant to Section 6901 of the Code or
otherwise) as a result of Treasury Regulation Section 1.1502-6 or similar
provision of applicable law, or as a result of a tax sharing or similar
agreement, arrangement or understanding.
"Indemnification Acknowledgment" has the meaning given such term in
Section 9.4(a)(ii).
"Indemnification Limit" has the meaning given such term in Section
9.7(a).
"Indemnified Party" means any Purchaser Indemnified Party or Seller
Indemnified Party, as the case may be.
"Indemnitee" means a party entitled to indemnification pursuant to
Article IX.
"Indemnitor" means a party liable for indemnification pursuant to
Article IX.
5
<PAGE>
"Insurance Policies" has the meaning given such term in Section 3.23.
"Intellectual Property Rights" shall mean all United States and
foreign registered patents, trademarks, trade names, service marks, copyrights
and all registrations and applications and renewals for any of the foregoing
and all goodwill associated therewith (in any form or medium), in each case
that are currently owned or used or held for use or being developed by or for
MANO, MANO I, Manischewitz or any of their Subsidiaries or Affiliates.
"IRS" means the Internal Revenue Service.
"Key Employee" shall mean Messrs. Robert Kroll, Richard Haine, Victor
Bevilaqua, Franklin Claire and Robert Solot.
"Knowledge" of a party, "known" to a party, "best of knowledge" of a
party, matters of which a party is "aware" and language of similar import
shall include all matters actually known or which should be known to such
party or any of such party's directors, managers, officers or by any Key
Employee, in each case after reasonable due diligence and reasonable
investigation.
"Kroll Letter Agreement" has the meaning given such term in Section
7.2(m).
"Lease" or "Leases" has the meaning given such term in Section
3.14(b).
"Leased Property" has the meaning given such term in Section 3.14(b).
"Legal Requirements" of a Person means any statute, rule, regulation,
or other provision of law, or any order, judgment or other direction of a
court or other tribunal or any Governmental Entity or Regulatory Authority, or
any other requirement, permit, registration, license or authorization of any
Governmental Entity or Regulatory Authority applicable to such Person, or any
of its properties, assets or business.
"Liens" shall mean any liens, charges, encumbrances, options, rights
of first refusal, security interests, claims, mortgages, pledges, charges,
easements, obligations or any other encumbrances or third party rights or
equitable interests, of any nature whatsoever (excluding restrictions on
transfer imposed by the Securities Act of 1933, as amended, and other
applicable securities laws).
"Losses" means any and all liabilities, losses, damages (including,
without limitation, consequential damages, but excluding special damages based
upon lost profits or enterprise value and punitive damages, except if the
Indemnitee is subjected to a Third Party Claim that includes a claim for
punitive damages based upon any action or inaction of the Indemnitor, in which
case, punitive damages will be included to the extent punitive damages
constitute part of the loss), costs, penalties, fines and expenses (including,
without limitation, interest charges, costs of investigation and the
reasonable fees and disbursements of attorneys and other professionals and
experts), whether or not involving a third party claim, asserted against,
imposed upon or incurred, directly or indirectly, by any Indemnified Party,
which in any way relates to or arises from any claim, demand,
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investigation, action, arbitration or other proceeding, without reduction for
any Tax benefit that may be obtained as a result thereof but reducing
therefrom any directly related insurance proceeds actually received by the
Indemnified Party (net of all costs and expenses (including, without
limitation, attorneys' fees and expenses) incurred in connection with
processing and/or enforcing any insurance claim).
"Material Adverse Effect" means a material adverse effect on the
assets, business operations or financial condition of MANO, MANO I,
Manischewitz and their Subsidiaries, taken as a whole.
"Material Contracts" has the meaning given such term in Section 3.17.
"Multiemployer Plan" has the meaning given such term in Section
3.11(d).
"Notice of Claim" has the meaning given such term in Section 9.4(a)(i).
"Optionholder Agreements" has the meaning given such term in Section
6.14.
"Owned Property" has the meaning given such term in Section 3.14(a);
provided that for purposes of this Agreement the term "Owned Property" shall
not include any real property in Israel.
"Paying Agent" has the meaning given such term in Section 2.2.
"Permitted Liens" means the Liens listed on Schedule C attached hereto.
"Person" means any individual, partnership, limited liability
company, corporation, association, joint stock company, trust, estate, joint
venture, unincorporated organization or any Governmental Entity or Regulatory
Authority.
"Personal Property Leases" has the meaning given such term in Section
3.16.
"Plan" has the meaning given such term in Section 3.11(a).
"Pre-Closing Period" means any Tax period that ends on or before the
Closing Date.
"Pre-Closing Portion of a Straddle Period" means the portion of a
Straddle Period through and including the Closing Date.
"Post-Closing Period" means any Tax Period that begins after the
Closing Date.
"Post-Closing Portion of a Straddle Period" means the portion of a
Straddle Period beginning after the Closing Date.
"Proceeding" has the meaning given such Term in Section 3.10(a)(v).
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"Promissory Notes" has the meaning given such term in Section 6.14.
"Purchase Price" has the meaning given such term in Section 2.2.
"Purchaser Documents" has the meaning given such term in Section 5.1.
"Purchaser Indemnified Party" has the meaning given such term in
Section 9.2.
"RAB" has the meaning given such term in Section 10.13.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Substance into the Environment.
"Seller Documents" means this Agreement and any other agreements,
certificates, documents and instruments executed and/or delivered by MANO,
MANO I, Manischewitz or any of the Sellers at the Closing in connection with
this Agreement and the transactions contemplated hereby or which are referred
to herein as having been delivered to the Purchaser.
"Seller Indemnified Party" has the meaning given such term in Section
9.3.
"Sellers' Designee" has the meaning given such term in Section 6.12(c).
"Settlement Accountants" has the meaning given such term in Section
6.12(k).
"Site" shall mean any of the real property, including, without
limitation, the Owned Property and Leased Property, currently or previously
owned, leased, used or operated by MANO, MANO I, Manischewitz or any of their
Subsidiaries, any predecessors of any of the foregoing or any entities
previously owned by any of the foregoing, including, without limitation, all
soil, subsoil, surface waters and groundwater thereat.
"Straddle Period" means any Tax period that begins on or before and
ends after the Closing Date.
"Subsidiary" of a Person means any entity of which the securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at
the time directly or indirectly owned by such Person or such Person otherwise
has the right to vote or to direct the vote of such securities or other
ownership interests.
"Tax" or "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (pursuant to
Section 59A of the Code or otherwise), custom duties, capital stock, net
worth, franchise, recording, employee's income withholding, foreign
withholding, social security (or
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its equivalent), unemployment, disability, real property, personal property,
sales, use, transfer, value added, occupancy, registration, alternative or
add-on minimum, estimated or other tax, charge, fee, levy, deficiency or other
assessment of whatever kind or nature, including any interest, penalties or
additions to tax in respect of the foregoing, whether disputed or not, and any
obligation to indemnify, assume or succeed to the liability of any other
Person in respect of the foregoing (including without limitation as a
transferee (pursuant to Section 6901 of the Code or otherwise), as a result of
Treasury Regulation Section 1.1502-6 or similar provision of applicable law,
or as a result of a tax sharing or similar agreement, arrangement or
understanding), and the term "Tax Liability" shall mean any liability (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due) with respect to Taxes.
"Tax Claim" has the meaning given such term in Section 6.12(d).
"Tax Return" means any federal, state, local or foreign return,
declaration, report, claim for refund or credit, document, or other
information or filing that is filed or required to be supplied to any
Governmental Entity or Regulatory Authority in respect of any Tax, and
including any amendment thereof, whether on a consolidated, combined, unitary
or separate basis.
"Termination Statements" has the meaning given such term in Section
7.2(j).
"Third Party Claim" means a claim or demand made by any Person,
corporation, Governmental Entity or Regulatory Authority or other third party
against an Indemnified Party.
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale. Upon the terms and provisions and
subject to the conditions of this Agreement and based upon the
representations, warranties, covenants and agreements of MANO, MANO I and the
Sellers set forth herein, at the Closing, the Purchaser shall purchase and
acquire (i) from KBMC, and KBMC shall sell, assign, transfer, convey and set
over to the Purchaser, free and clear of any and all Liens, all right, title
and interest of KBMC in and to the KBMC Interests and (ii) from the
Stockholders, and the Stockholders shall sell, assign, transfer, convey and
set over to the Purchaser, free and clear of any and all Liens, all right,
title and interest of each Stockholder in and to the Capital Stock legally and
beneficially owned by each Stockholder set forth opposite such Stockholder's
name on Schedule A attached hereto.
Section 2.2 Purchase Price. In consideration for the sale and
transfer of the KBMC Interests and Capital Stock to Purchaser, at the Closing,
the Purchaser shall pay to Kohlberg & Co., L.L.C., on behalf of the Sellers
(the "Paying Agent"), in cash, an amount equal to $127,000,000, less (i) the
amount outstanding at the Closing Date under the long-term debt portion of the
Credit Agreement (including all costs to retire such debt), (ii) $3,000,000;
(iii) the aggregate principal amount of the Promissory Notes issued in
connection with the cancellation of the Options; (iv) the payment of
management bonuses contemplated by Section 6.1(x); (v) agreed upon fees and
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expenses, including, without limitation, the fees and expenses (including,
without limitation, attorneys' fees and disbursements) of the Sellers, MANO,
MANO I, Manischewitz and the Subsidiaries in connection with this Agreement
and the transactions contemplated hereby, the estimated increase in any
employment and withholding Tax as a result of the cancellation of the Options,
payment of the management bonuses and amounts payable, if any, at the Closing,
under the Kroll Letter Agreement; and (vi) amounts payable, if any, at the
Closing, under the Kroll Letter Agreement (the "Purchase Price"). The Purchase
Price shall be allocated as follows: (x) 60.426% to KBMC in respect of the
KBMC Interests; and (y) 39.574% to the Stockholders for the Capital Stock.
Upon the Closing, the Promissory Notes issued to the Optionholders pursuant to
the Optionholder Agreements as provided for in Section 6.14 shall be paid by
MANO I.
Section 2.3 Closing. The closing of the purchase and sale of the KMBC
Interests, the Capital Stock and the Optionholders Interests pursuant to
Section 2.1, provided that all of the conditions set forth in Sections 7.1,
7.2 and 7.3 have been satisfied or waived, shall be held at the offices of
Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York,
New York 10036, at 10:00 a.m. (local time) on the Closing Date, or at such
other place and time as the Purchaser and KBMC may mutually agree.
Section 2.4 Deliveries at Closing.
(a) At the Closing, (i) the Purchaser shall deliver
the Purchase Price to the Paying Agent by wire transfer of immediately
available funds; (ii) KBMC shall deliver to the Purchaser certificates
representing the KBMC Interests in MANO I duly endorsed by and on behalf of
KBMC and consented by the manager of MANO I; and (iii) each Stockholder shall
deliver to the Purchaser certificates representing each such Stockholder's
shares of Capital Stock duly endorsed in blank or accompanied by stock
transfer powers executed in blank, in each case with signatures guaranteed,
and with all requisite stock transfer tax stamps attached.
(b) Additionally, on the Closing Date, the Sellers shall
deliver, or cause to be delivered, to Purchaser the following:
(i) payment of all applicable documentary
stamp and similar taxes (and all forms and returns
required in connection therewith) in connection
with transactions contemplated hereby;
(ii) an estoppel certificate (dated not
more than ten (10) days prior to the Closing Date)
from the lessor under the Lease in Jersey City, New
Jersey (including, without limitation, the consent
of that holder to that transaction) (in the form of
Exhibit 1 attached hereto); and
(iii) an affidavit from each Stockholder,
KBMC and each Optionholder pursuant to the Foreign
Investment in Real Property Tax Act, in the form of
Exhibit 2-A or Exhibit 2-B attached hereto, as
applicable.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MANO, MANO I AND KBMC
Each of MANO, MANO I and KBMC represents and warrants to the
Purchaser as follows:
Section 3.1 Organization and Qualification. Each of MANO I,
Manischewitz and MANO Holdings II, LLC ("MANO II") is a limited liability
company duly organized, validly existing and in good standing under the laws
of the State of Delaware, has the requisite limited liability company power to
own and lease its properties and assets and to carry on its business as now
being conducted, and is duly qualified as a foreign limited liability company
in good standing in each foreign jurisdiction in which the conduct of its
business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect. Each of MANO and MANO, Inc., a Delaware corporation ("MANO, Inc."), is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has the requisite corporate power to own and
lease its properties and assets and to carry on its business as now being
conducted and is duly qualified as a foreign corporation and is in good
standing in each foreign jurisdiction in which the conduct of its business
requires such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect. Except
for the recapitalization of Manischewitz completed in May 1996 and as set
forth on Schedule 3.1 attached hereto, MANO has never conducted and presently
does not conduct any business activity other than the direct ownership of the
MANO Interests. Except for the recapitalization of Manischewitz completed in
May 1996, MANO I has never conducted and presently does not conduct any
business activity other than the direct ownership of equity interests in
Manischewitz, MANO, Inc. and MANO II. MANO, Inc. has never conducted and
presently does not conduct any business activity other than the direct
ownership of an equity interest in MANO II. MANO II has never conducted and
presently does not conduct any business activity other than the direct
ownership of an equity interest in Manischewitz. Schedule 3.1 attached hereto
sets forth a list of each Subsidiary of MANO, MANO I, Manischewitz, MANO, Inc.
and MANO II and each of their Subsidiaries. Except as set forth on Schedule
3.1 attached hereto, none of MANO, MANO I, Manischewitz, MANO, Inc., MANO II
or any of their Subsidiaries is a party to any agreement or has obligation to
issue any equity interest or is a party to any agreement or has any obligation
or option, warrant or other right to acquire any equity interest in any
Person. Except as set forth on Schedule 3.1 attached hereto, no Person has any
option, warrant or other right to acquire any equity interest in MANO, MANO I,
Manischewitz, MANO, Inc., MANO II or any of their Subsidiaries. MANO, MANO I
and KBMC, as applicable, have heretofore delivered to the Purchaser true,
correct and complete copies of the Certificate of Incorporation and By-laws of
MANO and MANO, Inc., the Partnership Agreement of KBMC, the Certificates of
Formation and Operating Agreements of MANO I, Manischewitz and MANO II and the
minute books of MANO, MANO, Inc., MANO I, Manischewitz and MANO II.
Section 3.2 Authorization. Each of MANO and MANO I has the corporate
or limited liability company power and authority, as applicable, to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. Each of MANO, MANO I, Manischewitz and their respective
Subsidiaries have the corporate or limited liability company
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power and authority, as applicable, to execute, deliver and perform all other
agreements, certificates, documents and instruments to be executed, delivered
and performed by them as contemplated by this Agreement. The execution,
delivery and performance of this Agreement and the other Seller Documents by
each such Person has been duly authorized, where applicable, and this
Agreement and the other Seller Documents constitute the legal, valid and
binding obligation of each such Person who is a party thereto, as applicable,
enforceable against such Person in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application affecting the enforcement of creditors' rights
generally.
Section 3.3 Financial Data.
(a) Attached hereto as Schedule 3.3(a) are true, correct
and complete copies of Manischewitz's and its predecessor's audited
consolidated balance sheets and related statements of income and cash flows
and statement of changes of members' equity (together with the related notes)
as of and for the fiscal years ended July 31, 1997, 1996 and 1995 and its
unaudited consolidated balance sheet and related statements of income, cash
flows and changes in members' equity (together with the related notes) as of
and for the six (6) month period ended January 31, 1998 (collectively, the
"Financial Statements"). The Financial Statements (i) fairly present the
financial position of Manischewitz and its consolidated Subsidiaries as of the
dates thereof and the results of its operations, members' equity and cash
flows for each of the periods then ended; (ii) have been prepared in
accordance with GAAP; and (iii) in the case of unaudited interim Financial
Statements as of and for the six (6) month period ended January 31, 1998, have
been prepared from and are in agreement with the books and records of
Manischewitz and its Subsidiaries and in accordance with GAAP and shall
include all adjustments, consisting only of normal recurring accruals which
the management of Manischewitz and its consolidated Subsidiaries believe is
necessary for a fair presentation of Manischewitz's consolidated financial
position. Except as set forth on Schedule 3.3(a) attached hereto, since July
31, 1995, there have been no significant change in any accounting (including
Tax accounting) policies, practices or procedures of Manischewitz.
(b) Attached hereto as Schedule 3.3(b) are true, correct
and complete copies of the combined Financial Statements of MANO and KBMC
which contains the audited combined balance sheets and related statements of
income, cash flows and changes in equity (together with the related notes) of
MANO and KBMC as of and for the fiscal years ended July 31, 1997 and 1996 (the
"Combined Statements"). The Combined Statements (i) fairly present the
financial position of MANO and KBMC as of the dates thereof and the results of
their operations, cash flows and changes in equity for each of the periods
then ended; and (ii) have been prepared in accordance with GAAP. Except as set
forth on Schedule 3.3(b) attached hereto, since July 31, 1996, there have been
no significant change in any accounting (including Tax accounting) policies,
practices or procedures of MANO or KBMC.
Section 3.4 Absence of Undisclosed Liabilities. Except as set forth
on Schedule 3.4 attached hereto, none of Manischewitz, MANO, MANO I, KBMC or
any of their Subsidiaries have any liabilities or obligations, except those
set forth or adequately reserved against on the face of the audited
consolidated balance sheet (or disclosed in the notes thereto) for the fiscal
year ended
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July 31, 1997 or the unaudited consolidated balance sheet of Manischewitz and
its consolidated Subsidiaries as of January 31, 1998, or the audited combined
balance sheet of MANO and KBMC as of July 31, 1997 contained in the Combined
Statements (or disclosed in the notes thereto), as applicable, or which have
been incurred in the ordinary course of business since January 31, 1998, in
the case of Manischewitz and its Subsidiaries, and July 31, 1997, in the case
of MANO and KBMC on a combined basis, and which would not have a Material
Adverse Effect or would not materially impair, hinder or adversely affect the
ability of any of the Sellers to consummate the transactions contemplated
hereby. For purposes of this Agreement, all references to liabilities shall
include, without limitation, all liabilities, whether direct or indirect,
absolute, contingent or matured, and liquidated or unliquidated.
Section 3.5 No Material Adverse Effect. Since July 31, 1995, there
has been no: (i) Material Adverse Effect or (ii) any property damage or
destruction, individually, or in the aggregate, resulting in a loss or cost to
MANO, MANO I, Manischewitz or any of their Subsidiaries of more than $100,000
not covered by insurance, other than as set forth on Schedule 3.23.
Section 3.6 Capitalization; Ownership.
(a) The MANO Interests and the KBMC Interests constitute
all of the outstanding membership interests of MANO I, and together with the
Options constitute all of the outstanding equity interests of MANO I. The
Capital Stock constitutes all of the issued and outstanding capital stock of
MANO. The issued and outstanding equity interests of each Subsidiary of MANO,
MANO I or Manischewitz is set forth on Schedule 3.6 attached hereto
(indicating the owner thereof), all of which is held by MANO, MANO I or
another Subsidiary of MANO, MANO I or Manischewitz free and clear of all
Liens, other than the Liens indicated on Schedule 3.6, all of which will be
terminated and released on or prior to the Closing.
(b) MANO legally and beneficially owns the MANO Interests
free and clear of any Liens, other than Permitted Liens. The KBMC Interests
and the MANO Interests constitute all of the outstanding Membership Interests
in MANO I. Each of the Optionholders has the right to acquire the membership
interests in MANO I set forth opposite such Optionholder's name as set forth
on Schedule B attached hereto. Except for the Options or the right of first
refusal set forth on Schedule 3.1, there are no outstanding options, warrants,
rights or other securities giving the owner the right to acquire or receive
(upon exchange, conversion or otherwise) any membership interests or equity
interest in MANO I. MANO I legally and beneficially owns 99% of the
outstanding equity interests of Manischewitz, 99% of the outstanding equity
interests in MANO II, 100% of the outstanding capital stock of MANO Inc., and
MANO Inc. legally and beneficially owns 1% of the outstanding equity interests
of MANO II, and MANO II legally and beneficially owns 1% of the outstanding
equity interests of Manischewitz.
(c) At the Closing, upon payment of the Purchase Price, the
Purchaser will acquire all right, title and interest in the KBMC Interests and
the Capital Stock free and clear of all Liens. Each of the Options will be
cancelled immediately prior to the Closing in consideration of the issuance by
MANO I of a Promissory Note to each of the Optionholders in an amount set
forth
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opposite such Optionholder's name on Schedule B attached hereto less the
Optionholder's pro rata portion of the amounts set forth in clauses (iv), (v)
and (vi) of Section 2.2, net of applicable withholding Taxes, and as further
adjusted upward or downward based upon the pro rata portion of the
Optionholder's share of the actual amount contemplated by clause (i) of
Section 2.2 as compared to the estimate of such amount which was used in
calculating the amount set forth on Schedule B.
Section 3.7 Consents and Authorizations.
(a) Except as set forth in Schedule 3.7(a) attached hereto,
the execution, delivery and performance of this Agreement and the other Seller
Documents by such parties, as applicable, and the consummation of the
transactions contemplated hereby will not, (i) violate any provision of the
respective organizational and charter documents of MANO, MANO I, Manischewitz
or any of their Subsidiaries or any Seller, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, amendment, cancellation
or acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee, other evidence of indebtedness or
Contract to which MANO, MANO I, Manischewitz or any of their Subsidiaries or
any Seller is a party or by which any of them or any of their properties or
assets may be bound or otherwise subject or (iii) violate or contravene any
Legal Requirement applicable to MANO, MANO I, Manischewitz or any of their
Subsidiaries or any Seller or any of their properties or assets; except in the
case of clauses (ii) or (iii) for violations, breaches or defaults which would
not have a Material Adverse Effect or would not materially impair, hinder or
adversely affect the ability of any of the Sellers to consummate the
transactions contemplated hereby.
(b) Except as set forth in Schedule 3.7(b) attached hereto,
no filing or registration with, notification to, or authorization, consent or
approval of, any Governmental Entity or Regulatory Authority or any other
Person is required in connection with the execution, delivery and performance
of this Agreement or the other Seller Documents by any of MANO, MANO I,
Manischewitz, any of their Subsidiaries or the Sellers or the consummation of
the transactions contemplated hereby, except for (i) filings with the Federal
Trade Commission and with the Department of Justice pursuant to the HSR Act,
and (ii) such other consents, Authorizations, orders, authorizations,
notifications, registrations, declarations and filings the failure of which to
be obtained or made would not have a Material Adverse Effect or would not
materially impair, hinder or adversely affect the ability of any of the
Sellers to consummate the transactions contemplated hereby.
Section 3.8 Litigation; Governmental Investigations; etc. Schedule
3.8 attached hereto contains a true, correct and complete list of all actions,
suits, proceedings (including, without limitation, all arbitrations and
alternative dispute resolution proceedings), claims or governmental
investigations pending or, to the Knowledge of the Sellers, MANO, MANO I and
Manischewitz, threatened against MANO, MANO I, Manischewitz or any of their
Subsidiaries, any of their respective properties or assets, or any of their
respective directors, managers, officers or Key Employees, in each case at any
time during the last three (3) years (excluding personal injury claims and
worker's compensation claims which are adequately covered by insurance and
claims, actions,
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suits or proceedings where the claim for relief is in monetary damages and is
for less than $10,000). Except as set forth in Schedule 3.8 attached hereto,
there is no action, suit, investigation or other proceeding (including,
without limitation, all arbitrations and alternative dispute resolution
proceedings) of or before any Governmental Entity or Regulatory Authority or
other Person pending or, to the Knowledge of the Sellers, MANO, MANO I and
Manischewitz, threatened against MANO, MANO I, Manischewitz or any of their
Subsidiaries or which relates to the transactions contemplated by this
Agreement, nor does any of them have actual knowledge of any reasonable basis
or set of circumstances for any such action, suit, investigation or other
proceeding, the result of which could have a Material Adverse Effect or would
materially impair, hinder or adversely affect the ability of any of the
Sellers to consummate the transactions contemplated hereby. MANO, MANO I,
Manischewitz and the Sellers have heretofore furnished to the Purchaser true,
correct and complete copies of (i) all pleadings in, and material
correspondence with respect to, the actions, suits, proceedings, claims or
governmental actions set forth on Schedule 3.8; (ii) responses to accountant
audit inquiry letters from attorneys of MANO, MANO I, Manischewitz and their
Subsidiaries with respect to fiscal years ended July 31, 1995, 1996 and 1997;
and (iii) insurance company loss run reports indicating the claim experience
of Manischewitz in respect of personal injury, worker's compensation, product
liability, general liability and automobile liability claims for the period
from August 1, 1995 through January 31, 1998.
Section 3.9 Compliance with Law. Except as set forth on Schedule 3.9
attached hereto, none of MANO, MANO I, Manischewitz or any of their
Subsidiaries (or any of their respective properties, including, without
limitation, any Leased Property) is in violation of any Legal Requirement of
any Governmental Entity or Regulatory Authority or subject to, bound by or
otherwise affected by any judgment, decree or order of any Governmental Entity
or Regulatory Authority, except where any such violation or any such judgment,
decree or order would not, individually or in the aggregate, have a Material
Adverse Effect or would not materially impair, hinder or adversely affect the
ability of any of the Sellers to consummate the transactions contemplated
hereby. Except as set forth on Schedule 3.9 attached hereto, each of MANO,
MANO I, Manischewitz and each of their Subsidiaries has all Authorizations
required or necessary to conduct its business as now being conducted or the
use or ownership of its properties and assets, including, without limitation,
the use and occupancy of the Owned Property and the Leased Property, except
where the failure to own, hold or possess such Authorizations would not,
individually or in the aggregate, have a Material Adverse Effect or would not
materially impair, hinder or adversely affect the ability of any of the
Sellers to consummate the transactions contemplated hereby. Except as set
forth on Schedule 3.9 attached hereto, all such Authorizations are renewable
by their terms in the ordinary course of business without any payments and
none of such Authorizations will be adversely affected by the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. MANO, MANO I, Manischewitz and the Sellers
have furnished to the Purchaser true, correct and complete copies of all
material Authorizations.
Section 3.10 Taxes.
(a) Except as set forth on Schedule 3.10(a) attached
hereto:
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(i) MANO, MANO I, Manischewitz and each of their
Subsidiaries have duly and timely filed or caused to be filed all Tax Returns
required to be filed by, including or relating to MANO, MANO I, Manischewitz
or any of their Subsidiaries with respect to all periods ending on or prior to
the date hereof, which Tax Returns are true, correct and complete in all
material respects;
(ii) MANO, MANO I, Manischewitz and each of
their Subsidiaries have duly and timely paid all Taxes due and payable on or
before the date hereof and shall have duly and timely paid for all Taxes due
on or before the Closing Date, and have properly accrued on their financial
statements and books and records in accordance with GAAP, all Taxes in respect
of all periods up to and including the date hereof that are not yet payable,
and as of the Closing Date shall have so accrued all Taxes in respect of all
periods up to and including the Closing Date that will not be payable as of
the Closing Date;
(iii) MANO, MANO I, Manischewitz and each
of their Subsidiaries have complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes;
(iv) no Governmental Entity or Regulatory
Authority has proposed, asserted or assessed (tentatively or otherwise) any
adjustment that could reasonably be expected to result in an additional Tax
for which MANO, MANO I, Manischewitz or any of their Subsidiaries is or may be
liable that has not been settled and paid;
(v) there is no pending, proposed or, to
the knowledge of MANO, MANO I and Manischewitz, threatened audit, examination,
investigation, dispute, deficiency assessment, refund litigation, claim, or
other administrative or judicial proceeding (collectively, "Proceeding")
relating to any Tax for which MANO, MANO I, Manischewitz or any of their
Subsidiaries is or may be liable;
(vi) all Tax Returns of, including or
relating to MANO, MANO I, Manischewitz or any of their Subsidiaries through
the period ended July 31, 1994 have been examined by appropriate Governmental
Entity or Regulatory Authority, or the applicable statute of limitations for
the assessment of Taxes for such periods have expired;
(vii) there are no agreements or consents
in effect to waive or extend (x) the time within which to file any Tax Return
of MANO, MANO I, Manischewitz or any of their Subsidiaries in respect of any
tax period which has not since been filed or (y) the statute of limitations
with respect to any Tax for which MANO, MANO I, Manischewitz or any of their
Subsidiaries is or may be liable;
(viii) there are no powers of attorney in
effect relating to any Tax for which MANO, MANO I, Manischewitz or any of
their Subsidiaries is or may be liable in any Post-Closing Period or
Post-Closing Portion of a Straddle Period;
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(ix) there are no closing agreements
within the meaning of Section 7121 of the Code or any similar provision of
applicable law, ruling requests, requests to consent to change a method of
accounting, Code Section 481 adjustments, subpoenas or requests for
information with or by any Governmental Entity or Regulatory Authority that
could reasonably be expected to affect any Tax for which MANO, MANO I,
Manischewitz or any of their Subsidiaries is or may be liable in any
Post-Closing Period or Post-Closing Portion of a Straddle Period;
(x) none of MANO, MANO I, Manischewitz or any of
their Subsidiaries has or will have as of the Closing Date any material
liability for Taxes in excess of the amounts paid or reserves or accruals
established therefor on its books and records;
(xi) neither MANO or any corporate Subsidiary of
MANO or MANO I is or has ever been included in any consolidated, combined or
unitary Tax Return;
(xii) none of the transactions contemplated by
this Agreement (including, without limitation, the redemption of the Options
and the payment of the management bonuses contemplated hereby) will result in
MANO, MANO I, Manischewitz or any of their Subsidiaries making or being
required to make any payment that would not be deductible by reason of Section
280G of the Code (taking into account all other payments to any "disqualified
individual" within the meaning of Section 280G of the Code); and
(xiii) none of MANO, MANO I, Manischewitz
or any of their Subsidiaries has any "tax-exempt use property" or "tax-exempt
bond financed property" within the meaning of Section 168(h) and (g),
respectively, of the Code.
(b) Neither MANO or any corporate Subsidiary of MANO or
MANO I (i) is or has ever been a "consenting corporation" within the meaning
of Section 341(f) of the Code or (ii) has ever made or been required to make
an election under Section 338 of the Code. None of the assets of MANO, MANO I,
Manischewitz or any of their Subsidiaries is required to be treated as being
owned by any other Person pursuant to the "safe harbor" leasing provisions of
Section 168(g)(8) of the Internal Revenue Code of 1954, as in effect prior to
the repeal of said leasing provisions. None of MANO, MANO I, Manischewitz or
any of their Subsidiaries is a party to any Tax sharing or similar agreement,
arrangement or understanding.
(c) MANO elected to be treated as an S corporation for
federal income Tax purposes for its tax year beginning August 1, 1996 and such
election has been and will be effective continuously from such date through
and including the Closing Date. New Jersey is the only other jurisdiction in
which MANO elected to be treated as an S corporation (or its equivalent under
applicable law), which election is effective as of August 1, 1996. Such
election has been and will be effective continuously from its effective date
through and including the Closing Date. MANO is automatically treated as an S
corporation (or its equivalent) in Illinois effective as of August 1, 1996,
without filing any separate election. Such status will be effective
continuously from its effective date through and including the Closing Date.
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(d) MANO I, Manischewitz, and each Subsidiary of MANO,
MANO I or Manischewitz that is in the form of an unincorporated entity
(including, without limitation, a limited liability company) is and has since
its formation been a partnership for federal, state and local income and
franchise Tax purposes.
(e) Schedule 3.10(e) attached hereto sets forth a
list of each jurisdiction in which MANO, MANO I, Manischewitz or any of their
Subsidiaries files or is presently required to file a Tax Return and the type
of Tax Return filed, and except as set forth thereon, no Governmental Entity
or Regulatory Authority where such entity does not file a Tax Return with
respect to a particular Tax has made a claim or assertion that such entity is
subject to such Tax in such jurisdiction or is required to file a Tax Return
with respect to such Tax in such jurisdiction.
(f) The Purchaser has been provided true, correct and
complete copies of all Tax Returns filed by, including or relating to MANO,
MANO I, Manischewitz or any of their Subsidiaries for all tax periods ending
after July 31, 1994, as well as true, correct and complete copies of each
audit report relating to any proposed adjustments which, if correct, would
increase any Tax for which MANO, MANO I, Manischewitz or any of their
Subsidiaries is or may be liable in any period ending after July 31, 1994, as
well as the resolution thereof.
(g) Schedule 3.10(g) attached hereto sets forth for
each of MANO, MANO I, Manischewitz and each of their Subsidiaries a list of
each material Tax election made and/or in effect with respect to each such
entity.
Section 3.11 Employee Benefit Plans.
(a) MANO I has made available to the Purchaser true
and complete copies of each pension, profit-sharing, bonus, incentive,
deferred compensation, severance pay, retirement or other material employee
benefit plan, agreement or arrangement within the meaning of Section 3(3) of
ERISA and any other material pay practices, currently maintained or
contributed to by MANO, MANO I, Manischewitz or any of their Subsidiaries for
the benefit of any of its employees (collectively, the "Plans"), all of which
are set forth on Schedule 3.11 attached hereto.
(b) Except as set forth on Schedule 3.11 attached
hereto, each such Plan that is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (i) is being operated and administered in
compliance with Section 401(a) of the Code, except where any such failure to
comply would not have a Material Adverse Effect, and a current favorable
determination letter has been obtained from the IRS for such Plan; (ii) no
such Plan is subject to the minimum funding requirements of Section 412 of the
Code or Section 302 of ERISA or is otherwise subject to Title IV of ERISA;
(iii) except where such events would not, individually or in the aggregate,
have a Material Adverse Effect, there has been no non-exempt "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code involving the assets of such Plan; (iv) all required employer
contributions to such Plan have been made (or, in the case of contributions
not yet due, have been accrued on the financial statements and books and
records of MANO, MANO I, Manischewitz or their Subsidiaries); (v) MANO, MANO I
and Manischewitz have furnished to
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the Purchaser, as to each such Plan, a true, correct and complete copy of (x)
the most recent annual report (Form 5500) filed with the IRS and (y) each
plan, trust agreement, summary plan description, group annuity contract and
insurance contract, if any, relating to such Plan; and (vi) each such Plan has
been administered in compliance with ERISA and the terms of such Plan, except
where any such failure to comply would not have a Material Adverse Effect.
(c) Except as set forth on Schedule 3.11 attached
hereto, each such Plan that is an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA (i) is being operated and administered in
accordance with its terms, ERISA and the Code except where any such failure to
comply would not have a Material Adverse Effect; (ii) except where such events
would not, individually or in the aggregate, have a Material Adverse Effect,
there has been no non-exempt, "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code involving the assets of such
Plan; (iii) all required employer contributions to such Plan, if any, have
been made, or in the case of contributions not yet due, have been accrued on
the financial statements and records of Manischewitz; (iv) MANO, MANO I and
Manischewitz have furnished to the Purchaser as to each such Plan a true and
correct copy of (x) the most recent annual report (Form 5500) filed with the
IRS and (y) each plan, trust agreement, summary plan description, group
annuity contract, insurance contract and administrative services contract, if
any, relating to such Plan and (z) except for continuation requirements under
applicable law, has no obligation to provide benefits to retired or former
employees.
(d) Except as set forth on Schedule 3.11 attached hereto,
none of MANO, MANO I, Manischewitz or any of their Subsidiaries (i) has any
actual or potential withdrawal liability with respect to any multiemployer
plan (within the meaning of Section 3(37) of ERISA) (a "Multiemployer Plan"),
(ii) has failed to make contributions or pay any premiums required by the
terms of any Multiemployer Plan or applicable law, or would incur any actual
or potential withdrawal liability as a result of this Agreement, or (iii) has
any obligation to provide any welfare benefits under a multiemployer welfare
plan to retired or former employees other than continuation of coverage
required by applicable law.
(e) Except as set forth in Schedule 3.11 attached hereto,
none of MANO, MANO I, Manischewitz or any of their Subsidiaries has any actual
or potential liability under any employee benefit plans (within the meaning of
Section 3(3) of ERISA) that were previously maintained by MANO, MANO I,
Manischewitz or any such Subsidiary.
(f) Except as set forth on Schedule 3.11 attached hereto,
the execution, delivery and performance of this Agreement will not create a
liability for payments, distributions or reimbursements to participants or
beneficiaries under such Plans.
(g) Contributions to Multiemployer Plans have only been
made on employees eligible to participate in the Multiemployer Plans under the
terms of the Multiemployer Plans or any agreements relating thereto. Except as
disclosed on Schedule 3.11, no Multiemployer Plan has conducted a payroll
audit since January 1, 1996 and there is no scheduled payroll audit. Each of
MANO, MANO I, Manischewitz and each of their Subsidiaries, as applicable, has
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maintained all payroll records for which the applicable statute of limitations
for the collection of contributions by a Multiemployer Plan has not expired.
Except as disclosed on Schedule 3.11, none of MANO, MANO I, Manischewitz or
any of their respective Subsidiaries has any obligation to provide retiree
medical benefits to any employee or former employee.
Section 3.12 Intellectual Property Matters etc. Set forth on Schedule
3.12 attached hereto is a list of all registered and all material unregistered
Intellectual Property Rights, specifying as to each: (a) the nature of the
Intellectual Property Right; (b) the user of the Intellectual Property Right;
and (c) all licenses, sublicenses and other agreements (true and correct
copies of all such licenses, sublicenses and agreements have been furnished to
the Purchaser) to which MANO, MANO I, Manischewitz or any of their
Subsidiaries is a party relating in any manner to any Intellectual Property
Right, including, without limitation, any license or agreement granting a
third party any Intellectual Property Right, including, without limitation,
the right to use the name "Manischewitz". Except as set forth on Schedule 3.12
attached hereto, there are no royalties, fees or other amounts payable by
MANO, MANO I, Manischewitz or any of their Subsidiaries with respect to any of
the Intellectual Property Rights. MANO, MANO I, Manischewitz and each of their
Subsidiaries have ownership and use (free and clear of all Liens, other than
Permitted Liens) or rights by license, lease or other agreement to use (free
and clear of all Liens, other than Permitted Liens and licenses to third
parties which are set forth on Schedule 3.12 attached hereto) the Intellectual
Property Rights that are necessary to permit the conduct of their business and
operations as presently conducted. No present or former employee of any of
MANO, MANO I, Manischewitz or any of their Subsidiaries owns or has a
propriety or financial interest, directly or indirectly, in any of the
Intellectual Property Rights. None of MANO, MANO I, Manischewitz or any of
their Subsidiaries is a party in any pending or, to the Knowledge of the
Sellers, MANO, MANO I or Manischewitz, threatened action, suit or other
proceeding that involves a claim of infringement of any Intellectual Property
Right.
Section 3.13 Computer Software. MANO, MANO I, Manischewitz and each
of their Subsidiaries has such title or right to use by license, lease or
other agreement to use (free and clear of all Liens) the computer software,
including, without limitation, databases, application software which is used
by any of them in the conduct of its business and operations. Such computer
software performs in accordance with the documentation and written material
used in connection therewith, in all material respects, free from any material
defects, is in machine readable form and contains the current supportable
version of such computer software.
Section 3.14 Real Property.
(a) Schedule 3.14(a) attached hereto sets forth a true,
correct and complete list of all real property owned by MANO I, Manischewitz
or any of their Subsidiaries (each an "Owned Property"). Each of MANO I,
Manischewitz or one of their Subsidiaries has good and marketable fee title to
the Owned Properties, free and clear of all Liens, easements, restrictive
covenants, rights-of-way and other encumbrances, whether or not of record
("Encumbrances") other than (i) Encumbrances that are disclosed on Schedule
3.14(a); and (ii) Liens for real estate taxes, fees, levies, duties or other
governmental charges of any kind which are not yet delinquent or are
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being contested in good faith by appropriate proceedings which suspend the
collection thereof and for which appropriate reserves have been established to
the extent required by GAAP.
(b) Schedule 3.14(b) attached hereto sets forth a true,
correct and complete list (including, without limitation, all amendments of
all leases and subleases (as amended, collectively, called the "Leases")) of
all real property under which MANO I, Manischewitz or any of their
Subsidiaries (each such real property a "Leased Property") is a landlord,
tenant or subtenant. Each of MANO I, Manischewitz or a Subsidiary of any of
the foregoing has (assuming good title in the landlord) a valid leasehold
interest in the Leased Properties, in each case free and clear of all Liens
other than Permitted Liens and the Leases are in full force and effect and
enforceable in accordance with their respective terms, except as such
enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors' rights generally.
(c) There are no eminent domain proceedings pending or, to
the Knowledge of the Sellers, MANO, MANO I or Manischewitz, threatened against
any Owned Property or Leased Property.
(d) MANO and MANO I do not have any interest in any real
property.
(e) True, correct and complete copies of the Leases have
been delivered to the Purchaser by MANO, MANO I and Manischewitz. Except as
set forth in Schedule 3.14(b) attached hereto, the Leases have not been
amended or modified. Except as set forth in Schedule 3.14(b), the tenant or
subtenant (as applicable) under each Lease (i) has not assigned, pledged or
otherwise transferred, and has not sublet the premises demised by, such Lease
and (ii) is in exclusive possession of the premises demised by such Lease.
There are no defaults by any lessee or lessor under any Lease. To the
Knowledge of the Sellers, MANO, MANO I or Manischewitz, no event has occurred
or failed to occur which, with the giving of notice or the passage of time, or
both, would constitute a default under any Lease. No security deposit is being
held under any Lease. There is no material dispute under any Lease. All
brokerage commissions payable by MANO, MANO I, Manischewitz or any of their
Subsidiaries with respect to any Lease have been fully paid.
(f) There are no pending or, to the Knowledge of MANO,
MANO I, Manischewitz or any of their Subsidiaries, contemplated, zoning
changes, "floor area ratio" changes, variances, special zoning exceptions,
conditions or agreements affecting or which could reasonably be expected to
adversely affect any Owned Property or any Leased Property.
(g) No assessments or special assessments have been
levied since July 31, 1995 or, to the Knowledge of MANO, MANO I, Manischewitz
or any of their Subsidiaries, are contemplated or pending against any Owned
Property or any Leased Property.
(h) Public utilities currently serve all utility
requirements of all Owned Property and all Leased Property. All such public
utilities are installed and operating and all installation and connection
charges have been paid for in full.
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Section 3.15 Environmental Matters. Except as set forth on Schedule
3.15 attached hereto:
(a) MANO, MANO I, Manischewitz and each of their
Subsidiaries is in compliance with all Environmental Laws and Environmental
Permits, except to the extent that failure to comply with all Environmental
Laws and Environmental Permits would not, individually or in the aggregate,
have a Material Adverse Effect or would not materially impair, hinder or
adversely affect the ability of any of the Sellers to consummate the
transactions contemplated hereby;
(b) No Site is a treatment, storage or disposal facility,
as defined in and regulated under the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., or is a current or ever was listed or, to the
Knowledge of MANO, MANO I, Manischewitz or any of their Subsidiaries is a
proposed Environmental Clean-up Site;
(c) None of MANO, MANO I, Manischewitz or any of their
Subsidiaries has received any written notice with respect to any of them or
any Site from any Governmental Entity or Regulatory Authority or other Person
alleging that any of them is not in material compliance with any Environmental
Law or Environmental Permit, and none of them has received any written notice
or request for information with respect to, and has not been designated a
responsible or potentially responsible party for, remedial action, response
costs or investigation;
(d) There has been no Release of a Hazardous Substance at,
from, in, to, on or under any Site and no Hazardous Substance is present in,
on, about or migrating to or from any Site that could reasonably be expected
to give rise to any Environmental Claim against MANO, MANO I, Manischewitz or
any of their Subsidiaries;
(e) There are no pending or outstanding corrective actions
requested, required or being conducted by any Governmental Entity or Regulatory
Authority for the investigation, remediation or cleanup of any Site, and there
have been no such corrective actions, whether still pending or otherwise, that
could reasonably be expected to have a Material Adverse Effect or would
materially impair, hinder or adversely affect the ability of any of the Sellers
to consummate the transactions contemplated hereby;
(f) Each of MANO, MANO I, Manischewitz and their
Subsidiaries has obtained and holds all Environmental Permits necessary for the
operation of its business as presently conducted;
(g) There are no past, pending or, to the Knowledge of
MANO, MANO I, Manischewitz or any of their Subsidiaries, threatened
Environmental Claims against any of MANO, MANO I, Manischewitz or any of their
Subsidiaries, and none of the Sellers, MANO, MANO I or Manischewitz has actual
knowledge of any facts or circumstances which could reasonably be expected to
form the basis for any Environmental Claim against any of MANO, MANO I,
Manischewitz or any of their Subsidiaries, which, individually or in the
aggregate, could
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have a Material Adverse Effect or would materially impair, hinder or adversely
affect the ability of any of the Sellers to consummate the transactions
contemplated hereby;
(h) None of MANO, MANO I, Manischewitz or any of their
Subsidiaries, or any predecessor of any of them, or any entity previously
owned by any of them, has transported or arranged for the treatment, storage,
handling, disposal or transportation of any Hazardous Substance to any
off-Site location which could reasonably be expected to result in an
Environmental Claim against MANO, MANO I, Manischewitz or any of their
Subsidiaries;
(i) There are no (i) underground storage tanks, active or
abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii)
friable asbestos containing material at any Site;
(j) Since July 31, 1993, there have been no Environmental
investigations, studies, audits, tests, reviews or other analyses (which have
been reduced to writing) conducted by, on behalf of, or which are in the
possession of any of MANO, MANO I, Manischewitz or any of their Subsidiaries
with respect to any Site or any transportation, handling or disposal of any
Hazardous Substance (the Purchaser has been furnished with true, correct and
complete copies of all such investigations, studies, audits, tests, reviews
and other analyses);
(k) The transactions contemplated by this Agreement do not
impose any obligations under any Environmental Law or Environmental Permit for
Site investigation or cleanup or notification to or consent of any
Governmental Entity or Regulatory Authority or any third parties; and
(l) There are no Liens (other than Permitted Liens)
arising under or pursuant to any Environmental Law on any Site and, to the
actual knowledge of MANO, MANO I, Manischewitz or any Subsidiary, there are no
facts, circumstances, or conditions that could reasonably be expected to
restrict, encumber, or result in the imposition of special conditions under
any Environmental Law with respect to the ownership, occupancy, development,
use, or transferability of any Site.
Section 3.16 Personal Property. MANO, MANO I, Manischewitz and each
of their Subsidiaries, as applicable, has good, valid and marketable title to
the owned personal property owned by it, in each case free and clear of any
and all Liens except for Permitted Liens. Schedule 3.16 attached hereto sets
forth a list (including, without limitation, all amendments) of all Leases
relating to personal property (the "Personal Property Leases"). MANO, MANO I
and Manischewitz have furnished Purchaser with true, correct and complete
copies of all Personal Property Leases. The Personal Property Leases are in
full force and effect and are enforceable against MANO, MANO I, Manischewitz
and each of their Subsidiaries in accordance with their respective terms.
Except as set forth on Schedule 3.16 attached hereto, none of MANO, MANO I,
Manischewitz or any of their Subsidiaries has assigned, pledged or otherwise
transferred, or subjected, by consent or sufferance, to any Lien, and has not
sublet the Personal Property leased under, any Personal Property Lease. No
event has occurred or failed to occur nor does any circumstance or state of
facts presently exist,
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which, with the giving of notice or the passage of time or both, would
constitute a default under any Personal Property Lease, except for defaults
which would not have a Material Adverse Effect. No lessor or lessee under any
Personal Property Lease has exercised any option or right to: (i) cancel or
terminate such Personal Property Lease or shorten the term thereof; (ii) lease
additional Personal Property; (iii) reduce or relocate the Personal Property
leased under such Personal Property Lease; (iv) purchase any Personal
Property; or (v) renew or extend such Personal Property Lease. All machinery
and equipment and other material personal property of MANO, MANO I,
Manischewitz and each of their Subsidiaries (whether leased or owned) is in
good operating condition and repair, subject to ordinary wear and tear.
Section 3.17 Material Contracts. Schedule 3.17 attached hereto sets
forth, as of the date hereof, a true, correct and complete list of all
Contracts, to which any of MANO, MANO I, Manischewitz or any of their
Subsidiaries (or any of their respective properties) is a party or bound which
provides for or falls within any of the following categories (collectively,
the "Material Contracts"):
(i) Contracts with a distributor, sales agent or
manufacturer's representative;
(ii) collective bargaining arrangements with any labor
union;
(iii) Contracts for capital expenditures or the
acquisition or construction of fixed assets in excess of $50,000;
(iv) Contracts for the purchase or sale of inventory,
materials, supplies, merchandise, machinery, equipment, parts or other
property or services each of which involve, in the aggregate, the payment or
receipt of more than $50,000 in any twelve (12) month period (other than
standard inventory purchase orders executed in the ordinary course of
business);
(v) Contracts relating to the borrowing of money or the
issuance of any letter of credit, or the guaranty of another Person's
indebtedness or Contracts of suretyship or relating to the repurchase of any
goods or assets;
(vi) Contracts granting, or consenting to the existence
of, any Lien in favor of any Person on all or any part of its properties or
assets;
(vii) Contracts granting to any Person a right of first
refusal, first offer, option or similar preferential right to purchase or
acquire any of its properties, assets, securities or other equity;
(viii) Contracts under which it is (A) a lessee or
sublessee of any machinery, equipment, vehicle (including fleet equipment) or
other tangible personal property, or (B) a lessor of any personal property, in
either case, requiring payments of more than $25,000 in any twelve (12) month
period;
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(ix) Contracts limiting, restricting or prohibiting it
from conducting any business anywhere in the United States or elsewhere in the
world;
(x) joint venture or partnership Contracts;
(xi) Contracts of employment or for the retention of
consultants or the furnishing of services by any third party;
(xii) Contracts which indemnify any other Person or which
provide for charitable contributions or which are in the nature of a severance
agreement; or
(xiii) other Contracts requiring future payments in the
aggregate of $100,000 or more which is otherwise material to MANO, MANO I,
Manischewitz and their Subsidiaries, taken as a whole.
MANO, MANO I and Manischewitz have heretofore furnished to the Purchaser true,
correct and complete copies of each of the Material Contracts, including,
without limitation, all amendments or other modifications thereto. Except as
set forth on Schedule 3.17 attached hereto, each Material Contract (assuming
due authorization and execution by the counterparty to the Material Contract)
is (i) in full force and effect; and (ii) a valid and binding obligation of
MANO, MANO I, Manischewitz or any of their Subsidiaries, as applicable,
enforceable in accordance with its terms, subject only to bankruptcy,
reorganization, receivership and other laws affecting creditors' rights
generally. Except as set forth in item 1 on Schedule 3.17 attached hereto,
with regard to the distribution contracts listed in Schedule 3.17, there is no
default under or breach by MANO, MANO I, Manischewitz or any of their
Subsidiaries which (with or without notice or lapse of time or both) would
constitute a default under any Material Contract and, to the Knowledge of
MANO, MANO I, Manischewitz or any of their Subsidiaries there is no default
under or breach by any counterparty to a Material Contract which (with or
without notice or lapse of time or both) would constitute a default under any
Material Contract and which could reasonably be expected to have a Material
Adverse Effect. With respect to the various oral arrangements set forth on
Schedule A to Schedule 3.17 attached hereto, all such arrangements (x) have
been entered into by Manischewitz in the ordinary course of business and (y)
are on terms and conditions no less favorable to Manischewitz as it otherwise
obtains in arm's-length transactions with third parties.
Section 3.18 Employee Relations. Within the last three (3) years,
none of MANO, MANO I, Manischewitz or any of their Subsidiaries has
experienced any strike, picketing, boycott, work stoppage or slowdown or other
labor dispute, nor to the Knowledge of MANO, MANO I and Manischewitz is any
such event threatened against any of them. Except as set forth on Schedule
3.18 attached hereto, there is no pending, or to the Knowledge of MANO and
MANO I, Manischewitz or any of their Subsidiaries, any charge or complaint of
unfair labor practice, employment discrimination or similar matters against
MANO, MANO I, Manischewitz or any of their Subsidiaries. Since July 31, 1993,
none of MANO, MANO I, Manischewitz or
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any of their Subsidiaries has incurred any liability under the Worker
Adjustment and Retraining Notification Act. Except as set forth in Schedule
3.18 attached hereto, none of MANO, MANO I, Manischewitz or any of their
Subsidiaries is a party to any collective bargaining agreement and no
collective bargaining agent has been certified as a representative of any
employees of any of them and no representation campaign or election is now in
progress with respect to the employees of any of them.
Section 3.19 Brokers. Except as set forth on Schedule 3.19 attached
hereto, no broker, finder, investment banker or other Person is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of MANO, MANO I, Manischewitz, any of their Subsidiaries, the
Sellers or Optionholders. Any payment of such fee or commission shall be the
sole responsibility of the Sellers.
Section 3.20 Affiliate Transactions. Except as set forth on Schedule
3.20 attached hereto, none of MANO, MANO I, Manischewitz or any of their
Subsidiaries is a party to any agreement or transaction with any Seller,
Optionholder or any Affiliate of any Seller or Optionholder, other than in the
ordinary course of business and upon terms at least as favorable to MANO, MANO
I, Manischewitz and their Subsidiaries as would exist in an arm's-length
transaction.
Section 3.21 Receivables, Inventory and Payables. All accounts
receivable, inventory and accounts payable of MANO I have arisen, and as of
the Closing Date will have arisen, from bona fide transactions in the ordinary
course of business consistent with past practice.
Section 3.22 Letters of Credit. Except as set forth in Schedule 3.22
attached hereto, none of MANO, MANO I, Manischewitz or any of their
Subsidiaries has outstanding letters of credit (whether documentary, standby
or otherwise), or any obligation or responsibility in respect of any
outstanding letter of credit (whether documentary, standby or otherwise) of
any other Person, or any obligation in respect of any account party agreement
or other similar financial arrangement with respect to any such letter of
credit, or any obligation to cause any letter of credit to be issued.
Section 3.23 Insurance. Schedule 3.23 attached hereto sets forth a
true, correct and complete list of all policies of insurance of any kind or
nature covering MANO, MANO I, Manischewitz or any of their Subsidiaries and
which in any way relate to their respective business and operations (the
"Insurance Policies"), including, without limitation, policies of life, fire,
theft, casualty, product liability, workmen's compensation, business
interruption, employee fidelity and other casualty and liability insurance,
indicating the type of coverage, name of insured, the insurer, the premium,
the expiration date of each policy and the amount of coverage. All such
Insurance Policies: (a) are with insurance companies reasonably believed to be
financially sound and reputable and are in full force and effect; (b) are, to
the Knowledge of MANO, MANO I, Manischewitz or any of their Subsidiaries,
sufficient for compliance with all Legal Requirements and of all applicable
agreements; (c) to the Knowledge of MANO, MANO I, Manischewitz or any of their
Subsidiaries, are valid, outstanding and enforceable in accordance with their
respective terms, and no notice or cancellation has been received and there is
no existing default or event which, with the giving of notice or lapse of time
or both, would constitute a default under any such Insurance Policies or could
reasonably be expected to have an adverse effect on the coverage under any
such Insurance Policies; (d) provide full insurance coverage for the assets,
business and operations of Manischewitz and each
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of its Subsidiaries for all risks normally insured against by Persons carrying
on similar businesses; and (e) all premiums due in respect of the Insurance
Policies have been paid in full. The Purchaser has been furnished with true,
correct and complete copies of such Insurance Policies, claims histories
thereunder and all material correspondence with the insurance carriers of such
Insurance Policies. Manischewitz and each Subsidiary shall maintain in full
force and effect all such Insurance Policies and pay all premiums required to
be paid to effectuate such maintenance through the Closing Date. None of MANO,
MANO I, Manischewitz or any of their Subsidiaries (i) has performed or
permitted any act or omission which would cause the insurance coverage
provided in said policies to be reduced or canceled, or (ii) has received (and
neither MANO I, Manischewitz nor any of their Subsidiaries has knowledge of)
any notice or request from any insurance company or the Board of Fire
Underwriters (or organization exercising functions similar thereto) requiring
the performance of any work or canceling or threatening to cancel any of said
policies. Except as set forth on Schedule 3.23, since July 31, 1993, none of
MANO, MANO I, Manischewitz or any of their Subsidiaries (w) has been denied
any insurance coverage which it has requested or made any material reduction
in the scope or change in the nature of its insurance coverage, (x) has made
any claim under any casualty insurance policy in excess of $50,000, (y) has
actual knowledge of any casualty that has occurred for which such a claim in
excess of $50,000 could have been made and which was not made, or (z) has
assigned, pledged or otherwise transferred rights under such Insurance
Policies. All liability insurance maintained by MANO, MANO I, Manischewitz or
any of their Subsidiaries has been on an "occurrence" basis during the three
(3) year period prior to the Closing Date.
Section 3.24 Conditions Affecting Manischewitz. Except as set forth
on Schedule 3.24, to the actual knowledge of MANO, MANO I, Manischewitz and
their Subsidiaries, there is no fact, development or threatened development
with respect to the markets, products, customers, facilities, personnel,
vendors, suppliers, operations, assets or prospects of MANO, MANO I,
Manischewitz or any of their Subsidiaries which could reasonably be expected
to have a Material Adverse Effect or would materially impair, hinder or
adversely affect the ability of any of the Sellers to consummate the
transactions contemplated hereby. Without regard to any action which may be
instituted or taken by the Purchaser after the Closing, none of MANO, MANO I,
Manischewitz or any of their Subsidiaries has actual knowledge of any fact or
circumstances that would give any of them reason to believe that any employee,
agent, customer, distributor or supplier or other arrangement materially
advantageous to the business or operations of MANO, MANO I, Manischewitz or
any of their Subsidiaries would be lost or damaged as a result of the
consummation of the transactions contemplated hereby and would result in a
Material Adverse Effect.
Section 3.25 Management Fees. Except as set forth on Schedule 3.25
attached hereto, since July 31, 1997, Manischewitz has not paid any management
fees to Kohlberg & Co., L.L.C. or any of its Affiliates.
Section 3.26 Disclaimer. EXCEPT AS SET FORTH IN THIS AGREEMENT, NONE
OF MANO, MANO I OR KBMC MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND THE
PURCHASER ACKNOWLEDGES AND AGREES THAT IT IS NOT RELYING ON ANY
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REPRESENTATION OR WARRANTY MADE BY ANY OTHER PERSON WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY OTHER THAN AS SET FORTH IN THIS AGREEMENT OR
IN ANY OF THE OTHER SELLER DOCUMENTS.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers, severally and not jointly, represents and
warrants as to itself to the Purchaser as follows:
Section 4.1 Existence and Organization. Each of KBMC and KBMC
Management, L.P., the general partner of KBMC, is a limited partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation. KBMC GP, Inc., the general partner of KBMC
Management, L.P., is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. KBMC GP, Inc. has the
requisite corporate power to execute and deliver this Agreement and the other
Seller Documents on behalf of KBMC and to carry out the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the other Seller Documents by KBMC GP, Inc. have been duly authorized by
all necessary action on the part of KBMC GP, Inc., and this Agreement and
other Seller Documents constitute the legal, valid and binding obligation of
KBMC, enforceable against KBMC in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application affecting the enforcement of creditors' rights
generally.
Section 4.2 Authorization. Each of the Sellers has the legal capacity
and/or corporate or other power and authority, as applicable, to execute,
deliver and perform this Agreement and the other Seller Documents to which it
is a party and to consummate the transactions contemplated thereby. The
execution, delivery and performance of this Agreement and the other Seller
Documents by each of the Sellers have been duly authorized by all necessary
action on the part of each Seller, where applicable, and this Agreement and
other Seller Documents constitute the legal, valid and binding obligation of
each such Seller, enforceable against each such Seller in accordance with
their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application affecting the
enforcement of creditors' rights generally.
Section 4.3 Consents and Authorizations.
(a) Except as set forth on Schedule 4.3(a), the execution,
delivery and performance of this Agreement and the other Seller Documents by
each Seller and the consummation of the transactions contemplated hereby will
not, (i) violate any provision of the respective organizational and charter
documents of any Seller, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee, other evidence of indebtedness or
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other Contract to which any Seller is a party or by which any of them or any
of their properties or assets may be bound or otherwise subject or (iii)
violate or contravene any Legal Requirement applicable to any Seller or any of
their properties or assets; except in the case of clauses (ii) or (iii) for
violations, breaches or defaults which would not have a Material Adverse
Effect or would not materially impair, hinder or adversely affect the ability
of any of the Sellers to consummate the transactions contemplated hereby.
(b) Except as set forth in Schedule 4.3(b) attached hereto,
no filing or registration with, notification to, or authorization, consent or
approval of, any Governmental Entity or Regulatory Authority or any other
Person is required in connection with the execution, delivery and performance
of this Agreement by the Sellers or the consummation of the transactions
contemplated hereby, except for (i) filings with the Federal Trade Commission
and with the Department of Justice pursuant to the HSR Act, and (ii) such
other consents, Authorizations, orders, authorizations, notifications,
registrations, declarations and filings the failure of which to be obtained or
made would not have a Material Adverse Effect or would not materially impair,
hinder or adversely affect the ability of any of the Sellers to consummate the
transactions contemplated hereby.
Section 4.4 Ownership.
(a) Each Stockholder legally and beneficially owns the
number of shares of Capital Stock set forth opposite such Stockholder's name
on Schedule A attached hereto free and clear of any Liens, other than
Permitted Liens. KBMC legally and beneficially owns the KBMC Interests free
and clear of any Liens, other than Permitted Liens.
(b) At the Closing, upon payment of the Purchase Price, the
Purchaser will acquire all right, title and interest in the KBMC Interests and
the Capital Stock free and clear of all Liens. The MANO Interests and the KBMC
Interests constitute all of the outstanding Membership Interests.
Section 4.5 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER KBMC NOR ANY STOCKHOLDER MAKES ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY, AND THE PURCHASER ACKNOWLEDGES AND AGREES THAT IT IS NOT RELYING ON
ANY REPRESENTATION OR WARRANTY MADE BY ANY OTHER PERSON WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY OTHER THAN AS SET FORTH IN THIS AGREEMENT OR
IN ANY OF THE OTHER SELLER DOCUMENTS.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
Section 5.1 Organization and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Purchaser has the requisite corporate power
to execute and deliver this Agreement and the other agreements, certificates,
documents and instruments to be executed and delivered by the Purchaser at the
Closing in connection herewith (the "Purchaser Documents") and to consummate
the transactions contemplated hereby. The Purchaser is duly qualified as a
foreign corporation in good standing in each jurisdiction in which the conduct
of its business requires such qualification, except where the failure to be so
qualified would not prevent or materially delay consummation of the
transactions contemplated hereby.
Section 5.2 Corporate Authorization. The execution, delivery and
performance by the Purchaser of this Agreement and the other Purchaser
Documents and the consummation of the transactions contemplated hereby are
within the corporate power of the Purchaser and have been duly authorized by
all necessary corporate action. This Agreement and the other Purchaser
Documents constitute the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application affecting the enforcement of creditors' rights generally.
Section 5.3 Consents and Authorizations.
(a) Except as set forth on Schedule 5.3 attached hereto,
the execution, delivery and performance by the Purchaser of this Agreement and
the other Purchaser Documents and the consummation of the transactions
contemplated hereby require no action by or in respect of, or any filing with
or notice to or consent from or notice to or authorization from, any
Governmental Entity or Regulatory Authority, or any other Person which, if not
obtained or made, will prevent, materially delay or materially burden the
transactions contemplated by this Agreement.
(b )Except as set forth in Schedule 5.3 attached hereto,
the execution, delivery and performance of this Agreement and the other
Purchaser Documents, and the consummation of the transactions contemplated
hereby by the Purchaser will not (i) violate any provision of the Certificate
of Incorporation or By-laws of the Purchaser, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, amendment, cancellation
or acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee, other evidence of indebtedness or other
Contract to which the Purchaser is a party or by which it or any of its
properties or assets may be bound or otherwise subject or (iii) violate or
contravene any Legal Requirement applicable to the Purchaser or any of its
properties or assets; except in the case of clauses (ii) or (iii) for
violations, breaches or defaults which would not have a material adverse
effect
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on the Purchaser or would not materially impair, hinder or adversely affect
the ability of the Purchaser to consummate the transactions contemplated
hereby.
(c) Except as set forth in Schedule 5.3 attached hereto, no
filing or registration with, notification to, or authorization, consent or
approval of, any Governmental Entity or Regulatory Authority or any other
Person is required in connection with the execution, delivery and performance
of this Agreement or the other Purchaser Documents by the Purchaser or the
consummation of the transactions contemplated hereby, except for (i) filings
with the Federal Trade Commission and with the Department of Justice pursuant
to the HSR Act, and (ii) such other consents, Authorizations, orders,
authorizations, notifications, registrations, declarations and filings the
failure of which to be obtained or made would not have a material adverse
effect on the Purchaser or would not materially impair, hinder or adversely
affect the ability of the Purchaser to consummate the transactions
contemplated hereby.
Section 5.4 Financing. The Purchaser currently has sufficient funds
on hand, or has sufficient borrowing availability or commitments from
responsible financial institutions to enable the Purchaser to finance the
consummation of the transactions contemplated hereby and to pay related fees
and expenses.
Section 5.5 Litigation. There are no claims, actions, suits,
Authorizations, investigations, informal objections, complaints or proceedings
pending against the Purchaser before any Governmental Entity or Regulatory
Authority or any other Person, nor is the Purchaser subject to any order,
judgment, writ, injunction or decree, except in either case for matters which
will not prevent, or materially delay the consummation of the transactions
contemplated hereby.
Section 5.6 Securities Laws. The Purchaser is acquiring the KBMC
Interests and Capital Stock for its own account and not with a view towards
distribution in violation of applicable securities laws.
Section 5.7 Disclaimer. EXCEPT AS SET FORTH IN THIS AGREEMENT, THE
PURCHASER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND THE SELLERS ACKNOWLEDGE
AND AGREE THAT IT IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY MADE BY ANY
OTHER PERSON WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY OTHER THAN
AS SET FORTH IN THIS AGREEMENT OR IN ANY OF THE OTHER PURCHASER DOCUMENTS.
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ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business. During the period from the date of
this Agreement to the Closing Date (unless the Purchaser otherwise consents in
writing, which consent the Purchaser may withhold in its sole discretion),
MANO and MANO I shall, and MANO I shall cause Manischewitz and each Subsidiary
(at their sole cost and expense) to (a) conduct their respective businesses in
the ordinary course consistent with past practice, (b) exercise reasonable
best efforts to preserve their present business organizations and
relationships (including, without limitation, with distributors, customers,
vendors and others) and all of the goodwill associated therewith, (c) exercise
reasonable best efforts to keep available the services of its present
employees, (d) exercise reasonable best efforts to preserve their material
rights and franchises, and MANO and MANO I will not, and MANO I will use its
reasonable best efforts not to permit Manischewitz or any Subsidiary to take
any action that could reasonably be expected to have a Material Adverse Effect
or would materially impair, hinder or adversely affect the ability of any of
the Sellers to consummate the transactions contemplated hereby, (e) deliver to
the Purchaser a copy of each written notice sent or received under any Lease
or Personal Property Lease, (f) deliver to the Purchaser a copy of each
written notice or communication from a Governmental Entity or Regulatory
Authority, and (g) perform all material obligations under each Lease and
Personal Property Lease and each Material Contract. Without limiting the
generality of the foregoing, through the Closing Date, MANO and MANO I shall
not and MANO I will cause Manischewitz and each Subsidiary not to, without the
prior written consent of the Purchaser (which consent the Purchaser may
withhold in its sole discretion):
(i) sell, pledge, transfer, dispose of or encumber or
suffer or permit to exist any Lien (other than Permitted Liens) on any of
their respective properties or assets, except for sales of inventory in the
ordinary course of business consistent with past practices and sales of
obsolete assets (other than any Owned Property, Lease or Leased Property) and
of other assets in a manner consistent with past practices and sales which are
concurrently replaced with similar assets;
(ii) except as otherwise required by applicable law or by
any existing plan, arrangement or agreement, materially increase the
compensation or benefits payable to any salaried employee of MANO, MANO I,
Manischewitz or any of the Subsidiaries;
(iii) declare any dividends or make or pay any
distributions on or with respect to the Capital Stock or Membership Interests,
or repurchase or otherwise reacquire for value any Membership Interests, other
than (x) distributions by MANO and MANO I to their stockholders and members,
respectively, in an aggregate amount equal to forty percent (40%) of a number
which shall be agreed to in good faith by the Purchaser and KBMC three (3)
Business Days prior to the Closing, which number is intended to be an estimate
of the taxable income of MANO and MANO I, respectively, from January 1, 1998
through and including the Closing Date; (y) distributions by Manischewitz and
the Subsidiaries to enable MANO and MANO I to make the distributions described
in clause (x) of this Section 6.1(iii); and (z) the cancellation of all of the
Options, prior to the Closing Date in the manner contemplated hereby;
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(iv) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the issuance or granting
of options, warrants, commitments, subscriptions, rights to purchase
convertible securities or otherwise) any Membership Interest, share of Capital
Stock or any stock or equity interest of any class or any other security;
(v) incur any indebtedness for borrowed money other than
borrowings for working capital purposes under existing credit facilities in
the ordinary course of business and consistent with past practices;
(vi) enter into, amend or terminate any Material Contract
other than in the ordinary course of business and consistent with past
practices, except as contemplated by Section 7.3(h), or take or fail to take
any action within its reasonable control that constitutes a material breach of
any Material Contract;
(vii) amend or modify any Plan, except as may otherwise be
required by applicable law;
(viii) purchase any property or assets from any of the
Sellers or their Affiliates;
(ix) make any loans, advances or capital contributions to,
or investments in, any other Person (other than customary loans or advances to
employees in accordance with past practices and loans, advances and capital
contributions to Subsidiaries consistent with past practices);
(x) enter into, adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements of or for the benefit or welfare of
any employee, or (except for normal increases in the ordinary course of
business that are consistent with past practices), except for the cancellation
of the Options in the manner contemplated by this Agreement and to pay
concurrently with the Closing management bonuses in the aggregate amount of
$500,000 in accordance with a Memorandum from legal counsel to the Sellers,
MANO, MANO I to legal counsel to the Purchaser dated the date of this
Agreement;
(xi) pay, discharge or satisfy before it is due any claim
or liability, or fail to pay any such item in a timely manner, other than in
the ordinary course of business consistent with past practices;
(xii) cancel any debts or waive any claims or rights of
substantial value, other than in the ordinary course of business consistent
with past practices;
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(xiii) change any accounting principle, or method,
practice or procedure, or make, amend or revoke any election for foreign,
federal, state or local income Tax purposes;
(xiv) amend, waive, surrender or terminate or agree to the
amendment, waiver, surrender or termination of any Lease, Contract or
approval, other than in the ordinary course of business consistent with past
practices;
(xv) exercise any right or option under any Lease or
extend or renew any Lease or Contract, other than in the ordinary course of
business consistent with past practices; or
(xvi) enter into any contract, agreement, commitment or
arrangement to do, or take, or agree in writing or otherwise to take or
consent to, any of the foregoing actions. In addition, during the period from
the date of this Agreement through the Closing Date, the Stockholders shall
not permit MANO to conduct any business activities other than the ownership of
the MANO Interests and KBMC shall not conduct any business activities other
than the ownership of the KBMC Interests.
Section 6.2 Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations or otherwise to consummate and make effective
the transactions contemplated by this Agreement.
Section 6.3 Consents.
(a) Prior to the Closing, MANO, MANO I, Manischewitz
and the Sellers shall use their respective reasonable best efforts, in as
timely a manner as is reasonably practicable, to make all filings with, and
obtain all consents, Authorizations, qualifications and orders from, all
Governmental Entities and Regulatory Authorities and other Persons necessary
or required to be obtained by MANO, MANO I, Manischewitz or the Sellers to
consummate the transactions contemplated by this Agreement, all of which are
set forth on Schedules 3.7(b) and 4.3(b) attached hereto.
(b) Prior to the Closing, the Purchaser shall use its
reasonable best efforts, in as timely a manner as is reasonably practicable,
to make all filings with and obtain all consents, Authorizations,
qualifications and orders from, all Governmental Entities and Regulatory
Authorities and other Persons necessary or required to be obtained by the
Purchaser in order to consummate the transactions contemplated by this
Agreement, all of which are set forth on Schedule 5.3(c) attached hereto.
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(c) Each of the parties hereto shall furnish the
other parties hereto such necessary information and reasonable assistance as
such other parties may reasonably request in connection with Section 6.3(a) or
Section 6.3(b), as applicable.
Section 6.4 HSR Filings. In addition to and without limiting anything
contained in Section 6.3 hereof, MANO, MANO I, Manischewitz and the Sellers,
on the one hand, and Purchaser, on the other hand, will (i) promptly take all
actions necessary to make the filings required of them or any of their
Affiliates under the HSR Act in respect of the transactions contemplated
hereby; provided, that in any event the Purchaser shall cause its ultimate
parent entity to make its required filing under the HSR Act within five (5)
Business Days of the required filing under the HSR Act made by the ultimate
parent entity of Manischewitz; (ii) comply at the earliest practicable date
with any request for additional information or documentary material received
by any of them, as applicable, or any of their Affiliates, from the Federal
Trade Commission or Department of Justice pursuant to the HSR Act, (iii)
cooperate with each other in connection with any filing under the HSR Act and
in connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by either the Federal
Trade Commission or Department of Justice or the attorneys general of any
state; and (iv) use all commercially reasonable efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated by this Agreement under any Antitrust Law. Each of MANO, MANO I,
Manischewitz and the Sellers, on the one hand, and Purchaser, on the other
hand, shall promptly inform the other of any material communication received
by such party from the Federal Trade Commission, Department of Justice or any
other Governmental Entity or Regulatory Authority regarding any of the
transactions contemplated hereby, and of any understandings, undertakings or
agreements (oral or written) such party proposes to make or enter into with
the Federal Trade Commission, Department of Justice or any other Governmental
Entity or Regulatory Authority in connection with the transactions
contemplated hereby.
Section 6.5 Limitation on Fees. Except for any payment set forth on
Schedule 3.25 attached hereto, none of MANO, KBMC, MANO I, Manischewitz or any
Subsidiary shall pay any management fee or other fee to Kohlberg & Co., L.L.C.
or any of its Affiliates.
Section 6.6 Confidentiality; Access to Information. The
Confidentiality Agreement shall remain in full force and effect and shall
survive the execution and delivery of this Agreement and the termination of
this Agreement for any reason whatsoever. Subject to the terms of the
Confidentiality Agreement, from the date hereof through the Closing Date,
MANO, MANO I, Manischewitz and each of their Subsidiaries, and each of their
respective officers, directors, managers, employees, attorneys, accountants
and other agents, shall afford the directors, officers, employees, agents,
representatives and advisors of the Purchaser complete access at all
reasonable times to its officers, employees, agents, properties, books,
records and contracts, and shall furnish the Purchaser all financial,
operating and other data and information relating to MANO, MANO I,
Manischewitz and their Subsidiaries as the Purchaser may reasonably request.
Section 6.7 Public Announcements. Prior to the Closing, MANO I,
Manischewitz, the Sellers and their Affiliates, on the one hand, and the
Purchaser and its Affiliates, on the other hand,
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shall not issue any press release or otherwise make any public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement, except as may be required by
applicable law. After the Closing, only the Purchaser may issue a press
release or otherwise make a public statement or announcement with respect to
this Agreement or the transactions contemplated hereby or the existence of
this Agreement; provided that prior to issuing any such press release, making
any such public statement or announcement which mentions or refers to the
Sellers, the Purchaser obtains the prior consent of KBMC, which consent shall
not be unreasonably withheld or delayed.
Section 6.8 Further Assurances. Each of the parties hereto shall
execute such documents and other instruments and perform such further acts as
may be required or reasonably requested by any other party hereto to carry out
the provisions hereof and the transactions contemplated hereby. Each such
party shall, on or prior to the Closing Date, use its reasonable best efforts
to fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the transactions contemplated hereby, including, without
limitation, the execution and delivery of any documents, certificates,
instruments or other papers and the obtaining of all consents and
Authorizations that are required or necessary for the consummation of the
transactions contemplated hereby.
Section 6.9 Supplements. If to the actual knowledge of MANO, MANO I,
Manischewitz, any of their Subsidiaries or the Sellers herein, any
representation, warranty or statement made by any of them herein or any
schedule or other Seller Document delivered to the Purchaser in connection
herewith, shall be or become false or incorrect, MANO, MANO I, Manischewitz,
any of their Subsidiaries or the Sellers, as applicable, shall deliver to the
Purchaser a supplement in order that said representation, warranty, statement
or schedule, as so supplemented, shall be true and correct. It is understood
and agreed that the delivery of such a supplement to the Purchaser shall not
in any manner constitute a waiver or limitation by the Purchaser of any of its
rights under this Agreement or have any effect on the satisfaction of the
condition set forth in Section 7.2 hereof.
Section 6.10 No Solicitation. Prior to the Closing, none of MANO,
MANO I, Manischewitz or any of the Sellers or any of their respective
Affiliates will, directly or indirectly (including, without limitation,
through bankers, investment bankers, attorneys or agents), solicit, initiate,
facilitate or encourage (including, without limitation, by way of furnishing
or disclosing non-public information) any inquiries or the making of any
proposal with respect to any merger, consolidation or other business
combination involving MANO, MANO I, Manischewitz or any of their Subsidiaries
or KBMC or the acquisition of all or any of the Capital Stock or the assets of
MANO, MANO I, Manischewitz or any of their Subsidiaries or KBMC (an
"Acquisition Transaction") or negotiate, explore or otherwise engage in
discussions with any Person (other than the Purchaser and its representatives)
with respect to any Acquisition Transaction or enter into any agreement,
arrangement or understanding with respect to any such Acquisition Transaction.
Section 6.11 Tax Matters.
(a) The Sellers shall:
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(i) duly and timely file or cause to be
filed all Tax Returns required to be filed by, including or
relating to MANO, MANO I, Manischewitz or any of their
Subsidiaries, with respect to any Pre-Closing Period;
(ii) duly and timely pay or cause to be
paid all Taxes with respect to any Pre-Closing Period and
the Pre-Closing Portion of any Straddle Period that are
required to be paid on or before the Closing Date, and with
respect to all Taxes in respect of any Pre-Closing Period
and the Pre-Closing Portion of any Straddle Period that are
not yet payable shall properly accrue on its financial
statements and books and records in accordance with GAAP for
the payment of such amounts; and
(iii) cause MANO, MANO I, Manischewitz and
their Subsidiaries to comply in all material respects with
all applicable laws, rules and regulations relating to the
payment and withholding of Taxes in each Pre-Closing Period
and Pre-Closing Portion of a Straddle Period.
(b) The Tax Returns referred to in subsection (a)(i) above
shall be true, correct and complete in all material respects and shall be
prepared on a basis consistent with prior Tax Returns filed by MANO, MANO I,
Manischewitz or such Subsidiary, as the case may be, unless otherwise required
by applicable law. None of MANO, MANO I, Manischewitz or any of their
Subsidiaries shall make, amend or terminate any Tax election or change any Tax
accounting method, practice or procedure without the Purchaser's prior written
consent, unless required by applicable law. No Seller shall take, permit or
fail to take any action that could reasonably be expected to result (i) in the
termination or revocation of MANO's status as an S corporation (or its
equivalent) under federal, state or local tax law (other than the consummation
of the sale of Capital Stock of MANO to the Purchaser pursuant to this
Agreement) or (ii) in a change in the status of MANO I, Manischewitz or any
Subsidiary of MANO or MANO I that is an unincorporated entity (including,
without limitation, a limited liability company), from that of a partnership
for federal, state or local Income Tax purposes. Notwithstanding anything
herein to the contrary, the Sellers shall cause MANO I, Manischewitz and each
Subsidiary of MANO or MANO I that is a partnership for Income Tax purposes for
the Tax period that includes the Closing Date to duly and timely make an
election under Section 754 of the Code (and any similar provision of
applicable law) on its Income Tax Returns for such period. The Sellers (i)
shall cause to be prepared and duly and timely filed all Tax Returns relating
to any excise, sales, use, real or personal property or other transfer,
recording fees and charges and similar Taxes required to be filed as a result
of any transaction contemplated by this Agreement and (ii) shall be solely
responsible for such Taxes. The Sellers shall give the Purchaser a copy of
each Tax Return referred to in Section 6.11(a) or (b), together with all
related workpapers, for its review (but not approval) at least fifteen (15)
Business Days in the case of an Income Tax Return and at least five (5)
Business Days in the case of any other Tax Return prior to filing such Tax
Return. The Purchaser's receipt of any Tax Return, review and comments thereon
shall not waive any right the Purchaser or its affiliates may have under this
Agreement.
(c) Subject to the timely resolution of any disapproval by
the Sellers' Designee with respect to the Pre-Closing Portion of a Straddle
Period Tax Return as provided below
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in this Section 6.11(c) or 6.12(k), the Purchaser shall duly and timely file
or cause to be filed all Tax Returns required to be filed by, including or
relating to MANO, MANO I, Manischewitz or any of their Subsidiaries with
respect to any Straddle Period. Such Tax Returns shall be true, correct and
complete in all material respects and shall be prepared on a basis consistent
with prior Tax Returns filed by MANO, MANO I, Manischewitz or such Subsidiary,
as the case may be, unless otherwise required by applicable law. The Purchaser
shall give the Sellers' Designee a copy of each Tax Return referred to in this
Section 6.11(c), together with all related workpapers, for review by the
Sellers' Designee at least fifteen (15) Business Days in the case of an Income
Tax Return and at least five (5) Business Days in the case of any other Tax
Return prior to filing such Tax Return; provided that to the extent any such
Tax Return relates to a Pre-Closing Portion of a Straddle Period, the Tax
Return shall also be subject to the approval of the Sellers' Designee, which
approval shall not be unreasonably withheld; provided, further, if the
Sellers' Designee fails to advise the Purchaser in writing of its disapproval
of any such Tax Return within eight (8) days, in the case of an Income Tax
Return, and within two (2) days, in the case of any other Tax Return, the
Sellers' Designee shall be deemed to have accepted and approved such Tax
Return, which approval shall be final and may not be challenged at a later
time. Such disapproval shall set forth in reasonable detail each specific item
with which the Sellers' Designee disagrees, the reasons therefor and the
Sellers' Designee's position with respect to such item. The Sellers'
Designee's receipt of any Tax Return, review and comments thereon shall not
waive any right the Sellers (or the Sellers' Designee) may have under this
Agreement. After the Closing, none of MANO, MANO I, Manischewitz or any of
their Subsidiaries may file an amended Tax Return for any such entity with
respect to any Pre-Closing Period without the prior consent of the Sellers'
Designee, which consent shall not be unreasonably withheld.
(d) Any penalty or addition to tax in connection with the
late filing of a Tax Return for a Straddle Period because of the inability of
the Sellers' Designee and the Purchaser to resolve the Sellers' Designee's
disapproval of items with respect to such Tax Return within sufficient time to
timely file the Tax Return shall be borne by the parties in proportion to the
relative differences between the Purchaser's position with respect to the
Pre-Closing Portion of the Straddle Period as set forth on the Tax Return as
furnished to the Sellers' Designee and the Sellers' Designee's position with
respect thereto as set forth in the notice of disapproval from the position as
resolved between the parties or by the Settlement Accountants pursuant to
Section 6.12(k).
(e) The Sellers and the Purchaser shall cooperate
(and shall cause their tax professionals to cooperate) with each other in
connection with any Tax matter relating to MANO, MANO I, Manischewitz or any
of their Subsidiaries, including, without limitation, furnishing information
in connection with the preparation and filing of Tax Returns or the
computation of any Tax.
Section 6.12 Indemnification for Taxes.
(a) Each Seller shall jointly and severally indemnify the
Purchaser, MANO, MANO I, Manischewitz, each of their Subsidiaries and their
Affiliates and each Purchaser Indemnified Party (as such term is hereinafter
defined) and hold them harmless, from and against (i) any and all Income Taxes
for which MANO, MANO I, Manischewitz or any of their Subsidiaries
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(or any predecessor company to any of the foregoing) is or may be liable (or
for which the Purchaser is or may be liable as a result of its direct or of
indirect ownership of any of the foregoing companies) in respect of a
Pre-Closing Period or the Pre-Closing Portion of any Straddle Period, (ii) any
increase in any Income Tax for which the Purchaser, MANO, MANO I, Manischewitz
or any Subsidiary (or any predecessor company) is or may be liable resulting
from the inability to deduct any amount in connection with any management
bonuses contemplated hereby or any of the other transactions contemplated by
this Agreement as a result of Section 280G of the Code, (iii) any increase in
employment or withholding Tax for which the Purchaser, MANO, MANO I,
Manischewitz or any Subsidiary (or any predecessor company) is or may be
liable as a result of the cancellation of the Options by MANO I, the payment
of the management bonuses contemplated hereby or any of the other transactions
contemplated by this Agreement; provided, however, that there shall not be any
double counting based upon the reduction of the Purchase Price already taken
in account under clause (v) of Section 2.2 for the estimated increase in
employment and withholding Tax as a result of the cancellation of Options and
the payment of the management bonuses or amounts payable, if any, at Closing
under the Kroll Letter Agreement, and (iv) in each case, any Loss in
connection therewith, including, without limitation, all fees and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
incurred by the Purchaser, MANO, MANO I, Manischewitz, any of their
Subsidiaries or their Affiliates in connection therewith or in enforcing any
of their rights hereunder.
(b) The indemnity provided for in this Section 6.12:
(i) shall apply notwithstanding any investigation made by Purchaser in
connection with the transactions contemplated by this Agreement; (ii) shall be
separate and independent of any other indemnity provision contained herein;
(iii) anything in this Agreement to the contrary notwithstanding shall survive
until three (3) months after the expiration of the applicable statute of
limitations, including extensions or waivers thereof, for any such Taxes or
other items; and (iv) shall not be limited to the Indemnification Limit (as
such term is hereinafter defined).
(c) The Sellers designate Kohlberg & Co., L.L.C. (the
"Sellers' Designee") to represent the Sellers and act on their behalf in
connection with any Tax Claim (as defined below) or dispute relating to any
Tax. The actions of the Sellers' Designee shall be considered the actions of
all of the Sellers. The decisions, actions and inactions of the Sellers'
Designee with respect thereto shall be final and binding on each of the
Sellers and may be relied on by the Purchaser. Any fees or expenses of the
Sellers' Designee shall be borne solely by the Sellers.
(d) Each Seller shall forward to the Purchaser
within fifteen (15) days after receipt a copy of each written communication
from any Governmental Entity or Regulatory Authority received by such Seller
that relates to any Tax for which MANO, MANO I, Manischewitz or any of their
Subsidiaries is or may be liable or any pending, proposed or threatened
Proceeding relating to any such Tax (collectively, a "Tax Claim"). The
Purchaser shall forward to the Sellers' Designee within fifteen (15) days
after receipt a copy of each written communication from a Governmental Entity
or Regulatory Authority received by it that relates to any Tax in respect of a
Pre-Closing Period or the Pre-Closing Portion of any Straddle for which MANO,
MANO I, Manischewitz or any of their Subsidiaries is or may be liable or any
Tax Claim relating to any such
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Tax. If a party fails to timely provide notice of a Tax Claim, such party
shall not be entitled to indemnification for any Tax arising in connection
with such Tax Claim, but only to the extent, if any, that such failure shall
have actually adversely affected the indemnifying party's ability to defend
against, settle, or satisfy any Proceeding for which the indemnified party is
claiming indemnification under this Section 6.12 or Article IX.
(e) The Sellers' Designee shall have the right, at the
option of the Sellers' Designee, to assume control of the defense of any Tax
Claim that relates solely to Taxes of MANO, MANO I, Manischewitz or a
Subsidiary of any of the foregoing for a Pre-Closing Period; provided,
however, that, if such Tax Claim or the resolution thereof could reasonably be
expected to have an adverse impact on the Tax liability (an "Adverse Tax
Impact") of the Purchaser, MANO, MANO I, Manischewitz, any of their
Subsidiaries or their Affiliates for any Post-Closing Period or Post-Closing
Portion of a Straddle Period, the Sellers' Designee shall not agree to any
settlement of such Tax Claim without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld. Any determination
of whether or not there could be an Adverse Tax Impact shall be made without
regard to the Tax attributes (including, without limitation, any net operating
loss or tax credit) of the Purchaser, MANO, MANO I, Manischewitz or any of
their Subsidiaries or Affiliates other than (i) the Tax basis of its assets or
(ii) any Tax attributes arising as a result of the resolution of such Tax
Claim. If the Sellers' Designee assumes control, it shall defend such Tax
Claims in good faith and may use legal counsel selected by it, provided such
legal counsel is reasonably acceptable to the Purchaser. The Sellers' Designee
shall keep the Purchaser appraised as to the status of the Tax Claims and any
proceedings with respect thereto, including, without limitation, the positions
taken by the parties. The costs of such defense shall be borne solely by the
Sellers. Notwithstanding the foregoing, the Purchaser (or its designee) shall
have the right, at its expense, to participate in such defense, including,
without limitation, to attend any meetings and to be represented by legal
counsel selected by it; provided such legal counsel is reasonably acceptable
to the Sellers' Designee. Notwithstanding anything herein to the contrary, the
Sellers' Designee shall not suggest, negotiate for or agree to any position
which could reasonably be expected to have an Adverse Tax Impact on the
Purchaser, MANO, MANO I, Manischewitz or any of their Subsidiaries or
Affiliates for any Post-Closing Period or Post-Closing Portion of a Straddle
Period without the prior written consent of the Purchaser, which consent shall
not be unreasonably withheld.
(f) The Sellers' Designee shall have the right, at its
option, to jointly control with the Purchaser, the defense of any Tax Claim
that relates to Taxes of MANO, MANO I, Manischewitz or any of their
Subsidiaries for a Straddle Period. In such case, the Purchaser and the
Sellers' Designee shall work together in good faith to defend such Tax Claims.
The Purchaser may use legal counsel selected by it; provided such legal
counsel is reasonably acceptable to the Sellers' Designee, and the Sellers'
Designee may use counsel selected by it, provided such counsel is reasonably
acceptable to the Purchaser. The costs of such defense shall be borne by the
Sellers to the extent they relate to the Pre-Closing Portion of a Straddle
Period, and by the Purchaser, MANO, MANO I or their Subsidiaries to the extent
they relate to the Post-Closing Portion of a Straddle Period, based on the
portion of the proposed increase in Tax from the items being contested that is
allocable to each such period.
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(g) The Sellers' Designee shall assume control (or
joint control, in the case of Section 6.12(f)) of a Tax Claim by written
notice to the Purchaser within ten (10) days after notice of the Tax Claim
pursuant to Section 6.12(d), stating that the Sellers' Designee is undertaking
and will prosecute the defense of such Tax Claim, the Tax Claim is subject to
the indemnification provisions of Section 6.12(a) or Article IX and that the
Sellers will be liable to pay the full amount of the potential liability in
connection with such Tax Claim. The right of the Sellers' Designee to control
any defense under this Section 6.12 shall be limited to the items and amounts
in dispute for which the Sellers would be liable to indemnify the Purchaser,
MANO, MANO I, Manischewitz or any of their Subsidiaries and Affiliates or any
Purchaser Indemnified Party. The Purchaser and the Sellers' Designee shall
cooperate with each other in contesting such Tax Claims, including, without
limitation, the provision of records and information which are reasonably
relevant to such Tax Claims and making employees available on a mutually
convenient basis to provide additional information or explanation of any
material provided hereunder.
(h) In the event the Sellers' Designee fails to assume
control (or joint control, in the case of Section 6.12(f)) of a Tax Claim as
provided above, the Purchaser, MANO, MANO I, Manischewitz or the Subsidiary,
as the case may be, may, but shall not be required to, contest and assume
control of such Tax Claim. Regardless of any assumption of control of a Tax
Claim by the Purchaser, MANO, MANO I, Manischewitz, or any of their
Subsidiaries as provided in this Section 6.12(h), the Sellers shall be liable
for any Losses and costs and expenses of defense (including, without
limitation, attorneys' fees and expenses) to the extent provided for in this
Agreement.
(i) The Purchaser shall control any Tax Claim with
respect to, or which can affect, any Post-Closing Period; provided, however,
that if such Tax Claim or the resolution thereof could reasonably be expected
to have an Adverse Tax Impact on MANO, MANO I, Manischewitz, any of their
Subsidiaries or the Sellers for a Pre-Closing Period or any Pre-Closing
Portion of a Straddle Period, the Purchaser shall not agree to any settlement
of such Tax Claim without the prior written consent of the Sellers' Designee,
which consent shall not be unreasonably withheld. The Purchaser shall not
suggest, negotiate for or agree to any position which could reasonably be
expected to have an Adverse Tax Impact on MANO, MANO I, Manischewitz, any of
their Subsidiaries or the Sellers for a Pre-Closing Period or any Pre-Closing
Portion of a Straddle Period without the prior written consent of the Sellers'
Designee, which consent shall not be unreasonably withheld.
(j) To the extent permitted by applicable law, the
parties shall elect to treat the period that includes the Closing Date with
respect to any Tax as ending on such date and shall take such steps as may be
necessary therefor. For purposes of this indemnification, any Taxes for a
Straddle Period shall be allocated between the Pre-Closing Portion of the
Straddle Period and the balance of the period based on an interim closing of
the books as of the close of the Closing Date; provided, however, that any
real property or personal property Taxes shall be allocated based on the
relative number of days in the Pre-Closing Portion of the Straddle Period and
the balance of the period.
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(k) In the event a dispute arises between the Sellers or
the Sellers' Designee, on one hand, and the Purchaser, on the other, as to the
amount of Taxes, an indemnification for Taxes or any other matter relating to
Taxes under this Agreement, the parties shall initially attempt through good
faith negotiations to resolve such dispute, such negotiation to commence after
one of the parties to the dispute has furnished the other parties to the
dispute with written notice to commence such negotiations. Any amount which,
as a result of such negotiations, is agreed upon by all of the parties to the
dispute is payable to any party thereto shall be paid to the appropriate
party. If such dispute is not resolved within fifteen (15) days thereafter,
the parties shall submit the dispute for binding arbitration to the national
office of a nationally recognized certified public accounting firm (the
"Settlement Accountants") for resolution, which resolution shall be conclusive
and binding on the parties and not subject to judicial review. Notwithstanding
anything in this Agreement to the contrary, the fees and expenses of the
Settlement Accountants in resolving the dispute shall be borne equally by the
Sellers, on one hand, and the Purchaser, on the other. Any determination of
the Settlement Accountants may be enforced in any court of competent
jurisdiction.
(l) Any payment required pursuant to this Section
6.12 shall be made in cash within ten (10) days after the resolution of the
amount thereof. Any payment made pursuant to this Section 6.12 or Article IX
hereof shall constitute an adjustment to the Purchase Price for all purposes,
including federal, state and local Tax and financial accounting purposes.
Section 6.13 Risk of Loss.
(a) If prior to the Closing any portion of any Owned
Property or any portion of any material Leased Property shall be taken (or any
public announcement shall be made of an intent to take) by condemnation,
eminent domain or similar means or shall be damaged or destroyed by fire or
other casualty, and as a result thereof, a Material Adverse Effect has or
would occur, the Purchaser shall have the right to terminate this Agreement by
giving notice to KBMC within ten (10) Business Days following receipt by the
Purchaser of the notice provided for in Section 6.13(b).
(b) KBMC shall give to Purchaser prompt written notice of
any taking, public announcement, damage or destruction contemplated by Section
6.13(a).
Section 6.14 Cancellation of Options. Immediately prior to the
Closing, MANO I and the Optionholders shall enter into agreements
substantially in the form of Exhibit 6 attached hereto (the "Optionholder
Agreements") (any changes or modifications to the form of the Optionholder
Agreements to be subject to the approval of KBMC and the Purchaser, which
approval shall not be unreasonably withheld) in consideration for the amounts
set forth opposite such Optionholder's name on Schedule B attached hereto less
such Optionholder's pro rata portion of the amounts set forth in clauses (iv),
(v) and (vi) of Section 2.2, net of applicable withholding Taxes, and as
further adjusted upward or downward based upon the pro rata portion of the
Optionholder's share of the actual amount contemplated by clause (i) of
Section 2.2 as compared to the estimate of such amount which was used in
calculating the amount set forth on Schedule B, which amounts shall be
evidenced by promissory notes to be in the form of Exhibit 7 attached hereto
(the "Promissory Notes").
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Section 6.15 Books and Records. On or prior to the Closing, the
Sellers shall deliver to the Purchaser any and all agreements, books,
certificates, contracts, documents, records, reports and instruments relating
to the business of Manischewitz and its Subsidiaries, which agreements, books,
certificates, contracts, documents, records, reports and instruments were not
previously delivered to the Purchaser, are not in the possession of
Manischewitz and its Subsidiaries and are in the possession of any of KBMC,
MANO, MANO I or any Stockholder. At the reasonable request of the Sellers, the
Purchaser will give the Sellers or their authorized representative, during
normal business hours, access to all books and records of Manischewitz;
provided, that such access is sought solely in connection with a tax audit of,
or litigation involving, the Sellers or for which indemnification is sought
hereunder; provided, however, that this Section 6.15 does not apply to any
litigation between the Sellers and the Purchaser or any of the Purchaser's
Affiliates.
Section 6.16 Manischewitz Officer Bonus Incentive Plan. Should the
Closing occur, the Purchaser agrees that it will maintain in effect the
Officer Bonus Incentive Plan of Manischewitz in the form of Exhibit 8 attached
hereto for the fiscal year ending July 31, 1998, in accordance with its terms.
Section 6.17 Survival of Covenants. Except for the covenants that are
to be performed by the parties on or prior to the Closing, all other covenants
of the parties contained in this Agreement shall survive the Closing.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions to Each Party's Obligation. The respective
obligations of each of the parties to this Agreement to consummate the
transactions contemplated hereby are subject to the satisfaction prior to the
Closing Date of the following conditions precedent:
(a) No Legal Prohibition. No Legal Requirement shall have
been enacted, promulgated, entered by any Governmental Entity or Regulatory
Authority which would prohibit consummation of the transactions contemplated
hereby. On the Closing Date, there shall not be any effective permanent or
preliminary injunction, writ, temporary restraining order or any order of any
court of competent jurisdiction or other Governmental Entity or Regulatory
Authority prohibiting or directing that the transactions provided for herein
shall not be consummated as so provided.
(b) Litigation. No action, suit, investigation, inquiry or
other proceeding by any Governmental Entity or Regulatory Authority or any other
Person shall have been instituted or threatened which (i) could reasonably be
expected to result in a Material Adverse Effect or could reasonably be expected
to materially impair, hinder or adversely affect the ability of any of the
Sellers to consummate the transactions contemplated hereby; (ii) arises out of
or relates to this Agreement, the Seller Documents or the Purchaser Documents or
the transactions contemplated hereby; or (iii) questions the validity hereof or
the transactions contemplated hereby or seeks to obtain substantial damages in
respect thereof.
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(c) Hart-Scott-Rodino. The applicable waiting period under
the HSR Act shall have expired or been terminated.
Section 7.2 Conditions to Obligation of the Purchaser. All
obligations of the Purchaser pursuant to this Agreement including, without
limitation, the obligations to consummate the transactions contemplated hereby
at the Closing, shall be subject to the satisfaction, prior to or at the
Closing, of the following conditions precedent (any one or more of which may
be waived in writing by the Purchaser):
(a) Each of the representations and warranties of MANO,
MANO I or the Sellers contained in this Agreement and the representations and
warranties in the other Seller Documents shall be true, correct and complete
(without reference to any materiality qualifications contained therein,
including, without limitation, reference to any Material Adverse Effect) as of
the date made and as of the Closing Date as if made on and as of the Closing
Date (except to the extent that any representation or warranty is made
expressly as of a specific date, in which case such representation or warranty
shall be true, correct and complete as of such specified date), except if the
failure of such representations and warranties to be true, correct and
complete as of any such dates would not, individually or in the aggregate,
have a Material Adverse Effect;
(b) The Sellers, MANO, MANO I and Manischewitz and their
Subsidiaries shall have observed and performed in all material respects each
of their respective agreements, covenants and obligations under this Agreement
required to be observed or performed by any of them at or prior to the Closing
pursuant to the terms hereof;
(c) The Purchaser shall have received a certificate of a
duly authorized officer of MANO, the general partner of KBMC and a manager of
MANO I as to the satisfaction of the conditions set forth in Section 7.2(a)
and (b);
(d) The Purchaser shall have received the deliveries
pursuant to Sections 2.4(a)(ii), and 2.4(a)(iii) hereof and the deliveries
pursuant to Section 2.4(b);
(e) The Purchaser shall have received the opinion of
Brownstein Hyatt Farber & Strickland, P.C., counsel to the Sellers, MANO, MANO
I and Manischewitz, in the form of Exhibit 3 attached hereto;
(f) No Material Adverse Effect or any event which would
materially impair, hinder or adversely affect the ability of any of the
Sellers to consummate the transactions contemplated hereby shall have
occurred;
(g) The Purchaser shall have received copies of all
consents and Authorizations contemplated by Section 6.3(a) necessary or
required to be obtained by the Sellers, MANO, MANO I and Manischewitz in order
for each of them to consummate the transactions contemplated hereby;
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(h) The Escrow Agreement (as such term is hereinafter
defined) shall have been executed and delivered by KBMC and the Escrow Agent
(as such term is hereinafter defined);
(i) The Purchaser shall have received evidence reasonably
satisfactory to the Purchaser that all of the Options have been cancelled as
contemplated by Section 6.14 hereof and the Purchaser shall have received
copies of each of the Optionholder Agreements executed by each of the
Optionholders and MANO I;
(j) The Purchaser shall have received evidence that all
the obligations of Manischewitz under the Credit Agreement dated as of May 31,
1996 with Banque Indosuez and the lending institutions listed therein (the
"Credit Agreement") shall be terminated and all amounts outstanding thereunder
shall be paid in full immediately upon the occurrence of the Closing, and the
Liens on all collateral pledged to the banks thereunder shall be released
immediately upon the occurrence of the Closing, or UCC-3's or other
termination statements in form, substance and scope acceptable to the
Purchaser with respect to such Liens (the "Termination Statements") shall have
been delivered to the Purchaser prior to or at the Closing;
(k) The Purchaser shall have received, at its sole
cost and expense, a policy of title insurance, dated as of the Closing Date
and issued by the Purchaser's title insurance company with respect to all
Owned Property and all Leased Property (in amounts acceptable to Purchaser),
subject only to the Permitted Liens, together with (i) surveys acceptable to
the Purchaser of all owned Property and all Leased Property, which, which
surveys shall be certified to the Purchaser, any holder of any Lien and the
Purchaser's title insurance company, showing the locations of all buildings,
all other improvements and the Permitted Liens, (ii) insurance that the
Permitted Liens have not violated and that a violation shall not cause a
forfeiture or right or reentry and (iii) such other title insurance as the
Purchaser shall reasonably require;
(l) The letter agreement dated the date hereof among Mr.
Robert Kroll, Manischewitz and MANO I (the "Kroll Letter Agreement"), a copy
of which is attached hereto as Schedule 7.2(m) shall be in full force and
effect and shall not have been amended or modified;
(m) The Members' Agreement dated as of May 31,
1996, between MANO I, KBMC, MANO and the Optionholders shall be terminated;
and
(n) The Purchaser shall have received such officer
certificates, good standing certificates, resolutions, incumbency certificates,
documents and instruments as the Purchaser's counsel may reasonably request in
connection with this Agreement and the consummation of the transactions
contemplated hereby.
Section 7.3 Conditions to Obligation of the Sellers. The obligation
of the Sellers pursuant to this Agreement to consummate the transactions
contemplated hereby at the Closing shall be subject to the satisfaction or
waiver, prior to or at the Closing, of the following conditions precedent (any
one or more of which may be waived by the Sellers):
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(a) Each of the representations and warranties of the
Purchaser contained in this Agreement and the other Purchaser Documents shall
be true and correct (without reference to any materiality qualifications
contained therein, including, without limitation, reference to any Material
Adverse Effect) as of the date made and as of the Closing Date as if made on
and as of the Closing Date (except to the extent that any representation or
warranty is made expressly as of a specific date, in which case such
representation or warranty shall be true and correct as of such specified
date), except if the failure of such representations and warranties to be true
and correct as of any such dates would not, individually or in the aggregate,
have a Material Adverse Effect;
(b) The Purchaser shall have observed and performed in all
material respects its agreements, covenants and obligations under this
Agreement required to be observed or performed by it at or prior to the
Closing pursuant to the terms hereof;
(c) The Purchaser shall have delivered a certificate of
the President, an Executive Vice President, a Senior Vice President or the
Chief Financial Officer of Purchaser as to the satisfaction of the conditions
set forth in Section 7.2(a) and (b) hereof.
(d) The Sellers shall have received the opinion of
Parker Chapin Flattau & Klimpl, LLP, counsel to the Purchaser, in the form of
Exhibit 4 attached hereto;
(e) The Sellers shall have received copies of all consents
and Authorizations contemplated by Section 6.3(a) to be obtained by the
Purchaser in order for the Purchaser to consummate the transactions
contemplated hereby;
(f) The Escrow Agreement shall have been executed and
delivered by the Purchaser and the Escrow Agent;
(g) The Purchaser shall have delivered the Purchase Price
to the Paying Agent;
(h) The Purchaser shall have provided for the repayment of
all amounts outstanding under the Credit Agreement immediately upon the
occurrence of the Closing;
(i) The Purchaser shall have provided for the repayment of
the Promissory Notes immediately upon the occurrence of the Closing; and
(j) The Sellers shall have received such officer
certificates, good standing certificates, resolutions, incumbency
certificates, documents and instruments as the Sellers' counsel may reasonably
request in connection with this Agreement and the transactions contemplated
hereby.
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ARTICLE VIII
TERMINATION
Section 8.1 Termination. Notwithstanding anything to the contrary set
forth herein, this Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of the
Purchaser and KBMC;
(b) By KBMC, by written notice to the
Purchaser:
(i) if the Closing Date shall not have
occurred on or before April 19, 1998, other than as
the result of a willful failure of the Sellers to
satisfy or cause to be satisfied the conditions set
forth in Section 7.2; or
(ii) if, prior to the Closing Date, the
Purchaser fails to perform or violates in any
material respect any of its obligations or
agreements under this Agreement or the Purchaser
shall have breached in any material respect any of
its representations or warranties set forth herein,
and such failure or breach has not been cured
within thirty (30) days after receipt of written
notice of such failure or breach from KBMC; or
(iii) if after five (5) Business Days from
the date of the required filing under the HSR Act
with the Federal Trade Commission and Department of
Justice by the ultimate parent entity of
Manischewitz, the ultimate parent entity of the
Purchaser has not made its initial filing of the
Notification and Report Form under the HSR Act with
the Federal Trade Commission and Department of
Justice in respect of the transactions contemplated
hereby.
(c) By the Purchaser by written notice to
KBMC,
(i) if the Closing Date shall not have
occurred on or before April 19, 1998, other than as
the result of a willful failure on the part of the
Purchaser to satisfy the conditions set forth in
Section 7.3, other than Section 7.3(h);
(ii) if, prior to the Closing Date, any of
the Sellers, MANO, MANO I or Manischewitz fails to
perform in any material respect any of their
obligations or agreements under this Agreement, or
any of the representations or warranties of the
Sellers set forth herein have been breached in a
material respect, and such failure or breach has
not been cured within thirty (30) days after
receipt of written notice of such failure or breach
from the Purchaser; or
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(iii) pursuant to Section 6.13.
(d) By either the Purchaser, on the one hand,
or KBMC, on the other hand, if a court of competent
jurisdiction or any Governmental Entity or Regulatory
Authority shall have issued an order, decree or
ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their
reasonable best efforts to lift), in each case
permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this
Agreement.
Section 8.2 Effect of Termination. In the event of termination of
this Agreement in accordance with the provisions of Section 8.1 hereof, all
obligations of the parties under this Agreement shall forthwith terminate and
be null and void without liability of any party hereto to any other party
hereto, except (i) that the obligations set forth in Section 10.12 and in the
Confidentiality Agreement shall survive any such termination and (ii) for
liability for any intentional breach of this Agreement.
Section 8.3 Return of Documents. Upon the termination of this
Agreement in accordance with the provisions of Section 8.1 hereof, and upon
any written request therefor, each party will redeliver or destroy all
documents, work papers and other material of any other parties relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Representations and Warranties.
(a) All representations, warranties, covenants and
agreements of the parties contained in this Agreement or in any other document
or instrument executed or delivered in connection herewith shall survive the
Closing (subject to Section 9.6 hereof), notwithstanding any examination or
investigation made by or on behalf of any party to this Agreement.
(b) The right to indemnification, payment of Losses or
other remedy based on any representation, warranty, covenant or obligation of
a party hereunder shall not be affected by any investigation conducted with
respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation. The waiver of
any condition to a party's obligation to consummate the transactions
contemplated hereunder, where such condition is based on the accuracy of any
representation or warranty, or on the performance or observance of, or
compliance with, any covenant, agreement or obligation, will not affect the
right to indemnification, payment of Losses or other remedy based on such
representation, warranty, covenant or obligation.
Section 9.2 Indemnification by the Sellers. If the Closing occurs,
each of the Sellers, jointly and severally, shall indemnify and hold harmless
the Purchaser and its Affiliates (and
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MANO, MANO I, Manischewitz and their Subsidiaries following the Closing Date),
and each of their respective directors, officers, employees, agents,
representatives, stockholders, partners, members, managers and controlling
parties and all of their successors and assigns (collectively the "Purchaser
Indemnified Parties" and individually a "Purchaser Indemnified Party") from
and defend each of them from and against and will pay each Purchaser
Indemnified Party for any and all Losses resulting from or arising out of, or
in connection with, or relating to:
(a) any inaccuracy or breach of any representation or
warranty made by the Sellers contained herein or in any of the other Seller
Documents;
(b) any breach of any covenant, agreement or obligation
of any of MANO, MANO I, Manischewitz or the Sellers on their part to be
observed or performed on or prior to the Closing which are contained herein or
in any of the other Seller Documents;
(c) any breach of any covenant, agreement or obligation of
any of the Sellers to be observed or performed after the Closing which are
contained herein or in any of the other Seller Documents; and
(d) any amounts payable to any Key Employee, as a result
of, or based upon, a "change in control" (or similar event) of or with respect
to MANO, MANO I, Manischewitz or any of their Subsidiaries relating to or
based upon the transactions contemplated hereby, other than amounts payable to
Mr. Richard Haine pursuant to his Employment Agreement dated March 27, 1996,
as amended by a letter agreement dated February 23, 1998, and except as
otherwise provided hereby with respect to Mr. Robert Kroll under the Kroll
Letter Agreement.
Section 9.3 Indemnification by Purchaser. If the Closing occurs,
MANO, MANO I, Manischewitz and each of their Subsidiaries and the Purchaser
shall, jointly and severally, indemnify and hold harmless the Sellers and
their respective Affiliates, and each of their respective directors, officers,
employees, agents, representatives, stockholders, partners, members, managers
and controlling parties and all of their successors and assigns (collectively
the "Seller Indemnified Parties" and individually a "Seller Indemnified
Party"), from and defend each of them from and against and will pay to each
Seller Indemnified Party for any and all Losses resulting from or arising out
of, or in connection with, or relating to:
(a) any inaccuracy or breach of any representation or
warranty made by the Purchaser contained herein or in any of the other
Purchaser Documents; and
(b) any breach of any covenant, agreement or obligation of
the Purchaser on its part to be observed or performed on or prior to or after
the Closing which are contained herein or in any of the other Purchaser
Documents.
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Section 9.4 Indemnification Procedures - Third-Party Claims.
(a) The rights and obligations of a party claiming a right
to indemnification hereunder (each an "Indemnitee") from a party to this
Agreement (each an "Indemnitor") in any way relating to a third party claim
shall be governed by the following provisions of this Section 9.4:
(i) The Indemnitee shall give prompt written notice to the
Indemnitor of the commencement of any claim, action, suit or
proceeding, or any threat thereof, or any state of facts which
Indemnitee determines will give rise to a claim by the Indemnitee
against the Indemnitor based on the indemnity agreements contained in
this Agreement setting forth, in reasonable detail, the nature and
basis of the claim and the amount thereof, to the extent known, and
any other relevant information in the possession of the Indemnitee (a
"Notice of Claim"). The Notice of Claim shall be accompanied by any
relevant documents in the possession of the Indemnitee relating to
the claim (such as copies of any summons, complaint or pleading which
may have been served and/or any written demand or document evidencing
the same). No failure to give a Notice of Claim shall affect, limit
or reduce the indemnification obligations of an Indemnitor hereunder,
except to the extent such failure actually prejudices such
Indemnitor's ability successfully to defend the claim, action, suit
or proceeding giving rise to the indemnification claim.
(ii) In the event that an Indemnitee furnishes an Indemnitor
with a Notice of Claim, then upon the written acknowledgment by the
Indemnitor given to the Indemnitee within thirty (30) days of receipt
of the Notice of Claim, stating that the Indemnitor is undertaking
and will prosecute the defense of the claim under such indemnity
agreements and confirming that as between the Indemnitor and the
Indemnitee, the claim covered by the Notice of Claim is subject to
this Article IX and that the Indemnitor will be able to pay the full
amount of potential liability in connection with any such claim
(including, without limitation, any action, suit or proceeding and
all proceedings on appeal or other review which counsel for the
Indemnitee may reasonably consider appropriate) (an "Indemnification
Acknowledgment"), then the claim covered by the Notice of Claim may
be defended by the Indemnitor, at the sole cost and expense of the
Indemnitor; provided, however, that the Indemnitee is authorized to
file any motion, answer or other pleading that may be reasonably
necessary or appropriate to protect its interests during such thirty
(30) day period. However, in the event the Indemnitor does not
furnish an Indemnification Acknowledgment to the Indemnitee or does
not offer reasonable assurances to the Indemnitee as to Indemnitor's
financial capacity to satisfy any final judgment or settlement, the
Indemnitee may, upon written notice to the Indemnitor, assume the
defense (with legal counsel chosen by the Indemnitee) and dispose of
the claim, at the sole cost and expense of the Indemnitor.
Notwithstanding receipt of an Indemnification Acknowledgment, the
Indemnitee shall have the right to employ its own counsel in respect
of any such claim, action, suit or proceeding, but the fees and
expenses of such counsel shall be at the Indemnitee's own cost and
expense, unless (A) the employment of such counsel and the payment of
such fees and expenses shall have been specifically authorized by the
Indemnitor in connection with the defense of such
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claim, action, suit or proceeding or (B) the Indemnitee shall have
reasonably concluded based upon a written opinion of counsel that
there may be specific defenses available to the Indemnitee which are
different from or in addition to those available to the Indemnitor in
which case the costs and expenses incurred by the Indemnitee shall be
borne by the Indemnitor.
(iii) The Indemnitee or the Indemnitor, as the case may be,
who is controlling the defense of the action, suit, proceeding or
claim, shall keep the other fully informed of such claim, action,
suit or proceeding at all stages thereof, whether or not such party
is represented by counsel. The parties hereto agree to render to each
other such assistance as they may reasonably require of each other in
order to ensure the proper and adequate defense of any such claim,
action, suit or proceeding. Subject to the Indemnitor furnishing the
Indemnitee with an Indemnification Acknowledgment in accordance with
Section 9.4(a)(ii) hereof, the Indemnitee shall cooperate with the
Indemnitor and provide such assistance, at the sole cost and expense
of the Indemnitor, as the Indemnitee may reasonably request in
connection with the defense of any such claim, action, suit or
proceeding, including, but not limited to, providing the Indemnitor
with access to and use of all relevant corporate records and making
available its officers and employees for depositions, pre-trial
discovery and as witnesses at trial, if required. In requesting any
such cooperation, the Indemnitor shall have due regard for, and
attempt to not be disruptive of, the business and day-to-day
operations of the Indemnitee and shall follow the requests of the
Indemnitee regarding any documents or instruments which the
Indemnitee believes should be given confidential treatment.
(b) The Indemnitor shall not make or enter into any
settlement of any claim, action, suit or proceeding which Indemnitor has
undertaken to defend, without the Indemnitee's prior written consent (which
consent shall not be unreasonably withheld or delayed), unless there is no
obligation, directly or indirectly, on the part of the Indemnitee to
contribute to any portion of the payment for any of the Losses, the Indemnitee
receives a general and unconditional release with respect to the claim (in
form, substance and scope reasonably acceptable to the Indemnitee), there is
no finding or admission of any violation of law by, or effect on any other
claim that may be made against the Indemnitee and, in the reasonable judgment
of the Indemnitee, the relief granted in connection therewith is not likely to
have a Material Adverse Effect on the Indemnitee or the Indemnitee's
reputation or prospects.
(c) Any claim for indemnification that may be made under
more than one subsection under Section 9.2 or 9.3, respectively, may be made
under the subsection that the claiming party may elect in its sole discretion,
notwithstanding that such claim may be made under more than one subsection.
Section 9.5 Procedure for Indemnification -- Other Claims,
Indemnification Generally A claim for indemnification for any matter not
relating to a third-party claim may be asserted by notice directly by the
Indemnitee to the Indemnitor.
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Section 9.6 Time Limitations. (a) If the Closing occurs, except for
any liability with respect to (x) the representations and warranties set forth
in the fifth, sixth and seventh sentences of Section 3.1 and in Sections 3.2,
3.3, 3.4, 3.6, 3.21, 4.1, 4.2 and 4.4 or (y) any act which constitutes fraud
that results in a breach of any representation or warranty or any covenant,
agreement or obligation of MANO, MANO I, Manischewitz, their Subsidiaries or
any of the Sellers set forth herein, the Sellers shall have no liability with
respect to the matters described in Section 9.2 unless, on or before the date
that is the second anniversary of the Closing Date, the Purchaser notifies
KBMC or any other Seller of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by the Purchaser. If the Closing
occurs, the Sellers shall have no liability under Section 9.2 with respect to
the representations and warranties set forth in Sections 3.3, 3.4 and 3.21
unless, on or before the date that is the eighteen (18) month anniversary of
the Closing Date, the Purchaser notifies KBMC or any other Seller of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by the Purchaser. Notwithstanding the foregoing, any claim with
respect to the representations and warranties set forth in the fifth, sixth
and seventh sentences of Section 3.1 and in Sections 3.2, 3.6, 4.1, 4.2 and
4.4 or the matters referred to in clause (y) of this Section 9.6(a) may be
made at any time until thirty (30) days after the passage of the applicable
statute of limitations, including any extensions and waivers thereof; provided
that any such extension or waiver (i) was made by the Sellers with respect to
a claim relating to a Pre-Closing Period, (ii) was made by the Purchaser with
respect to a claim relating to a Post-Closing Period and (iii) was made by
either the Sellers or the Purchaser with respect to a claim relating to a
Straddle Period.
(b) If the Closing occurs, except for any liability with
respect to any covenant, agreement or obligation contained in this Agreement
to be performed by the Purchaser following the Closing, the Purchaser shall
have no liability with respect to the matters described in Section 9.3 unless,
on or before the second anniversary of the Closing Date, KBMC notifies the
Purchaser of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by KBMC. Any claim with respect to a covenant,
agreement or obligation contained in this Agreement to be performed by the
Purchaser following the Closing may be made at any time until thirty (30) days
after the passage of the applicable statute of limitations, including any
extensions and waivers thereof; provided that any such extension or waiver (i)
was made by the Sellers with respect to a claim relating to a Pre-Closing
Period, (ii) was made by the Purchaser with respect to a claim relating to a
Post-Closing Period and (iii) was made by either the Sellers or the Purchaser
with respect to a claim relating to a Straddle Period.
Section 9.7 Limitations on Amount.
(a) If the Closing occurs, the Sellers shall have no
liability for indemnification with respect to Losses pursuant to Section 9.2
hereof until the aggregate amount of all Losses with respect to such matters
exceeds $225,000, and then the Sellers shall be responsible, jointly and
severally, for all Losses, but without regard to the first $100,000 of Losses.
Anything to the contrary notwithstanding, the Sellers shall have no liability
for indemnification with respect to Losses pursuant to Section 9.2 hereof to
the extent that the aggregate amount of all Losses with respect to such
matters exceeds $6,000,000 (the "Indemnification Limit"). Anything to the
contrary
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notwithstanding, the limitations set forth in this Section 9.7(a) shall not
apply to any claim by the Purchaser with respect to the representations or
warranties set forth in the fifth, sixth and seventh sentences of Section 3.1
and in Sections 3.2, 3.6, 4.1, 4.2 and 4.4, or the matters referred to in clause
(y) of Section 9.6(a), such that any such claim shall not be subject to the
Indemnification Limit and the Sellers shall be responsible for all Losses from
the first dollar.
(b) Notwithstanding anything set forth in Section 6.12(a)
or the last sentence of Section 9.7(a), the aggregate indemnification
obligation of the Sellers under this Agreement shall not exceed the sum of (i)
the Purchase Price and (ii) the items set forth in clauses (iii), (iv) and (v)
of Section 2.2.
(c) Notwithstanding anything contained in this Agreement
to the contrary (but subject to Section 9.7 hereof), any obligation of the
Sellers to indemnify for Losses pursuant to Section 3.15 which requires
environmental remediation shall be limited to the Losses actually incurred by
any Purchaser Indemnified Party in connection with taking such actions and
incurring such costs and expenses (including, without limitation, attorneys'
fees and expenses) as in the reasonable opinion of the Purchaser may be
required by applicable Environmental Laws or any order or judgment of any
court or Governmental Entity or Regulatory Authority implementing or enforcing
such Environmental Laws and any repairs or improvements that may be required
by any Legal Requirement or are otherwise necessary as a result of the
environmental remediation. Such costs of remediation shall be limited to such
costs and expenses which are necessary to satisfy but not exceed enforceable
limits or standards imposed by the applicable Environmental Laws or any order
or judgment of any court or other Governmental Entity or Regulatory Authority
implementing or enforcing such Environmental Laws so that MANO I, Manischewitz
and their Subsidiaries can make use of their respective properties and assets
in the operation of the business of MANO I and Manischewitz and the
Subsidiaries, as applicable.
(d) If the Closing occurs, the Purchaser shall have no
liability forindemnification hereunder with respect to Losses pursuant to
Section 9.3 hereof until the aggregate amount of all Losses with respect to such
matters exceeds $225,000, and then the Purchaser shall be responsible for all
Losses based thereon, but without regard to the first $100,000 of Losses.
Anything to the contrary notwithstanding, the Purchaser shall have no liability
for indemnification with respect to Losses pursuant to Section 9.3 or based upon
a claim under Section 6.12 to the extent that the aggregate amount of all Losses
with respect to such matters exceeds the Indemnification Limit.
Section 9.8 Limitations on Application to Taxes. Notwithstanding
anything to the contrary in this Agreement, the provisions of this Article IX
(other than Sections 9.1, 9.7(b) and 9.9 and this Section 9.8) shall not apply
in any manner (including, without limitation, the limitations set forth in
Sections 9.6 and 9.7(a) hereof) to any indemnification claim with respect to
Taxes to the extent Section 6.12(a) applies, and Section 6.12 hereof shall be
the only provision (other than Sections 9.1, 9.7(b) and 9.9 and this Section
9.8) that applies with respect to any such indemnification claim. The provisions
of this Article IX (including Sections 9.1, 9.2(a), 9.2(b), 9.6, 9.7, 9.9 and
9.12 and this Section 9.8) shall apply to an inaccuracy or breach of a
representation or
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warranty contained in Section 3.10 or 6.11, to the extent not explicitly covered
by Section 6.12(a); provided, however, that in such case, the indemnification
procedures and other provisions set forth in Section 6.12(b) through (l) shall
apply instead of Section 9.4. Should there be any conflict between the
applicable provisions of Section 6.12 and this Article IX with respect to any
issue or matter relating to indemnification for Taxes, those provisions of
Section 6.12 hereof shall be controlling and binding on the parties.
Section 9.9 Acknowledgment of Indemnification Responsibility, etc.
Each of the Sellers acknowledges that regardless of such Seller's lack of
Knowledge of certain of the representations and warranties made by MANO and/or
MANO I hereunder or the observance or performance of the covenants, agreements
and obligations contained herein by any of MANO, KBMC, MANO I, Manischewitz or
any of their Subsidiaries and although such Sellers may not have been involved
in, or familiar with, the day-to-day operations of MANO, KBMC, MANO I,
Manischewitz or any of their Subsidiaries, each Seller is fully responsible,
on a joint and several basis, for the indemnification by the Sellers set forth
in this Article IX. After the Closing, the Purchaser's ownership of MANO, MANO
I, Manischewitz and Subsidiaries shall not limit, restrict, modify, alter or
amend any of the rights, remedies or privileges granted to the Purchaser
pursuant to Section 6.12 hereof or this Article IX.
Section 9.10 Escrow Agreement. In order to secure to the Purchaser the
payment of amounts payable to the Purchaser or any Purchaser Indemnified Party
pursuant to Section 9.2 hereof, if any, KBMC, the Purchaser and a third party
escrow agent reasonably acceptable to KBMC and the Purchaser, as escrow agent
(the "Escrow Agent"), shall enter into an Escrow Agreement dated as of the
Closing Date, substantially in the form of Exhibit 5 attached hereto (the
"Escrow Agreement") (any changes or modifications to the form of the Escrow
Agreement to be subject to the approval of KBMC and the Purchaser, which
approvals shall not be unreasonably withheld). Pursuant to the Escrow Agreement,
at the Closing, the Purchaser and KBMC shall, from the proceeds of the Purchase
Price, cause to be deposited with the Escrow Agent the sum of $6,000,000 (the
"Escrow Funds"), to be held by the Escrow Agent for a period of two (2) years
from the date of the Closing (or longer, if at such date there are any
outstanding claims for indemnification pursuant to Section 6.12 and/or Article
IX by any Purchaser Indemnified Party in accordance with the terms of the Escrow
Agreement). The Escrow Funds shall be held and disposed of in accordance with
the terms and provisions of the Escrow Agreement. The Sellers shall be
responsible for the payment of the fees and expenses, if any, charged by the
Escrow Agent. The Escrow Agent shall not in any way restrict, limit or modify
the rights of the Purchaser pursuant to this Agreement. The sole source of funds
for the payment of any Losses payable by the Sellers under this Agreement shall
be the Escrow Funds, other than with respect to any Losses described in the last
sentence of Section 9.7(a) or a claim made under Section 6.12.
Section 9.11 Additional Indemnification Matters.
(a) Without limiting the entitlement of any Purchaser
Indemnified Party to seek indemnification pursuant to Section 9.2 hereof, should
the indemnification claim be a matter
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for which any Purchaser Indemnified Party is entitled to make a claim under any
of its insurance policies then in effect, the Purchaser Indemnified Party shall
make such a claim.
(b) Notwithstanding anything to the contrary set forth
herein, no Purchaser Indemnified Party will make a claim for indemnification for
a breach of the representation and warranty set forth in Section 3.15(i)(iii)
hereof if the release of friable asbestos was the result of work commenced by
Manischewitz after the Closing Date.
Section 9.12 Claims in Excess of Indemnification Limit. Notwithstanding
anything to the contrary set forth herein, from and after the time when the
aggregate amount of Losses paid or potentially payable by an indemnifying party
under this Agreement which are subject to the Indemnification Limit exceeds or
could potentially exceed the Indemnification Limit based upon Losses paid and
pending indemnification claims made in accordance with this Agreement, the
Purchaser Indemnified Party or the Seller Indemnified Party, as applicable,
shall have the right, at its own cost and expense, to jointly control the
defense and settlement of any pending indemnification claims the liability for
which could potentially result in the aggregate Losses exceeding the
Indemnification Limit. At such time as the aggregate amount of Losses which are
subject to the Indemnification Limit have been paid or settled (subject to being
paid) exceed the Indemnification Limit, the indemnifying party shall no longer
have the right to participate in the control or defense of such claims.
ARTICLE X
MISCELLANEOUS
Section 10.1 Headings. The headings contained in this Agreement are for
convenience of reference purposes only and shall not affect in any way the
meaning, construction or interpretation of any provision of this Agreement.
Section 10.2 Severability. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be illegal, invalid, unenforceable or void,
then such provision shall be enforced to the extent that it is not illegal,
invalid, unenforceable or void, and the remainder of this Agreement, as well as
such provision as applied to other Persons, places or circumstances, shall
remain in full force and effect. It is the intention of the parties that this
Agreement shall be enforced to the fullest extent permitted by applicable law.
Section 10.3 Notices. All notices, demands, Authorizations, consents,
requests, instructions and other communications to be given or delivered or
permitted under or by reason of the provisions of this Agreement will be in
writing and shall be deemed to be delivered and received by the intended
recipient as follows: (a) if personally delivered, on the Business Day of such
delivery (as evidenced by the receipt of the personal delivery service), (b)
if mailed certified or registered mail return receipt requested (with all
postage prepaid), four (4) Business Days after the date set forth on the
return receipt, (c) if delivered by overnight courier (with all charges having
been
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prepaid), on the Business Day of such delivery (as evidenced by the receipt of
the overnight courier service of recognized standing), or (d) if delivered by
facsimile transmission, on the Business Day of such delivery if sent by 6:00
p.m. in the time zone of the recipient, or if sent after that time, on the next
succeeding Business Day (as evidenced by the printed confirmation of delivery
generated by the sending party's telecopier machine). If any notice, demand,
Authorization, consent, request, instruction or other communication cannot be
delivered because of a changed address of which no notice was given (in
accordance with this Section 10.3), or the refusal to accept same, the notice
shall be deemed received on the Business Day the notice is sent (as evidenced by
the affidavit of the sender). All such notices, demands, Authorizations,
consents, requests, instructions and other communications will be sent to the
following addresses or facsimile numbers as applicable:
(i) If to the Sellers, and, if prior to the Closing,
to MANO, MANO I, Manischewitz or any Subsidiary thereof:
One Manischewitz Plaza
Jersey City, NJ 07032
Attention: Mr. Robert D. Kroll
Fax: (201) 333-4007
with copies to:
Kohlberg & Co., L.L.C.
111 Radio Circle
Mt. Kisco, NY 10549
Attention: Mr. Samuel P. Frieder
Fax: (914) 241-7476
and
Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street, 22nd Floor
Denver, CO 80202-4437
Attention: Steven S. Siegel, Esq.
Fax: (303) 623-1956
(ii) If to the Purchaser:
R.A.B. Food Holdings, Inc.
444 Madison Avenue
New York, NY 10022
Attention: Mr. Richard A. Bernstein
Fax: (212) 888-5025
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with copies to:
R.A.B. Food Holdings, Inc.
444 Madison Avenue
New York, NY 10022
Attention: James A. Cohen, Esq.
Fax: (212) 888-5025
and
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036
Attention: Martin Eric Weisberg, Esq.
Fax: (212) 704-6288
and
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: Mitchell N. Baron, Esq.
Fax: (212) 309-6273
or to such other address or facsimile number as any party may specify by notice
given to the other party in accordance with this Section 10.3.
Section 10.4 Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the internal laws of the State of New
York without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than those of the State of
New York.
Section 10.5 Dispute Resolution.
(a) Except with respect to the matters subject to Section
6.12(k) hereunder, any dispute, controversy or claim arising out of or relating
to this Agreement or the transactions contemplated hereby or the validity,
interpretation, breach or termination thereof (a "Dispute") shall be resolved in
accordance with the procedures set forth in this Section 10.5. Until completion
of such procedures, no party may take action to force a resolution of the
Dispute by any judicial, arbitral or similar process, except to the limited
extent necessary to (i) avoid the expiration of the time period in which a claim
that might eventually be permitted hereby must be brought or (ii) obtain interim
relief, including injunctive relief, to preserve the status quo or prevent
irreparable harm.
57
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(b) All communications between the parties or their
representatives in connection with the attempted resolution of any Dispute shall
be deemed to have been delivered in furtherance of a Dispute settlement and
shall be exempt from discovery and production, and shall not be admissible in
evidence (whether as an admission or otherwise), in any judicial or other
proceeding for the resolution of the Dispute.
(c) The parties shall attempt to resolve the Dispute
initially through good faith negotiations, which shall commence after one of the
parties to the Dispute has furnished the other parties affected by the Dispute
written notice to commence such negotiations. If such negotiations do not
resolve the Dispute within fifteen (15) Business Days after the commencement
thereof, any party to the Dispute may, by written notice to the other parties to
the Dispute, require that the parties to the Dispute attempt to resolve the
Dispute pursuant to a non-binding minitrial not to exceed two (2) days under the
Center for Public Resources (the "CPR"), such minitrial shall be conducted in
New York, New York, Model Minitrial Procedure as then in effect. Unless
otherwise agreed, the parties to the Dispute will select a minitrial neutral
adviser from the CPR Panels of neutrals and shall notify the CPR to initiate the
selection process. The minitrial neutral adviser will be asked to provide a
written opinion as to the likely outcome of the Dispute.
(d) Notwithstanding the foregoing, any Dispute with
respect to indemnification pursuant to Section 9.2 hereof relating to the
representations and warranties set forth in Section 3.3 or 3.21 hereof (other
than as a basis of the claims subject to clause (y) of Section 9.6(a)) shall be
exclusively resolved by binding arbitration conducted by the Settlement
Accountants, which resolution shall be conclusive and binding on the parties and
not subject to judicial review. Any determination of the Settlement Accountants
with respect to such a Dispute may be enforced in any court of competent
jurisdiction.
(e) If the Dispute (other than a Dispute with respect to
the matters covered in Section 6.12(k) and 10.5(d)) is not resolved following
completion of the procedures provided for in Section 10.5(c), either party to
the Dispute shall, by written notice to the other parties to the Dispute, be
entitled to require that the parties to the Dispute exclusively resolve the
Dispute pursuant to binding arbitration proceedings, which shall be conducted in
New York, New York. Any arbitration conducted pursuant to this Section 10.5(e)
shall be conducted pursuant to the rules of the American Arbitration Association
(the "AAA") and before a panel of three (3) arbitrators chosen from lists of
qualified arbitrators submitted by the AAA (the "Arbitrators"). The
determination of a majority of the Arbitrators in the arbitration shall be
conclusive and binding on the parties to the dispute and shall not be subject to
appeal or judicial review. The award of the Arbitrators may be enforced in any
court of competent jurisdiction. The Arbitrators shall be entitled to award that
all or a portion of the prevailing party's out-of-pocket costs and expenses
(including, without limitation, attorneys' fees and expenses) as well as the
costs and expenses of the Arbitrators and AAA be paid by the other party to the
arbitration proceedings.
Section 10.6 JURISDICTION. EACH OF THE PARTIES UNCONDITIONALLY AND
IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK LOCATED IN NEW YORK COUNTY AND THE FEDERAL
58
<PAGE>
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK WITH RESPECT TO ANY ACTION,
SUIT OR PROCEEDING INSTITUTED TO ENFORCE THE DETERMINATION OF THE SETTLEMENT
ACCOUNTANTS OR THE ARBITRATORS, AS APPLICABLE, OR WHICH ARISES OUT OF OR RELATES
TO THE ESCROW AGREEMENT. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY FURTHER
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY RIGHT THAT SUCH PARTY MAY HAVE TO
DEMAND A JURY TRIAL IN ANY SUCH ACTION, SUIT OR PROCEEDING AND AGREES THAT SUCH
PARTY WILL NOT OBJECT TO OR CONTEST THE VENUE OF THE AFORESAID COURTS OR ASSERT
THAT SUCH COURTS CONSTITUTE AN INCONVENIENT FORUM. EACH OF THE SELLERS HEREBY
DESIGNATES KOHLBERG & CO., L.L.C. AS SUCH SELLERS' AGENT TO RECEIVE SERVICE OF
PROCESS IN NEW YORK WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING AND
KOHLBERG & CO., L.L.C. AGREES TO SERVE AS PROCESS AGENT FOR THE LIMITED PURPOSES
SET FORTH IN THIS SECTION 10.6.
Section 10.7 Entire Agreement. This Agreement (including the Exhibits
and Schedules attached hereto), the Seller Documents, the Purchaser Documents
and the Confidentiality Agreement constitute the entire agreement among the
parties with respect to the subject matter of this Agreement and supersede any
prior agreements or understandings, whether written and oral, among the
parties or between any of them with respect to the subject matter of this
Agreement all of which are merged herein. There are no representations,
warranties, covenants, promises or undertakings, other than those expressly
set forth or referred to herein.
Section 10.8 Amendment; Waiver, etc. This Agreement may be amended,
modified or waived only by a written agreement signed by the Purchaser and the
Sellers. With regard to any power, remedy or right provided in this Agreement or
otherwise available to any party, (i) no waiver or extension of time shall be
effective unless expressly contained in a writing signed by the waiving party,
(ii) no alteration, modification or impairment shall be implied by reason of any
previous waiver, extension of time, delay or omission in exercise or other
indulgence, and (iii) waiver by any party of the time for performance of any act
or condition hereunder does not constitute a waiver of the act or condition
itself. The Stockholders hereby designate and appoint KBMC (which designation
and appointment is irrevocable and coupled with an interest) as the
attorney-in-fact of Stockholders for entering into any amendments, modifications
or waivers to this Agreement and the other Seller Documents as KBMC may be
directed by the holders of a majority of the outstanding Capital Stock. The
Stockholders hereby ratify all actions taken by KBMC in accordance with the
foregoing authorization.
Section 10.9 Assignability. Neither the rights nor the obligations of
any party to this Agreement may be transferred or assigned. Any purported
assignment of this Agreement or any of the rights and obligations hereunder
shall be ab initio null, void and of no force or effect.
Section 10.10 Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective successors
and, if applicable, permitted assigns.
59
<PAGE>
Section 10.11 Third-Party Beneficiaries. Each party intends that this
Agreement shall not benefit or create any right or cause of action in any Person
other than the parties hereto, other than any lender to, or other financing
source of, the Purchaser.
Section 10.12 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original but all of which,
when taken together, shall constitute but one and the same instrument.
Section 10.13 Guarantee. R.A.B. Holdings, Inc., a Delaware corporation
("RAB"), does hereby guarantee (this "Guarantee") the performance by the
Purchaser of its obligations under this Agreement. The enforcement of this
Guarantee is not conditioned upon the exhaustion of all available remedies
against the Purchaser. This Guarantee shall immediately terminate and be of no
force or effect after the occurrence of the Closing. RAB acknowledges that the
Sellers are relying on this Guarantee in entering into this Agreement.
Section 10.14 Expenses. Except as otherwise expressly provided herein,
each party to this Agreement shall bear all of its own costs and expenses in
connection with the negotiation, execution and delivery of this Agreement and
the performance of its obligations hereunder and in connection with the
transactions contemplated hereby, including, without limitation, all fees and
expenses of its agents, representatives, attorneys and accountants. The Sellers
shall be responsible for the expenses related to the termination of the Credit
Agreement, including, without limitation, filing all Termination Statements
whether filed before or after the Closing Date.
Section 10.15 Termination of Securities Purchase Agreements and
Shareholders Agreement. (a) MANO and each of the Stockholders, by executing and
delivering a counterpart of this Agreement, does hereby agree and consent to,
concurrently with the occurrence of the Closing hereunder, the termination of
the Securities Purchase Agreement dated as of May 31, 1996 between MANO and such
Stockholder and the promissory note which secures such Securities Purchase
Agreement.
(b) MANO and each of the Stockholders, by executing and
delivering a counterpart of this Agreement, does hereby agree and consent to,
concurrently with the occurrence of the Closing hereto, the termination of the
Amended and Restated Stockholders Agreement dated as of May 31, 1996, between
MANO and the Stockholders who are parties thereto.
60
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
61
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date first written above.
R.A.B. FOOD HOLDINGS, INC.
By:_____________________________________
Name:
Title:
R.A.B. HOLDINGS, INC., for purposes of
Section 10.13 only
By:_____________________________________
Name:
Title:
MANO HOLDINGS I, LLC
By:_____________________________________
Name: Robert D. Kroll
Title: President
KBMC ACQUISITION COMPANY, L.P.
By: KBMC Management, L.P.,
its General Partner
By: KBMC GP, Inc., its general partner
By:_____________________________________
Name: Samuel P. Frieder
Title: Vice President
<PAGE>
MANO HOLDINGS CORPORATION
By:_____________________________________
Name:
Title:
THE STOCKHOLDERS OF
MANO HOLDINGS CORPORATION
----------------------------------------
James A. Kohlberg
----------------------------------------
Pamela Kohlberg
Trust FBO Andrew S. Kohlberg dated
4/4/89
By:_____________________________________
Name:
Title:
Trust FBO Nathan N. Davis dated 9/90
By:_____________________________________
Name:
Title:
----------------------------------------
Arthur Aeder
----------------------------------------
George W. Peck IV
<PAGE>
----------------------------------------
Donald Stone
----------------------------------------
Robert Svikhart
----------------------------------------
Walter W. Farley
----------------------------------------
Christopher Lacovara
----------------------------------------
Samuel P. Frieder
----------------------------------------
Marion Antonini
----------------------------------------
Daniel Yih
The Paine Family Trust
By:_____________________________________
Name:
Title:
1995 JK GRAT
By:_____________________________________
Name:
Title:
<PAGE>
----------------------------------------
Albert G. Pastino
----------------------------------------
Ranjit Bhonsle
----------------------------------------
Jerome Kohlberg Jr.
----------------------------------------
Brian D. Crosby
----------------------------------------
Evan Wildstein
----------------------------------------
Robert Kroll
FOR PURPOSES OF SERVING AS THE SELLERS'
DESIGNEE PURSUANT TO SECTION 6.12 AND AS
PROCESS AGENT PURSUANT TO SECTION 10.6
AND FOR NO OTHER PURPOSE KOHLBERG & CO.,
L.L.C.
By:_____________________________________
Name:
Title:
<PAGE>
CERTIFICATE OF INCORPORATION
OF
R.A.B. HOLDINGS, INC.
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and promoting the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware (particularly Chapter 1,
Title 8 of the Delaware Code and the acts amendatory thereof and supplemental
thereto, and known, identified and referred to as the "General Corporation Law
of the State of Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called
the "corporation") is R.A.B. Holdings, Inc.
SECOND: The address, including street, number, city, and
county, of the registered office of the corporation in the State of Delaware
is 1050 South State Street, Dover, Delaware 19903, County of Kent; and the
name of the registered agent of the corporation in the State of Delaware is
Bridge Service Corp.
THIRD: The purpose of the corporation is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation
shall have authority to issue is Two Hundred (200), all of which are with One
Cent ($.01) par value. All such shares are of one class and are shares of
Common Stock.
FIFTH: The name and the mailing address of the
incorporator are as follows:
NAME MAILING ADDRESS
Brooke Spiegel c/o Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them and/or between
this corporation and its
<PAGE>
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver of receivers appointed for this corporation under the provisions
of section 291 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the corporation, as the case may be, and also on the
corporation.
EIGHTH: For management of the business and for the conduct
of the affairs of the corporation, and in further definition, limitation and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute
the whole Board of Directors shall be fixed by, or in the
manner provided in, the Bylaws. The phrase "whole Board"
and the phrase "total number of directors" shall be deemed
to have the same meaning, to wit, the total number of
directors which the corporation would have if there were
no vacancies. No election of directors need be by written
ballot.
2. After the original or other By-laws of the corporation
have been adopted, amended, or repealed, as the case may
be, in accordance with the provisions of Section 109 of
the General Corporation Law of the State of Delaware, and,
after the corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws
of the corporation may be exercised by the Board of
Directors of the corporation; provided, however, that any
provision for the classification of directors of the
corporation for staggered terms pursuant to the provisions
of subsection (d) of Section 141 of the General
Corporation law of the State of Delaware shall be set
forth in an initial Bylaw or in a Bylaw adopted by the
stockholders entitled to vote of the corporation unless
provisions for such classification shall be set forth in
this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue
only one class of stock, each outstanding share shall
entitle the holder thereof to notice of, and the right to
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<PAGE>
vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one
class of stock, no outstanding share of any class of stock
which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of
stockholders except as the provisions of paragraph (2) of
subsection (b) of section 242 of the General Corporation
Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is
otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the
number of authorized shares of said class.
NINTH: The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to
in or covered by said section, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified
may be entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in
force may be added or inserted in the manner and at the time prescribed by
said laws, and all rights at any time conferred upon the stockholders of the
corporation by this certificate of incorporation are granted subject to the
provisions of this Article ELEVENTH.
IN WITNESS WHEREOF, the undersigned has signed this
certificate and does hereby affirm the statements contained therein as true
under the penalties of perjury this 6th day of May, 1996.
-----------------------------
Brooke Spiegel
Incorporator
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<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 03/25/1997
971097093 - 2620608
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
R.A.B. HOLDINGS, INC.
R.A.B. Holdings, Inc., a Delaware corporation (the
"Corporation"), does hereby certify as follows:
1. The name of the corporation is R.A.B. HOLDINGS, INC.
2. The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
May 6, 1996.
3. The amendment of the Corporation's Certificate of
Incorporation set forth below was approved by unanimous written consent of the
board of Directors of the Corporation and by the sole stockholder of the
Corporation.
4. The Certificate of Incorporation is hereby amended by
changing the FOURTH Article thereof so that, as amended, said Article shall be
read in full as follows:
"FOURTH: The total number of shares which the Corporation
shall have authority to issue is 1,100,000 shares, consisting of 1,000,000
shares of common stock, par value $0.01 per share, and 100,000 shares of
preferred stock, without par value. The Board of Directors may authorize the
issuance from time to time of the preferred stock in one or more series and
with such designations, powers, preferences and rights and the qualifications,
limitations or restrictions (which may differ with respect to each series) as
the Board of Directors may fix by resolution."
5. The foregoing amendment was duly adopted in accordance
with the applicable provisions of Sections 228 and 242 of the General
Corporation Law of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be duly executed by its President and Chief Executive Officer
this 25th day of March 1997.
By: /s/ Richard A. Bernstein
-------------------------------------
Richard A. Bernstein
President and Chief Executive Officer
<PAGE>
BY-LAWS
OF
R.A.B. HOLDINGS, INC.
(a Delaware corporation)
--------------------------
<PAGE>
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.1. Annual Meeting. The annual meeting of stockholders
shall be held on the date and at the time determined, from time to time, by
the board of directors of the corporation (the "Board"). The first annual
meeting shall be held on a date within thirteen (13) months after the
organization of the corporation.
1.2. Special Meetings. Special meetings of the stockholders
may be called by resolution of the Board or the Chairman of the Board. Special
meetings of the stockholders shall be called by the Chairman of the Board or
the Secretary of the corporation upon the written request (stating the purpose
or purposes of the meeting) of a majority of the directors then in office or
of the holders of a majority of the outstanding shares of the common stock of
the corporation entitled to vote at such meeting. Only business related to the
purposes set forth in the notice of the meeting may be transacted at a special
meeting.
1.3. Place and Time of Meetings. Meetings of the
stockholders may be held in or outside the State of Delaware at the place and
time specified by the Board or the officer or stockholders requesting the
meeting. Whenever the Board or the officers or stockholders requesting the
meeting shall fail to specify such place, the meeting shall be held at the
principal place of business of the corporation.
1.4. Notice of Meetings; Waiver of Notice. Written notice of
each meeting of stockholders shall be given to each stockholder entitled to
vote at the meeting, except that (a) it shall not be necessary to give notice
to any stockholder who submits a signed waiver of notice before or after the
meeting, and (b) no notice of an adjourned meeting need be given except when
required under Section 1.5 of these By-laws. Each notice of a meeting shall be
given, personally or by mail, not less than ten (10) nor more than sixty (60)
days before the date of the meeting, unless the lapse of the prescribed period
shall have been waived, and shall state the time and place of the meeting, and
unless it is the annual meeting, shall state at whose direction or request the
meeting is called. The notice of an annual meeting shall state that the
meeting is called for the election of directors and for the transaction of
other business which may properly come before the meeting, and shall (if any
other action which could be taken at a special meeting is to be taken at such
annual meeting) state the
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<PAGE>
purpose or purposes. The notice of a special meeting shall in all instances
state the purpose or purposes for which the meeting is called. The notice of
any meeting shall also include, or be accompanied by, any additional
statements, information or documents prescribed by the General Corporation
Law. If mailed, the notice shall be considered given when deposited, with
postage thereon prepaid, in the United States mail and addressed to a
stockholder at his address on the corporation's records or at such other
address which a stockholder may have furnished by request in writing to the
Secretary of the corporation. The attendance of any stockholder at a meeting,
without protesting at the beginning of the meeting that the meeting is not
lawfully called or convened, shall constitute a waiver of notice by such
stockholder. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice.
1.5. Quorum. At any meeting of stockholders, the presence in
person or by proxy of the holders of a majority of the shares entitled to vote
shall constitute a quorum for the transaction of any business. In the absence
of a quorum, a majority in voting interest of those present or, if no
stockholders are present, any officer entitled to preside at or to act as
secretary of the meeting, may adjourn the meeting until a quorum is present.
At any adjourned meeting at which a quorum is present, any action may be taken
which might have been taken at the meeting as originally called. No notice of
an adjourned meeting need be given if the time and place are announced at the
meeting at which the adjournment is taken except that, if adjournment is for
more than thirty (30) days or if, after the adjournment, a new record date is
fixed for the meeting, notice of the adjourned meeting shall be given pursuant
to Section 1.4 of these By-laws.
1.6. Voting; Proxies. Each stockholder of record shall be
entitled to one vote for every share registered in such stockholder's name on
all matters to which such stockholder is entitled to vote. Corporate action to
be taken by stockholder vote, other than the election of directors, shall be
authorized by a majority of the votes cast at a meeting of stockholders,
except as otherwise provided by law or by Section 1.9 of these By-laws.
Directors shall be elected in the manner provided in Section 2.1 of these
By-laws. Voting need not be by ballot unless requested by a majority of the
stockholders entitled to vote at the meeting or ordered by the chairman of the
meeting; provided however, that all elections of directors shall be by written
ballot, unless otherwise provided
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<PAGE>
in the certificate of incorporation of the corporation. Each stockholder
entitled to vote at any meeting of stockholders or to express consent to or
dissent from corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy. Every proxy must be signed
by the stockholder or by his duly authorized attorney-in-fact. No proxy shall
be valid after three (3) years from its date unless such proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power.
1.7. List of Stockholders. Not less than ten (10) days prior
to the date of any meeting of stockholders, the Secretary of the corporation
or any other officer of the corporation who has charge of the stock ledger of
the corporation shall prepare a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. For a period of not less than ten (10) days prior to the meeting,
the list shall be available during ordinary business hours for inspection by
any stockholder for any purpose germane to the meeting. During this period,
the list shall be kept either (a) at a place specified in the notice of the
meeting which is within the city or other municipality or community where the
meeting is to be held or (b) at the place where the meeting is to be held. The
list shall also be available for inspection by stockholders at the time and
place of the meeting. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the list required
by this Section 1.7 or the books of the corporation, or to vote at any meeting
of stockholders.
1.8. Inspectors. The directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one
or more inspectors. In case any person who may be appointed as an inspector
fails to appear or act, the vacancy may be filled by appointment made by the
directors in advance of the meeting or at the meeting by the person presiding
thereat. Each inspector, if any, before entering upon the discharge of such
inspector's duties, shall take and sign an oath faithfully to execute the
duties of inspectors at such meeting with strict impartiality and according to
the best of such inspector's ability. The inspector or inspectors, if any,
shall determine the number of shares of stock
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<PAGE>
outstanding and the voting power of each, the shares of stock represented at
the meeting, the existence of a quorum and the validity and effect of any
proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count
and tabulate all votes, ballots or consents, determine the results and do such
acts as are proper to conduct the election or vote with fairness to all
stockholders. At the request of the person presiding at the meeting, the
inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by such inspector or inspectors and
execute a certificate of any fact found by such inspector or inspectors.
1.9. Action by Consent Without a Meeting. Any action
required or permitted by the General Corporation Law of the State of Delaware
to be taken at any meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voting. Prompt notice of the taking of any such
corporate action by written consent shall be given to those stockholders who
did not consent in writing. Action taken pursuant to this Section 1.9 shall be
subject to the provisions of Section 228 of the General Corporation Law of the
State of Delaware.
ARTICLE II
BOARD OF DIRECTORS
2.1. Number, Qualification, Election and Term of Directors.
The business and affairs of the corporation shall be managed by or under the
direction of the entire Board, which shall initially consist of three (3)
directors. Subject to the provisions of any applicable shareholders agreement
from time to time in effect, the number of directors may be changed by
resolution of a majority of the Board or by a majority of the stockholders,
but no decrease may shorten the term of any incumbent director. The first
Board, unless the members thereof shall have been named in the certificate of
incorporation of the corporation, shall be elected by the incorporator or
incorporators of the Corporation, and shall hold office until the first annual
meeting of stockholders and until their respective successors are elected and
qualified. Thereafter, directors shall be elected at each annual
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<PAGE>
meeting of stockholders by a plurality of the votes cast and shall hold office
until the next annual meeting of stockholders and until the election and
qualification of their respective successors, subject to the provisions of
Section 2.9 of these By-laws. A director need not be a stockholder of the
corporation, a citizen of the United States or a resident of the State of
Delaware. As used in these By-laws, the term "entire Board" means the total
number of directors which the corporation would have if there were no
vacancies on the Board.
2.2. Quorum and Manner of Acting. A majority of the entire
Board shall constitute a quorum for the transaction of business at any
meeting, except as permitted by Section 2.10 of these By-laws or as otherwise
provided by the General Corporation Law. Action of the Board shall be
authorized by the vote of a majority of the directors present at the time of
the vote if there is a quorum, unless otherwise provided by law or these
By-laws. In the absence of a quorum, a majority of the directors present may
adjourn any meeting from time to time until a quorum is present. The quorum
and voting provisions of these By-laws shall not be construed or interpreted
and conflicting with any provisions of the General Corporation Law which
govern a meeting of directors held to fill vacancies and newly created
directorships or action by disinterested directors.
2.3. Place of Meetings. Meetings of the Board shall be held
at such place in or outside the State of Delaware as shall be fixed by the
Board.
2.4. Annual and Regular Meetings. Annual meetings of the
Board for the election of officers and consideration of other matters shall be
held either (a) without notice immediately after the annual meeting of
stockholders and at the same place, or (b) as soon as practicable after the
annual meeting of stockholders, upon notice as provided in Section 2.6 of
these By-laws. Regular meetings of the Board may be held without notice at
such times and places as the Board determines. If the day fixed for a regular
meeting is a legal holiday, the meeting shall be held on the next succeeding
business day.
2.5. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board or by a majority of the entire Board.
2.6. Notice of Meetings; Waiver of Notice. Notice of the
time and place of each special meeting of the Board, and of each annual
meeting not held immediately after the annual meeting of stockholders and at
the same place, shall be given to each director by mailing such notice
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to each director at such director's residence or usual place of business at
least five (5) days before the meeting, or by delivering or telecopying such
notice to each director at least two (2) days before the meeting. Notice of a
special meeting shall also state the purpose or purposes for which the meeting
is called. Notice need not be given to any director who submits a signed
waiver of notice before or after the meeting or who attends the meeting
without protesting at the beginning of the meeting the transaction of any
business because the meeting was not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board need be specified in any written waiver of notice. Notice
of any adjourned meeting need not be given, other than by announcement at the
meeting at which the adjournment is taken.
2.7. Board Action Without a Meeting. Any action required or
permitted to be taken at any meeting by the Board or any committee thereof, as
the case may be, may be taken without a meeting if all of the members of the
Board or any committee thereof, as the case may be, consent in writing to the
adoption of a resolution authorizing the action. The resolution and the
written consents by the members of the Board or any committee thereof, as the
case maybe, shall be filed with the minutes of the proceedings of the Board or
any committee thereof, as the case maybe.
2.8. Participation in Board Meetings by Conference
Telephone. Any or all members of the Board may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the
same time. Participation by such means shall constitute presence in person at
the meeting.
2.9. Resignation and Removal of Directors. Any director may
resign at any time by delivering such director's resignation in writing to the
Chairman of the Board, the President or Secretary of the corporation, to take
effect at the time specified in the resignation. The acceptance of a
resignation, unless required by its terms, shall not be necessary to make it
effective. Any or all of the directors may be removed at any time, either with
or without cause, by vote of the holders of a majority of the shares then
entitled to vote at an election of directors.
2.10. Vacancies. Subject to the provisions of any applicable
shareholders agreement from time to time in effect, any vacancy in the Board,
including one created by an increase in the number of directors, may be filled
for the unexpired term by a majority vote of the remaining directors
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then in office, although less than a quorum, or by the sole remaining
director. Such directors who are elected in the interim to fill vacancies and
newly created directorships shall hold office until the next annual meeting of
stockholders and until the election and qualification of their respective
successors, subject to the provisions of Section 2.9 of these By-laws.
2.11. Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board, shall have and may exercise
powers and authority of the Board in the management of the business and
affairs of the corporation with the exception of any authority the delegation
of which is prohibited by Section 141 of the General Corporation Law, and may
authorize the seal of the corporation to be affixed to all papers which may
require it.
2.12. Compensation. Directors shall receive such
compensation as the Board determines, together with reimbursement of their
reasonable expenses in connection with the performance of their duties. At the
discretion of the Board, a director may also be paid for serving the
corporation, its affiliates or subsidiaries in other capacities.
ARTICLE III
OFFICERS
3.1. Number; Security. The executive officers of the
corporation shall be the Chairman of the Board, the President, one or more
Vice Presidents (including one or more Executive Vice Presidents and Senior
Vice Presidents, if the Board so determines), a Secretary and a Treasurer.
Except as may otherwise be provided in the resolution of the Board choosing
him, no officer need be a director of the corporation. Any two or more offices
may be held by the same person. The
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Board may require any officer, agent or employee to give security for the
faithful performance of his duties.
3.2. Election; Term of Office. The executive officers of the
corporation shall be elected annually by the Board, and each such officer
shall hold office until the next annual meeting of the Board and until the
election of such officer's successor, subject to the provisions of Section 3.4
of these By-laws.
3.3. Subordinate Officers. The Board may appoint subordinate
officers (including Assistant Secretaries and Assistant Treasurers), agents or
employees, each of whom shall hold office for such period and have such powers
and duties as the Board determines. The Board may delegate to any executive
officer or to any committee the power to appoint and define the powers and
duties of any subordinate officers, agents or employees.
3.4. Resignation and Removal of Officers. Any officer may
resign at any time by delivering his resignation in writing to the Chairman of
the Board, the President or the Secretary of the corporation, such resignation
to take effect at the time specified in the resignation. The acceptance of a
resignation, unless required by its terms, shall not be necessary to make any
such resignation effective. Any officer elected or appointed by the Board or
appointed by an executive officer may be removed by the Board either with or
without cause, and in the case of an officer appointed by an executive
officer, by the executive officer which appointed him or by the Chairman of
the Board.
3.5. Vacancies. A vacancy in any office may be filled
for the unexpired term in the manner prescribed in Sections 3.2 and 3.3 of
these By-laws for election or appointment to the office.
3.6. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board and of the stockholders, and shall have
such powers and duties as the Board assigns to him.
3.7. The President. The President shall serve as the chief
executive officer and chief operating officer of the corporation. Subject to
the control of the Board and the Chairman of the Board, the President shall
have general and active management of the business and affairs of the
corporation and shall have such other powers and duties as the Board or the
Chairman of the Board assigns to him.
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<PAGE>
3.8. Vice President. Each Vice President shall have
such powers and duties as the Board or the President and/or the Chairman
of the Board assigns to him.
3.9. The Treasurer. The Treasurer shall be the chief
financial officer of the corporation and shall be in charge of the
corporation's books and accounts. Subject to the control of the Board, the
Treasurer shall have such other powers and duties as the Board or the
President and/or the Chairman of the Board assigns to him.
3.10. The Secretary. The Secretary shall be the secretary
of, and keep the minutes of, all meetings of the Board and of the
stockholders, shall be responsible for giving any required notice of all
meetings of stockholders and of the Board, and shall keep the seal and, when
authorized by the Board or any committee thereof, apply it to any instrument
requiring it. Subject to the control of the Board, the Secretary shall have
such powers and duties as the Board or the President and/or the Chairman of
the Board assigns to him. In the absence of the Secretary from any meeting,
the minutes shall be kept by the person appointed for that purpose by the
presiding officer.
3.11. Salaries. The Board may fix the officers'
salaries, if any, or it may authorize the Chairman of the Board to fix
the salary of any other officer.
ARTICLE IV
SHARES
4.1. Certificates Representing Stock. The corporation's
shares shall be represented by certificates in the form approved by the Board.
Each certificate shall be signed by the Chairman of the Board, the President
or a Vice President, and by the Secretary or an Assistant Secretary, and shall
be sealed with the corporation's seal or a facsimile of the seal. Any or all
of the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, such certificate may be
issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue. Whenever the corporation
shall be authorized to issue more than one class of stock or more than one
series of any class of stock, and whenever the corporation shall issue any
shares of its stock as partly paid stock, the certificates representing shares
of any such class or series or of any such
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partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
4.2. Uncertificated Shares. Subject to any conditions
imposed by the General Corporation Law, the Board of the corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of the stock of the corporation shall be uncertificated shares. Within
a reasonable time after the issuance or transfer of any uncertificated shares,
the corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
4.3. Fractional Share Interests. The corporation may, but
shall not be required to, issue fractions of a share. If the corporation does
not issue fractions of a share, it shall (a) arrange for the disposition of
fractional interests by those entitled thereto, (b) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined or (c) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder thereof to
receive a full share upon the surrender of such scrip or warrants aggregating
a full share. A certificate for a fractional share or an uncertificated
fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon and to participate in any of the assets of the corporation
in the event of liquidation. The Board may cause scrip or warrants to be
issued subject to the conditions that they shall become void if not exchanged
for certificates representing the full shares or uncertificated full shares
before a specified date, or subject to the conditions that the shares for
which scrip or warrants are exchangeable may be sold by the corporation and
the proceeds thereof distributed to the holders of scrip or warrants, or
subject to any other conditions which the Board may impose.
4.4. Transfers; Stolen Certificates, etc. Upon compliance
with provisions restricting the transfer or registration of transfer of shares
of stock, if any, transfers or registration of transfers of shares of stock of
the corporation shall be made only on the stock ledger of the corporation by
the registered holder thereof, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the
corporation or with a transfer agent or a
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registrar, if any, and on surrender of the certificate or certificates for
such shares of stock properly endorsed and the payment of all taxes due
thereon. The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by it and
alleged to have been lost, stolen or destroyed, and the Board may require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
4.5. Determination of Stockholders of Record. In order that
the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the Board may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting. In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board. If no record date has been
fixed by the Board, the record date for determining the stockholders entitled
to consent to corporate action in writing without a meeting, when no prior
action by the Board is required by the General Corporation Law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the books and records
in which proceedings of meetings of stockholders are recorded. Delivery made
to the corporation's registered office shall be
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by hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board and prior action by the Board is
required by the General Corporation Law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the date on which the Board
adopts the resolution taking such prior action. In order that the corporation
may determine the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more
than sixty (60) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board adopts the resolution relating
thereto.
ARTICLE V
INDEMNIFICATION
The corporation shall indemnify and advance litigation
expenses to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware, to each person who is or was an
officer or director of the corporation and is or was a party or is threatened
to be made a party to any action, suit or other proceeding by reason of the
fact that such officer or director is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE VI
OFFICES
6.1. Registered Office. The corporation shall at all
times maintain a registered office in the State of Delaware.
6.2. Other Offices. The corporation may also have offices at
such places both within and without the State of Delaware as the Board may
from time to time determine.
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ARTICLE VII
MISCELLANEOUS
7.1. Seal. The Board shall adopt a corporate seal, which
shall be in the form of a circle and shall bear the corporation's name and the
year and state in which it was incorporated.
7.2. Fiscal Year. The Board may determine the corporation's
fiscal year. Until changed by the Board, the last day of the corporation's
fiscal year shall be the 31st day of December.
7.3. Voting of Shares in Other Corporations. Shares in other
corporations which are held by the corporation may be represented and voted by
the Chairman of the Board, the President or an Executive Vice President of the
corporation or by a proxy or proxies appointed by one of them. The Board may,
however, appoint some other person to vote the shares.
7.4. Amendments. Subject to the provisions of the
certificate of incorporation of the corporation and to the provisions of the
General Corporation Law, these By-laws may be amended, altered or repealed and
new By-laws may be adopted by a vote of the majority of the stockholders
entitled to vote thereon or by a majority of the entire Board, but any By-law
adopted by the stockholders may only be amended, repealed or altered by a vote
of the majority of the stockholders.
7.5. Meaning of Certain Terms. As used herein in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock"
or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the corporation is authorized to issue only
one class of shares of stock, and said reference is also intended to include
any outstanding share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class upon which or upon whom the
certificate of incorporation confers such rights where there are two or more
classes or series of shares of stock or upon which or upon whom the General
Corporation Law confers such rights notwithstanding that the certificate of
incorporation may provide for more than one class or series of shares of
stock, one or more of which are limited or denied such rights thereunder;
provided, however, that no such right shall vest in the event of an increase
or a decrease in the authorized number of shares of stock of any class or
series which is
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otherwise denied voting rights under the provisions of the certificate of
incorporation, except as may otherwise be required by the General Corporation
Law.
7.6. Delaware Law. All references herein to the General
Corporation Law of the State of Delaware (the "General Corporation Law") shall
be to the General Corporation Law, as from time to time amended and in effect.
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CERTIFICATE OF INCORPORATION
OF
R.A.B. FOOD HOLDINGS, INC.
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and promoting the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware (particularly Chapter 1,
Title 8 of the Delaware Code and the acts amendatory thereof and supplemental
thereto, and known, identified and referred to as the "General Corporation Law
of the State of Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called
the "Corporation") is R.A.B. Food Holdings, Inc.
SECOND: The address, including street, number, city, and
county, of the registered office of the Corporation in the State of Delaware
is 30 Old Rudnick Lane, Dover, Delaware 19901, County of Kent; and the name of
the registered agent of the Corporation in the State of Delaware is Bridge
Service Corp.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation
shall have authority to issue is Two Hundred (200), all of which are with One
Cent ($.01) par value. All such shares are of one class and are shares of
Common Stock.
FIFTH: The name and the mailing address of the
incorporator are as follows:
NAME MAILING ADDRESS
Brooke Spiegel c/o Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its
<PAGE>
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver of receivers appointed for the Corporation under the provisions of
section 291 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
EIGHTH: For management of the business and for the conduct
of the affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of
Directors. The number of directors which shall constitute
the whole Board of Directors shall be fixed by, or in the
manner provided in, the Bylaws. The phrase "whole Board"
and the phrase "total number of directors" shall be deemed
to have the same meaning, to wit, the total number of
directors which the Corporation would have if there were
no vacancies. No election of directors need be by written
ballot.
2. After the original or other By-laws of the Corporation
have been adopted, amended, or repealed, as the case may
be, in accordance with the provisions of Section 109 of
the General Corporation Law of the State of Delaware, and,
after the Corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws
of the Corporation may be exercised by the Board of
Directors of the Corporation; provided, however, that any
provision for the classification of directors of the
Corporation for staggered terms pursuant to the provisions
of subsection (d) of Section 141 of the General
Corporation law of the State of Delaware shall be set
forth in an initial Bylaw or in a Bylaw adopted by the
stockholders entitled to vote of the Corporation unless
provisions for such classification shall be set forth in
this certificate of incorporation.
3. Whenever the Corporation shall be authorized to issue
only one class of stock, each outstanding share shall
entitle the holder thereof to notice of, and the
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right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one
class of stock, no outstanding share of any class of stock
which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of
stockholders, except as the provisions of paragraph (2) of
subsection (b) of Section 242 of the General Corporation
Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is
otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the
number of authorized shares of said class.
NINTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented.
TENTH: The Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said Section from and
against any and all of the expenses (including, without limitation, attorneys
fees and expenses), liabilities or other matters referred to in or covered by
said Section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to
action in another capacity while holding the position giving rise to the
entitlement to indemnification, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, estate, executors and administrators of any such person.
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in
force may be added or inserted in the manner and at the time prescribed by
said laws, and all rights at any time conferred upon the stockholders of the
Corporation by this certificate of incorporation are granted subject to the
provisions of this Article ELEVENTH.
IN WITNESS WHEREOF, the undersigned has signed this
certificate and does hereby affirm the statements contained therein as true
under the penalties of perjury this 26th day of January, 1998.
-----------------------------
Brooke Spiegel, Incorporator
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CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
R.A.B. FOOD HOLDINGS, INC.
Pursuant to the provisions of Section 242 of the Delaware
General Corporation Law, the undersigned, being the President of the
Corporation, hereby certifies and sets forth as follows:
FIRST: The name of the Corporation is R.A.B. Food Holdings,
Inc.
SECOND: The Certificate of Incorporation was filed by the
Secretary of State on the 26th day of January, 1998.
THIRD: The Certificate of Incorporation of the Corporation is
hereby amended by striking out Article First thereof and by substituting in lieu
of said Article the following new Article:
"FIRST: The name of the Corporation is R.A.B.
Enterprises, Inc."
FOURTH: The amendment to the Certificate of Incorporation
was authorized by the consent of the sole holder of all of the issued and
outstanding stock entitled to vote by a written consent given in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, I hereunto set my hand this 14th day of
April, 1998 and I affirm that the foregoing certificate is my act and deed and
that the facts stated therein as true.
/s/ Richard A. Bernstein
------------------------------
Richard A. Bernstein, President
<PAGE>
BY-LAWS
OF
R.A.B. ENTERPRISES, INC.
(a Delaware corporation)
<PAGE>
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.1. Annual Meeting. The annual meeting of stockholders
shall be held on the date and at the time determined, from time to time, by
the board of directors of the corporation (the "Board"). The first annual
meeting shall be held on a date within thirteen (13) months after the
organization of the corporation.
1.2. Special Meetings. Special meetings of the stockholders
may be called by resolution of the Board or the Chairman of the Board. Special
meetings of the stockholders shall be called by the Chairman of the Board or
the Secretary of the corporation upon the written request (stating the purpose
or purposes of the meeting) of a majority of the directors then in office or
of the holders of a majority of the outstanding shares of the common stock of
the corporation entitled to vote at such meeting. Only business related to the
purposes set forth in the notice of the meeting may be transacted at a special
meeting.
1.3. Place and Time of Meetings. Meetings of the
stockholders may be held in or outside the State of Delaware at the place and
time specified by the Board or the officer or stockholders requesting the
meeting. Whenever the Board or the officers or stockholders requesting the
meeting shall fail to specify such place, the meeting shall be held at the
principal place of business of the corporation.
1.4. Notice of Meetings; Waiver of Notice. Written notice of
each meeting of stockholders shall be given to each stockholder entitled to
vote at the meeting, except that (a) it shall not be necessary to give notice
to any stockholder who submits a signed waiver of notice before or after the
meeting, and (b) no notice of an adjourned meeting need be given except when
required under Section 1.5 of these By-laws. Each notice of a meeting shall be
given, personally or by mail, not less than ten (10) nor more than sixty (60)
days before the date of the meeting, unless the lapse of the prescribed period
shall have been waived, and shall state the time and place of the meeting, and
unless it is the annual meeting, shall state at whose direction or request the
meeting is called. The notice of an annual meeting shall state that the
meeting is called for the election of directors and for the transaction of
other business which may properly come before the meeting, and shall (if any
other action which could be taken at a special meeting is to be taken at such
annual meeting) state
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the purpose or purposes. The notice of a special meeting shall in all instances
state the purpose or purposes for which the meeting is called. The notice of
any meeting shall also include, or be accompanied by, any additional
statements, information or documents prescribed by the General Corporation
Law. If mailed, the notice shall be considered given when deposited, with
postage thereon prepaid, in the United States mail and addressed to a
stockholder at his address on the corporation's records or at such other
address which a stockholder may have furnished by request in writing to the
Secretary of the corporation. The attendance of any stockholder at a meeting,
without protesting at the beginning of the meeting that the meeting is not
lawfully called or convened, shall constitute a waiver of notice by such
stockholder. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice.
1.5. Quorum. At any meeting of stockholders, the presence in
person or by proxy of the holders of a majority of the shares entitled to vote
shall constitute a quorum for the transaction of any business. In the absence
of a quorum, a majority in voting interest of those present or, if no
stockholders are present, any officer entitled to preside at or to act as
secretary of the meeting, may adjourn the meeting until a quorum is present.
At any adjourned meeting at which a quorum is present, any action may be taken
which might have been taken at the meeting as originally called. No notice of
an adjourned meeting need be given if the time and place are announced at the
meeting at which the adjournment is taken except that, if adjournment is for
more than thirty (30) days or if, after the adjournment, a new record date is
fixed for the meeting, notice of the adjourned meeting shall be given pursuant
to Section 1.4 of these By-laws.
1.6. Voting; Proxies. Each stockholder of record shall be
entitled to one vote for every share registered in such stockholder's name on
all matters to which such stockholder is entitled to vote. Corporate action to
be taken by stockholder vote, other than the election of directors, shall be
authorized by a majority of the votes cast at a meeting of stockholders,
except as otherwise provided by law or by Section 1.9 of these By-laws.
Directors shall be elected in the manner provided in Section 2.1 of these
By-laws. Voting need not be by ballot unless requested by a majority of the
stockholders entitled to vote at the meeting or ordered by the chairman of the
meeting; provided however, that all elections of directors shall be by written
ballot, unless otherwise
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provided in the certificate of incorporation of the corporation. Each
stockholder entitled to vote at any meeting of stockholders or to express
consent to or dissent from corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. Every proxy must be
signed by the stockholder or by his duly authorized attorney-in-fact. No proxy
shall be valid after three (3) years from its date unless such proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power.
1.7. List of Stockholders. Not less than ten (10) days prior
to the date of any meeting of stockholders, the Secretary of the corporation
or any other officer of the corporation who has charge of the stock ledger of
the corporation shall prepare a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. For a period of not less than ten (10) days prior to the meeting,
the list shall be available during ordinary business hours for inspection by
any stockholder for any purpose germane to the meeting. During this period,
the list shall be kept either (a) at a place specified in the notice of the
meeting which is within the city or other municipality or community where the
meeting is to be held or (b) at the place where the meeting is to be held. The
list shall also be available for inspection by stockholders at the time and
place of the meeting. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the list required
by this Section 1.7 or the books of the corporation, or to vote at any meeting
of stockholders.
1.8. Inspectors. The directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one
or more inspectors. In case any person who may be appointed as an inspector
fails to appear or act, the vacancy may be filled by appointment made by the
directors in advance of the meeting or at the meeting by the person presiding
thereat. Each inspector, if any, before entering upon the discharge of such
inspector's duties, shall take and sign an oath faithfully to execute the
duties of inspectors at such meeting with strict impartiality and according to
the best of such inspector's ability. The inspector or inspectors, if any,
shall determine the number of shares of stock
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outstanding and the voting power of each, the shares of stock represented at
the meeting, the existence of a quorum and the validity and effect of any
proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count
and tabulate all votes, ballots or consents, determine the results and do such
acts as are proper to conduct the election or vote with fairness to all
stockholders. At the request of the person presiding at the meeting, the
inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by such inspector or inspectors and
execute a certificate of any fact found by such inspector or inspectors.
1.9. Action by Consent Without a Meeting. Any action
required or permitted by the General Corporation Law of the State of Delaware
to be taken at any meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voting. Prompt notice of the taking of any such
corporate action by written consent shall be given to those stockholders who
did not consent in writing. Action taken pursuant to this Section 1.9 shall be
subject to the provisions of Section 228 of the General Corporation Law of the
State of Delaware.
ARTICLE II
BOARD OF DIRECTORS
2.1. Number, Qualification, Election and Term of Directors.
The business and affairs of the corporation shall be managed by or under the
direction of the entire Board, which shall initially consist of three (3)
directors. Subject to the provisions of any applicable shareholders agreement
from time to time in effect, the number of directors may be changed by
resolution of a majority of the Board or by a majority of the stockholders,
but no decrease may shorten the term of any incumbent director. The first
Board, unless the members thereof shall have been named in the certificate of
incorporation of the corporation, shall be elected by the incorporator or
incorporators of the Corporation, and shall hold office until the first annual
meeting of stockholders and until their respective successors are elected and
qualified. Thereafter, directors shall be elected at each annual
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meeting of stockholders by a plurality of the votes cast and shall hold office
until the next annual meeting of stockholders and until the election and
qualification of their respective successors, subject to the provisions of
Section 2.9 of these By-laws. A director need not be a stockholder of the
corporation, a citizen of the United States or a resident of the State of
Delaware. As used in these By-laws, the term "entire Board" means the total
number of directors which the corporation would have if there were no
vacancies on the Board.
2.2. Quorum and Manner of Acting. A majority of the entire
Board shall constitute a quorum for the transaction of business at any
meeting, except as permitted by Section 2.10 of these By-laws or as otherwise
provided by the General Corporation Law. Action of the Board shall be
authorized by the vote of a majority of the directors present at the time of
the vote if there is a quorum, unless otherwise provided by law or these
By-laws. In the absence of a quorum, a majority of the directors present may
adjourn any meeting from time to time until a quorum is present. The quorum
and voting provisions of these By-laws shall not be construed or interpreted
and conflicting with any provisions of the General Corporation Law which
govern a meeting of directors held to fill vacancies and newly created
directorships or action by disinterested directors.
2.3. Place of Meetings. Meetings of the Board shall be held
at such place in or outside the State of Delaware as shall be fixed by the
Board.
2.4. Annual and Regular Meetings. Annual meetings of the
Board for the election of officers and consideration of other matters shall be
held either (a) without notice immediately after the annual meeting of
stockholders and at the same place, or (b) as soon as practicable after the
annual meeting of stockholders, upon notice as provided in Section 2.6 of
these By-laws. Regular meetings of the Board may be held without notice at
such times and places as the Board determines. If the day fixed for a regular
meeting is a legal holiday, the meeting shall be held on the next succeeding
business day.
2.5. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board or by a majority of the entire Board.
2.6. Notice of Meetings; Waiver of Notice. Notice of the
time and place of each special meeting of the Board, and of each annual
meeting not held immediately after the annual meeting of stockholders and at
the same place, shall be given to each director by mailing such notice
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to each director at such director's residence or usual place of business at
least five (5) days before the meeting, or by delivering or telecopying such
notice to each director at least two (2) days before the meeting. Notice of a
special meeting shall also state the purpose or purposes for which the meeting
is called. Notice need not be given to any director who submits a signed
waiver of notice before or after the meeting or who attends the meeting
without protesting at the beginning of the meeting the transaction of any
business because the meeting was not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board need be specified in any written waiver of notice. Notice
of any adjourned meeting need not be given, other than by announcement at the
meeting at which the adjournment is taken.
2.7. Board Action Without a Meeting. Any action required or
permitted to be taken at any meeting by the Board or any committee thereof, as
the case may be, may be taken without a meeting if all of the members of the
Board or any committee thereof, as the case may be, consent in writing to the
adoption of a resolution authorizing the action. The resolution and the
written consents by the members of the Board or any committee thereof, as the
case maybe, shall be filed with the minutes of the proceedings of the Board or
any committee thereof, as the case maybe.
2.8. Participation in Board Meetings by Conference
Telephone. Any or all members of the Board may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the
same time. Participation by such means shall constitute presence in person at
the meeting.
2.9. Resignation and Removal of Directors. Any director may
resign at any time by delivering such director's resignation in writing to the
Chairman of the Board, the President or Secretary of the corporation, to take
effect at the time specified in the resignation. The acceptance of a
resignation, unless required by its terms, shall not be necessary to make it
effective. Any or all of the directors may be removed at any time, either with
or without cause, by vote of the holders of a majority of the shares then
entitled to vote at an election of directors.
2.10. Vacancies. Subject to the provisions of any applicable
shareholders agreement from time to time in effect, any vacancy in the Board,
including one created by an
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increase in the number of directors, may be filled for the unexpired term by a
majority vote of the remaining directors then in office, although less than a
quorum, or by the sole remaining director. Such directors who are elected in the
interim to fill vacancies and newly created directorships shall hold office
until the next annual meeting of stockholders and until the election and
qualification of their respective successors, subject to the provisions of
Section 2.9 of these By-laws.
2.11. Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board, shall have and may exercise
powers and authority of the Board in the management of the business and
affairs of the corporation with the exception of any authority the delegation
of which is prohibited by Section 141 of the General Corporation Law, and may
authorize the seal of the corporation to be affixed to all papers which may
require it.
2.12. Compensation. Directors shall receive such
compensation as the Board determines, together with reimbursement of their
reasonable expenses in connection with the performance of their duties. At the
discretion of the Board, a director may also be paid for serving the
corporation, its affiliates or subsidiaries in other capacities.
ARTICLE III
OFFICERS
3.1. Number; Security. The executive officers of the
corporation shall be the Chairman of the Board, the President, one or more
Vice Presidents (including one or more Executive Vice Presidents and Senior
Vice Presidents, if the Board so determines), a Secretary and a Treasurer.
Except as may otherwise be provided in the resolution of the Board choosing
him, no officer need be a director of the corporation. Any two or more offices
may be held by the same person. The
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Board may require any officer, agent or employee to give security for the
faithful performance of his duties.
3.2. Election; Term of Office. The executive officers of the
corporation shall be elected annually by the Board, and each such officer
shall hold office until the next annual meeting of the Board and until the
election of such officer's successor, subject to the provisions of Section 3.4
of these By-laws.
3.3. Subordinate Officers. The Board may appoint subordinate
officers (including Assistant Secretaries and Assistant Treasurers), agents or
employees, each of whom shall hold office for such period and have such powers
and duties as the Board determines. The Board may delegate to any executive
officer or to any committee the power to appoint and define the powers and
duties of any subordinate officers, agents or employees.
3.4. Resignation and Removal of Officers. Any officer may
resign at any time by delivering his resignation in writing to the Chairman of
the Board, the President or the Secretary of the corporation, such resignation
to take effect at the time specified in the resignation. The acceptance of a
resignation, unless required by its terms, shall not be necessary to make any
such resignation effective. Any officer elected or appointed by the Board or
appointed by an executive officer may be removed by the Board either with or
without cause, and in the case of an officer appointed by an executive
officer, by the executive officer which appointed him or by the Chairman of
the Board.
3.5. Vacancies. A vacancy in any office may be filled for
the unexpired term in the manner prescribed in Sections 3.2 and 3.3 of these
By-laws for election or appointment to the office.
3.6. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board and of the stockholders, and shall have
such powers and duties as the Board assigns to him.
3.7. The President. The President shall serve as the chief
executive officer and chief operating officer of the corporation. Subject to
the control of the Board and the Chairman of the Board, the President shall
have general and active management of the business and affairs of the
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corporation and shall have such other powers and duties as the Board or the
Chairman of the Board assigns to him.
3.8. Vice President. Each Vice President shall have such
powers and duties as the Board or the President and/or the Chairman of the
Board assigns to him.
3.9. The Treasurer. The Treasurer shall be the chief
financial officer of the corporation and shall be in charge of the
corporation's books and accounts. Subject to the control of the Board, the
Treasurer shall have such other powers and duties as the Board or the
President and/or the Chairman of the Board assigns to him.
3.10. The Secretary. The Secretary shall be the secretary
of, and keep the minutes of, all meetings of the Board and of the
stockholders, shall be responsible for giving any required notice of all
meetings of stockholders and of the Board, and shall keep the seal and, when
authorized by the Board or any committee thereof, apply it to any instrument
requiring it. Subject to the control of the Board, the Secretary shall have
such powers and duties as the Board or the President and/or the Chairman of
the Board assigns to him. In the absence of the Secretary from any meeting,
the minutes shall be kept by the person appointed for that purpose by the
presiding officer.
3.11. Salaries. The Board may fix the officers' salaries, if
any, or it may authorize the Chairman of the Board to fix the salary of any
other officer.
ARTICLE IV
SHARES
4.1. Certificates Representing Stock. The corporation's
shares shall be represented by certificates in the form approved by the Board.
Each certificate shall be signed by the Chairman of the Board, the President
or a Vice President, and by the Secretary or an Assistant Secretary, and shall
be sealed with the corporation's seal or a facsimile of the seal. Any or all
of the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, such certificate may be
issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue. Whenever the corporation
shall be authorized to issue more than one class of stock or more
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than one series of any class of stock, and whenever the corporation shall issue
any shares of its stock as partly paid stock, the certificates representing
shares of any such class or series or of any such partly paid stock shall set
forth thereon the statements prescribed by the General Corporation Law. Any
restrictions on the transfer or registration of transfer of any shares of stock
of any class or series shall be noted conspicuously on the certificate
representing such shares.
4.2. Uncertificated Shares. Subject to any conditions
imposed by the General Corporation Law, the Board of the corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of the stock of the corporation shall be uncertificated shares. Within
a reasonable time after the issuance or transfer of any uncertificated shares,
the corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
4.3. Fractional Share Interests. The corporation may, but
shall not be required to, issue fractions of a share. If the corporation does
not issue fractions of a share, it shall (a) arrange for the disposition of
fractional interests by those entitled thereto, (b) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined or (c) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder thereof to
receive a full share upon the surrender of such scrip or warrants aggregating
a full share. A certificate for a fractional share or an uncertificated
fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon and to participate in any of the assets of the corporation
in the event of liquidation. The Board may cause scrip or warrants to be
issued subject to the conditions that they shall become void if not exchanged
for certificates representing the full shares or uncertificated full shares
before a specified date, or subject to the conditions that the shares for
which scrip or warrants are exchangeable may be sold by the corporation and
the proceeds thereof distributed to the holders of scrip or warrants, or
subject to any other conditions which the Board may impose.
4.4. Transfers; Stolen Certificates, etc. Upon compliance
with provisions restricting the transfer or registration of transfer of shares
of stock, if any, transfers or registration of transfers of shares of stock of
the corporation shall be made only on the stock ledger of the
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corporation by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the corporation or with a transfer agent or a registrar, if any, and on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon. The corporation may issue a
new certificate of stock or uncertificated shares in place of any certificate
theretofore issued by it and alleged to have been lost, stolen or destroyed, and
the Board may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to give the corporation a bond sufficient to indemnify
the corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
4.5. Determination of Stockholders of Record. In order that
the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, the Board may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting. In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board. If no record date has been
fixed by the Board, the record date for determining the stockholders entitled
to consent to corporate action in writing without a meeting, when no prior
action by the Board is required by the General Corporation Law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer
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or agent of the corporation having custody of the books and records in which
proceedings of meetings of stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
and prior action by the Board is required by the General Corporation Law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the date on
which the Board adopts the resolution taking such prior action. In order that
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than sixty (60) days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
ARTICLE V
INDEMNIFICATION
The corporation shall indemnify and advance litigation
expenses to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware, to each person who is or was an
officer or director of the corporation and is or was a party or is threatened
to be made a party to any action, suit or other proceeding by reason of the
fact that such officer or director is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE VI
OFFICES
6.1. Registered Office. The corporation shall at all times
maintain a registered office in the State of Delaware.
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6.2. Other Offices. The corporation may also have offices at
such places both within and without the State of Delaware as the Board may
from time to time determine.
ARTICLE VII
MISCELLANEOUS
7.1. Seal. The Board shall adopt a corporate seal, which
shall be in the form of a circle and shall bear the corporation's name and the
year and state in which it was incorporated.
7.2. Fiscal Year. The Board may determine the corporation's
fiscal year. Until changed by the Board, the last day of the corporation's
fiscal year shall be the 31st day of December.
7.3. Voting of Shares in Other Corporations. Shares in other
corporations which are held by the corporation may be represented and voted by
the Chairman of the Board, the President or an Executive Vice President of the
corporation or by a proxy or proxies appointed by one of them. The Board may,
however, appoint some other person to vote the shares.
7.4. Amendments. Subject to the provisions of the
certificate of incorporation of the corporation and to the provisions of the
General Corporation Law, these By-laws may be amended, altered or repealed and
new By-laws may be adopted by a vote of the majority of the stockholders
entitled to vote thereon or by a majority of the entire Board, but any By-law
adopted by the stockholders may only be amended, repealed or altered by a vote
of the majority of the stockholders.
7.5. Meaning of Certain Terms. As used herein in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock"
or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the corporation is authorized to issue only
one class of shares of stock, and said reference is also intended to include
any outstanding share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class upon which or upon whom the
certificate of incorporation confers such rights where there are two or more
classes or series of shares of stock or upon which or upon whom the General
Corporation Law confers such rights notwithstanding that the certificate of
incorporation
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may provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder; provided, however, that no
such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the certificate of incorporation,
except as may otherwise be required by the General Corporation Law.
7.6. Delaware Law. All references herein to the General
Corporation Law of the State of Delaware (the "General Corporation Law") shall
be to the General Corporation Law, as from time to time amended and in effect.
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CERTIFICATE OF INCORPORATION
OF
MILLBROOK ACQUISITION CORP.-II
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and promoting the purposes
hereinafter stated, under the provisions and subject to the requirements of the
laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware
Code and the acts amendatory thereof and supplemental thereto, and known,
identified and referred to as the "General Corporation Law of the State of
Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Millbrook Acquisition Corp.-II.
SECOND: The address, including street, number, city, and
county, of the registered office of the Corporation in the State of Delaware is
1013 Centre Road, Wilmington, Delaware 19805, and the name of the registered
agent of the corporation in the State of Delaware at such address is Corporation
Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, all of which are
with a par value of $.01 per share. All such shares are of one class and are
shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator
are as follows:
NAME MAILING ADDRESS
---- ---------------
Christopher S. Auguste c/o Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the
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Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver of receivers
appointed for the Corporation under the provisions of section 291 of
Title 8 of the Delaware Code order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case
may be, agree to any compromise or arrangement and to any reorganization
of the Corporation as consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
EIGHTH: For management of the business and for the conduct
of the affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of
the affairs of the Corporation shall be vested in its Board of Directors. The
number of directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the Bylaws. The phrase "whole Board" and
the phrase "total number of directors" shall be deemed to have the same meaning,
to wit, the total number of directors which the Corporation would have if there
were no vacancies. No election of directors need be by written ballot.
2. After the original or other By-laws of the
Corporation have been adopted, amended, or repealed, as the case may be, in
accordance with the provisions of Section 109 of the General Corporation Law of
the State of Delaware, and, after the Corporation has received any payment for
any of its stock, the power to adopt, amend, or repeal the Bylaws of the
Corporation may be exercised by the Board of Directors of the Corporation;
provided, however, that any provision for the classification of directors of the
Corporation for staggered terms pursuant to the provisions of subsection (d) of
Section 141 of the General Corporation law of the State of Delaware shall be set
forth in an initial Bylaw or in a Bylaw adopted by the stockholders entitled to
vote of the Corporation unless provisions for such classification shall be set
forth in this certificate of incorporation.
3. Whenever the Corporation shall be authorized to
issue only one class of stock, each outstanding share shall entitle the holder
thereof to notice
2
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of, and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of the certificate of incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders, except as the provisions of
paragraph (2) of subsection (b) of Section 242 of the General Corporation Law of
the State of Delaware shall otherwise require; provided, that no share of any
such class which is otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the number of authorized shares
of said class.
NINTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.
TENTH: The Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said Section from and
against any and all of the expenses (including, without limitation, attorneys'
fees and expenses), liabilities or other matters referred to in or covered by
said Section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding the position giving rise to the entitlement to
indemnification, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, estate, executors and administrators of any such person.
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
IN WITNESS WHEREOF, the undersigned has signed this
certificate and does hereby affirm the statements contained therein as true
under the penalties of perjury this 27th day of April, 1998.
-----------------------------
Christopher S. Auguste
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CERTIFICATE OF OWNERSHIP AND MERGER
OF
MILLBROOK DISTRIBUTION SERVICES INC.
(an Indiana corporation)
AND
MILLBROOK ACQUISITION CORP.-II
(a Delaware corporation)
Pursuant to Section 253 of the General
Corporation Law of the State of Delaware
It is hereby certified that:
FIRST: Millbrook Distribution Services Inc. (the
"Corporation") was organized pursuant to the Indiana Business Corporation Law
(the "IBCL") on January 18, 1933.
SECOND: Immediately prior to the merger the Corporation was
the owner of all of the outstanding shares of the capital stock of Millbrook
Acquisition Corp.-II ("MAC-II"), a corporation organized pursuant to the
provisions of the General Corporation Law of Delaware on April 27, 1998.
THIRD: The board of directors of the Corporation by
unanimous written consent determined to merge the Corporation into MAC-II and
did adopt the following resolutions on April __, 1998:
RESOLVED, that the Corporation does hereby merge
itself into its wholly owned subsidiary, Millbrook
Acquisition Corp.-II, a Delaware corporation ("MAC-II"),
with MAC-II being the surviving corporation and thereby
assuming all of the obligations and liabilities of the
Corporation.
RESOLVED, that the terms and conditions of the
merger are as follows:
From and after the effective time of the merger,
all of the estate, property, rights, privileges, powers, and
franchises of the Corporation shall become vested in and be
held by MAC-II as fully and entirely and without change or
diminution as the same were before held and enjoyed by the
Corporation, and MAC-II shall assume all of the obligations
of the Corporation.
<PAGE>
Upon completion of the merger, the holders of the
shares of the Corporation shall receive an equivalent number
of shares of the shares of MAC-II and shall have no further
claims of any kind or nature; and all of the shares of
MAC-II held by the Corporation, its sole shareholder, shall
be surrendered and canceled.
After the effective time of the merger, each holder
of record of any outstanding certificate or certificates
theretofore representing common stock of the Corporation may
surrender the same to MAC-II at its office in Massachusetts
and such holder shall be entitled upon such surrender to
receive in exchange therefor a certificate or certificates
representing an equal number of shares of common stock of
MAC-II. Until so surrendered, each outstanding certificate
which prior to the effective time of the merger represented
one or more shares of common stock of the Corporation shall
be deemed for all corporate purposes to evidence ownership
of an equal number of shares of common stock of MAC-II.
From and after the effective time of the merger,
the Certificate of Incorporation and the Bylaws of the
surviving corporation shall be the Certificate of
Incorporation and Bylaws of MAC-II, as in effect immediately
prior to such effective time, except that Article FIRST of
the Certificate of Incorporation, relating to the name of
the corporation, is hereby amended and changed so as to read
as follows:
"FIRST: The name of the corporation
(hereinafter called the "Corporation") is
Millbrook Distribution Services Inc.";
and said Certificate of Incorporation, as herein
amended and changed, and Bylaws shall continue in full force
and effect until further amended and changed in the manner
prescribed by the provisions of the laws of the General
Corporation Law of the State of Delaware.
At and after the effective time of the merger, the
members of the board of directors and officers of the
Corporation shall be the members of the board of directors
and the corresponding officers of MAC-II.
FOURTH: The proposed merger has been approved, adopted,
certified, executed and acknowledged by the Corporation in accordance with the
laws under which it is organized.
FIFTH: The merger shall become effective on the date and at
the time at which the filing of the Certificate of Ownership and Merger in the
State of Delaware and the Articles of Merger in the State of Indiana has
occurred in the manner required to cause the merger to become effective.
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<PAGE>
IN WITNESS WHEREOF, we have signed this certificate this ___ day of
April, 1998.
MILLBROOK DISTRIBUTION SERVICES INC. MILLBROOK ACQUISITION CORP.-II
By:__________________________________ By:_________________________________
Name: Name:
Title: Title:
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<PAGE>
BY-LAWS
OF
MILLBROOK DISTRIBUTION SERVICES INC.
(a Delaware corporation)
---------------
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.1 Annual Meeting. The annual meeting of stockholders shall
be held on the date and at the time determined, from time to time, by the
board of directors of the corporation (the "Board"). The first annual meeting
shall be held on a date within thirteen (13) months after the organization of
the corporation.
1.2 Special Meetings. Special meetings of the stockholders
may be called by resolution of the Board or the Chairman of the Board. Special
meetings of the stockholders shall be called by the Chairman of the Board or
the Secretary of the corporation upon the written request (stating the purpose
or purposes of the meeting) of a majority of the directors then in office or
of the holders of a majority of the outstanding shares of the common stock of
the corporation entitled to vote at such meeting. Only business related to the
purposes set forth in the notice of the meeting may be transacted at a special
meeting.
1.3 Place and Time of Meetings. Meetings of the stockholders
may be held in or outside the State of Delaware at the place and time
specified by the Board or the officer or stockholders requesting the meeting.
Whenever the Board or the officers or stockholders requesting the meeting
shall fail to specify such place, the meeting shall be held at the principal
place of business of the corporation.
1.4 Notice of Meetings; Waiver of Notice. Written notice of
each meeting of stockholders shall be given to each stockholder entitled to
vote at the meeting, except that (a) it shall not be necessary to give notice
to any stockholder who submits a signed waiver of notice before or after the
meeting, and (b) no notice of an adjourned meeting need be given except when
required
<PAGE>
under Section 1.5 of these By-laws. Each notice of a meeting shall be given,
personally or by mail, not less than ten (10) nor more than sixty (60) days
before the date of the meeting, unless the lapse of the prescribed period
shall have been waived, and shall state the time and place of the meeting, and
unless it is the annual meeting, shall state at whose direction or request the
meeting is called. The notice of an annual meeting shall state that the
meeting is called for the election of directors and for the transaction of
other business which may properly come before the meeting, and shall (if any
other action which could be taken at a special meeting is to be taken at such
annual meeting) state the purpose or purposes. The notice of a special meeting
shall in all instances state the purpose or purposes for which the meeting is
called. The notice of any meeting shall also include, or be accompanied by,
any additional statements, information or documents prescribed by the General
Corporation Law. If mailed, the notice shall be considered given when
deposited, with postage thereon prepaid, in the United States mail and
addressed to a stockholder at his address on the corporation's records or at
such other address which a stockholder may have furnished by request in
writing to the Secretary of the corporation. The attendance of any stockholder
at a meeting, without protesting at the beginning of the meeting that the
meeting is not lawfully called or convened, shall constitute a waiver of
notice by such stockholder. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
1.5 Quorum. At any meeting of stockholders, the presence in
person or by proxy of the holders of a majority of the shares entitled to vote
shall constitute a quorum for the transaction of any business. In the absence
of a quorum, a majority in voting interest of those present or, if no
stockholders are present, any officer entitled to preside at or to act as
secretary of the meeting, may adjourn the meeting until a quorum is present.
At any adjourned meeting at which a quorum is present, any action may be taken
which might have been taken at the meeting as originally called. No notice of
an adjourned meeting need be given if the time and place are announced at the
meeting at which the adjournment is taken except that, if adjournment is for
more than thirty (30) days or if, after the adjournment, a new record date is
fixed for the meeting, notice of the adjourned meeting shall be given pursuant
to Section 1.4 of these By-laws.
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1.6 Voting; Proxies. Each stockholder of record shall be
entitled to one vote for every share registered in such stockholder's name on
all matters to which such stockholder is entitled to vote. Corporate action to
be taken by stockholder vote, other than the election of directors, shall be
authorized by a majority of the votes cast at a meeting of stockholders,
except as otherwise provided by law or by Section 1.9 of these By-laws.
Directors shall be elected in the manner provided in Section 2.1 of these
By-laws. Voting need not be by ballot unless requested by a majority of the
stockholders entitled to vote at the meeting or ordered by the chairman of the
meeting; provided however, that all elections of directors shall be by written
ballot, unless otherwise provided in the certificate of incorporation of the
corporation. Each stockholder entitled to vote at any meeting of stockholders
or to express consent to or dissent from corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy. Every
proxy must be signed by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after three (3) years from its date
unless such proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power.
1.7 List of Stockholders. Not less than ten (10) days prior
to the date of any meeting of stockholders, the Secretary of the corporation
or any other officer of the corporation who has charge of the stock ledger of
the corporation shall prepare a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. For a period of not less than ten (10) days prior to the meeting,
the list shall be available during ordinary business hours for inspection by
any stockholder for any purpose germane to the meeting. During this period,
the list shall be kept either (a) at a place specified in the notice of the
meeting which is within the city or other municipality or community where the
meeting is to be held or (b) at the place where the meeting is to be held. The
list shall also be available for inspection by stockholders at the time and
place of the meeting. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the list required
by this Section 1.7 or the books of the corporation, or to vote at any meeting
of stockholders.
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<PAGE>
1.8 Inspectors. The directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one
or more inspectors. In case any person who may be appointed as an inspector
fails to appear or act, the vacancy may be filled by appointment made by the
directors in advance of the meeting or at the meeting by the person presiding
thereat. Each inspector, if any, before entering upon the discharge of such
inspector's duties, shall take and sign an oath faithfully to execute the
duties of inspectors at such meeting with strict impartiality and according to
the best of such inspector's ability. The inspector or inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum and the validity and effect of any proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the results and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. At the request of the
person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by
such inspector or inspectors and execute a certificate of any fact found by
such inspector or inspectors.
1.9 Action by Consent Without a Meeting. Any action required
or permitted by the General Corporation Law of the State of Delaware to be
taken at any meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voting. Prompt notice of the taking of any such corporate
action by written consent shall be given to those stockholders who did not
consent in writing. Action taken pursuant to this Section 1.9 shall be subject
to the provisions of Section 228 of the General Corporation Law of the State
of Delaware.
ARTICLE II
BOARD OF DIRECTORS
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<PAGE>
2.1 Number, Qualification, Election and Term of Directors.
The business and affairs of the corporation shall be managed by or under the
direction of the entire Board, which shall initially consist of four (4)
directors. Subject to the provisions of any applicable shareholders agreement
from time to time in effect, the number of directors may be changed by
resolution of a majority of the Board or by a majority of the stockholders,
but no decrease may shorten the term of any incumbent director. The first
Board, unless the members thereof shall have been named in the certificate of
incorporation of the corporation, shall be elected by the incorporator or
incorporators of the Corporation, and shall hold office until the first annual
meeting of stockholders and until their respective successors are elected and
qualified. Thereafter, directors shall be elected at each annual meeting of
stockholders by a plurality of the votes cast and shall hold office until the
next annual meeting of stockholders and until the election and qualification
of their respective successors, subject to the provisions of Section 2.9 of
these By-laws. A director need not be a stockholder of the corporation, a
citizen of the United States or a resident of the State of Delaware. As used
in these By-laws, the term "entire Board" means the total number of directors
which the corporation would have if there were no vacancies on the Board.
2.2 Quorum and Manner of Acting. A majority of the entire
Board shall constitute a quorum for the transaction of business at any
meeting, except as permitted by Section 2.10 of these By-laws or as otherwise
provided by the General Corporation Law. Action of the Board shall be
authorized by the vote of a majority of the directors present at the time of
the vote if there is a quorum, unless otherwise provided by law or these
By-laws. In the absence of a quorum, a majority of the directors present may
adjourn any meeting from time to time until a quorum is present. The quorum
and voting provisions of these By-laws shall not be construed or interpreted
and conflicting with any provisions of the General Corporation Law which
govern a meeting of directors held to fill vacancies and newly created
directorships or action by disinterested directors.
2.3 Place of Meetings. Meetings of the Board shall be held
at such place in or outside the State of Delaware as shall be fixed by the
Board.
2.4 Annual and Regular Meetings. Annual meetings of the
Board for the election of officers and consideration of other matters shall be
held either (a) without notice immediately after the annual meeting of
stockholders and at the same place, or (b) as soon as practicable after the
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<PAGE>
annual meeting of stockholders, upon notice as provided in Section 2.6 of
these By-laws. Regular meetings of the Board may be held without notice at
such times and places as the Board determines. If the day fixed for a regular
meeting is a legal holiday, the meeting shall be held on the next succeeding
business day.
2.5 Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board or by a majority of the entire Board.
2.6 Notice of Meetings; Waiver of Notice. Notice of the time
and place of each special meeting of the Board, and of each annual meeting not
held immediately after the annual meet ing of stockholders and at the same
place, shall be given to each director by mailing such notice to each director
at such director's residence or usual place of business at least five (5) days
before the meeting, or by delivering or telecopying such notice to each
director at least two (2) days before the meeting. Notice of a special meeting
shall also state the purpose or purposes for which the meeting is called.
Notice need not be given to any director who submits a signed waiver of notice
before or after the meeting or who attends the meeting without protesting at
the beginning of the meeting the transaction of any business because the
meeting was not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
need be specified in any written waiver of notice. Notice of any adjourned
meeting need not be given, other than by announcement at the meeting at which
the adjournment is taken.
2.7 Board Action Without a Meeting. Any action required or
permitted to be taken at any meeting by the Board or any committee thereof, as
the case may be, may be taken without a meeting if all of the members of the
Board or any committee thereof, as the case may be, consent in writing to the
adoption of a resolution authorizing the action. The resolution and the
written consents by the members of the Board or any committee thereof, as the
case maybe, shall be filed with the minutes of the proceedings of the Board or
any committee thereof, as the case maybe.
2.8 Participation in Board Meetings by Conference Telephone.
Any or all members of the Board may participate in a meeting of the Board by
means of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each
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<PAGE>
other at the same time. Participation by such means shall constitute presence in
person at the meeting.
2.9 Resignation and Removal of Directors. Any director may
resign at any time by delivering such director's resignation in writing to the
Chairman of the Board, the President or Secretary of the corporation, to take
effect at the time specified in the resignation. The acceptance of a
resignation, unless required by its terms, shall not be necessary to make it
effective. Any or all of the directors may be removed at any time, either with
or without cause, by vote of the holders of a majority of the shares then
entitled to vote at an election of directors.
2.10 Vacancies. Subject to the provisions of any applicable
shareholders agreement from time to time in effect, any vacancy in the Board,
including one created by an increase in the number of directors, may be filled
for the unexpired term by a majority vote of the remaining directors then in
office, although less than a quorum, or by the sole remaining director. Such
directors who are elected in the interim to fill vacancies and newly created
directorships shall hold office until the next annual meeting of stockholders
and until the election and qualification of their respective successors,
subject to the provisions of Section 2.9 of these By-laws.
2.11 Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board, shall have and may exercise
powers and authority of the Board in the management of the business and
affairs of the corporation with the exception of any authority the delegation
of which is prohibited by Section 141 of the General Corporation Law, and may
authorize the seal of the corporation to be affixed to all papers which may
require it.
2.12 Compensation. Directors shall receive such compensation
as the Board determines, together with reimbursement of their reasonable
expenses in connection with the
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performance of their duties. At the discretion of the Board, a director may also
be paid for serving the corporation, its affiliates or subsidiaries in other
capacities.
ARTICLE III
OFFICERS
3.1 Number; Security. The executive officers of the
corporation shall be the Chairman of the Board, the President, one or more
Vice Presidents (including one or more Executive Vice Presidents and Senior
Vice Presidents, if the Board so determines), a Secretary and a Treasurer.
Except as may otherwise be provided in the resolution of the Board choosing
him, no officer need be a director of the corporation. Any two or more offices
may be held by the same person. The Board may require any officer, agent or
employee to give security for the faithful performance of his duties.
3.2 Election; Term of Office. The executive officers of the
corporation shall be elected annually by the Board, and each such officer
shall hold office until the next annual meeting of the Board and until the
election of such officer's successor, subject to the provisions of Section 3.4
of these By-laws.
3.3 Subordinate Officers. The Board may appoint subordinate
officers (including Assistant Secretaries and Assistant Treasurers), agents or
employees, each of whom shall hold office for such period and have such powers
and duties as the Board determines. The Board may delegate to any executive
officer or to any committee the power to appoint and define the powers and
duties of any subordinate officers, agents or employees.
3.4 Resignation and Removal of Officers. Any officer may
resign at any time by delivering his resignation in writing to the Chairman of
the Board, the President or the Secretary of the corporation, such resignation
to take effect at the time specified in the resignation. The acceptance of a
resignation, unless required by its terms, shall not be necessary to make any
such resignation effective. Any officer elected or appointed by the Board or
appointed by an executive officer may be removed by the Board either with or
without cause, and in the case of an officer
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<PAGE>
appointed by an executive officer, by the executive officer which appointed him
or by the Chairman of the Board.
3.5 Vacancies. A vacancy in any office may be filled for the
unexpired term in the manner prescribed in Sections 3.2 and 3.3 of these
By-laws for election or appointment to the office.
3.6 Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board and of the stockholders, and shall have
such powers and duties as the Board assigns to him.
3.7 The President. The President shall serve as the chief
executive officer and chief operating officer of the corporation. Subject to
the control of the Board and the Chairman of the Board, the President shall
have general and active management of the business and affairs of the
corporation and shall have such other powers and duties as the Board or the
Chairman of the Board assigns to him.
3.8 Vice President. Each Vice President shall have such
powers and duties as the Board or the President and/or the Chairman of the
Board assigns to him.
3.9 The Treasurer. The Treasurer shall be the chief
financial officer of the corporation and shall be in charge of the
corporation's books and accounts. Subject to the control of the Board, the
Treasurer shall have such other powers and duties as the Board or the
President and/or the Chairman of the Board assigns to him.
3.10 The Secretary. The Secretary shall be the secretary of,
and keep the minutes of, all meetings of the Board and of the stockholders,
shall be responsible for giving any required notice of all meetings of
stockholders and of the Board, and shall keep the seal and, when authorized by
the Board or any committee thereof, apply it to any instrument requiring it.
Subject to the control of the Board, the Secretary shall have such powers and
duties as the Board or the President and/or the Chairman of the Board assigns
to him. In the absence of the Secretary from any meeting, the minutes shall be
kept by the person appointed for that purpose by the presiding officer.
3.11 Salaries. The Board may fix the officers' salaries, if
any, or it may authorize the Chairman of the Board to fix the salary of any
other officer.
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ARTICLE IV
SHARES
4.1 Certificates Representing Stock. The corporation's
shares shall be represented by certificates in the form approved by the Board.
Each certificate shall be signed by the Chairman of the Board, the President
or a Vice President, and by the Secretary or an Assistant Secretary, and
shall be sealed with the corporation's seal or a facsimile of the seal. Any or
all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue. Whenever
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class of stock, and whenever the corporation shall
issue any shares of its stock as partly paid stock, the certificates
representing shares of any such class or series or of any such partly paid
stock shall set forth thereon the statements prescribed by the General
Corporation Law. Any restrictions on the transfer or registration of transfer
of any shares of stock of any class or series shall be noted conspicuously on
the certificate representing such shares.
4.2 Uncertificated Shares. Subject to any conditions imposed
by the General Corporation Law, the Board of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any uncertificated shares,
the corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
4.3 Fractional Share Interests. The corporation may, but
shall not be required to, issue fractions of a share. If the corporation does
not issue fractions of a share, it shall (a) arrange for the disposition of
fractional interests by those entitled thereto, (b) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined or (c) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder thereof to
receive a full share upon the surrender of such scrip or warrants aggregating
a full share. A certificate for a fractional
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share or an uncertificated fractional share shall, but scrip or warrants shall
not unless otherwise provided therein, entitle the holder to exercise voting
rights, to receive dividends thereon and to participate in any of the assets of
the corporation in the event of liquidation. The Board may cause scrip or
warrants to be issued subject to the conditions that they shall become void if
not exchanged for certificates representing the full shares or uncertificated
full shares before a specified date, or subject to the conditions that the
shares for which scrip or warrants are exchangeable may be sold by the
corporation and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the Board may impose.
4.4 Transfers; Stolen Certificates, etc. Upon compliance with
provisions restricting the transfer or registration of transfer of shares of
stock, if any, transfers or registration of transfers of shares of stock of the
corporation shall be made only on the stock ledger of the corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation or with a
transfer agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the payment of all
taxes due thereon. The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by it and
alleged to have been lost, stolen or destroyed, and the Board may require the
owner of the lost, stolen or destroyed certificate, or his legal representative,
to give the corporation a bond sufficient to indemnify the corporation against
any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of any such new certificate
or uncertificated shares.
4.5 Determination of Stockholders of Record. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the Board may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice
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of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting. In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board. If no record date has been fixed
by the Board, the record date for determining the stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board is required by the General Corporation Law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the books and records in which proceedings of
meetings of stockholders are recorded. Delivery made to the corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board and prior
action by the Board is required by the General Corporation Law, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board adopts the resolution taking such prior action. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the Board may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty (60) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board adopts the resolution relating
thereto.
ARTICLE V
INDEMNIFICATION
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The corporation shall indemnify and advance litigation
expenses to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware, to each person who is or was an
officer or director of the corporation and is or was a party or is threatened to
be made a party to any action, suit or other proceeding by reason of the fact
that such officer or director is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
ARTICLE VI
OFFICES
6.1 Registered Office. The corporation shall at all times
maintain a registered office in the State of Delaware.
6.2 Other Offices. The corporation may also have offices at
such places both within and without the State of Delaware as the Board may
from time to time determine.
ARTICLE VII
MISCELLANEOUS
7.1 Seal. The Board shall adopt a corporate seal, which
shall be in the form of a circle and shall bear the corporation's name and the
year and state in which it was incorporated.
7.2 Fiscal Year. The Board may determine the corporation's
fiscal year. Until changed by the Board, the last day of the corporation's
fiscal year shall be the 31st day of December.
7.3 Voting of Shares in Other Corporations. Shares in other
corporations which are held by the corporation may be represented and voted by
the Chairman of the Board, the Presi dent or an Executive Vice President of
the corporation or by a proxy or proxies appointed by one of them. The Board
may, however, appoint some other person to vote the shares.
7.4 Amendments. Subject to the provisions of the certificate
of incorporation of the corporation and to the provisions of the General
Corporation Law, these By-laws may be amended, altered or repealed and new
By-laws may be adopted by a vote of the majority of the stockholders entitled
to vote thereon or by a majority of the entire Board, but any By-law adopted
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by the stockholders may only be amended, repealed or altered by a vote of the
majority of the stockholders.
7.5 Meaning of Certain Terms. As used herein in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock"
or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the corporation is authorized to issue only
one class of shares of stock, and said reference is also intended to include
any outstanding share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class upon which or upon whom the
certificate of incorporation confers such rights where there are two or more
classes or series of shares of stock or upon which or upon whom the General
Corporation Law confers such rights notwithstanding that the certificate of
incorporation may provide for more than one class or series of shares of
stock, one or more of which are limited or denied such rights thereunder;
provided, however, that no such right shall vest in the event of an increase
or a decrease in the authorized number of shares of stock of any class or
series which is otherwise denied voting rights under the provisions of the
certificate of incorporation, except as may otherwise be required by the
General Corporation Law.
7.6 Delaware Law. All references herein to the General
Corporation Law of the State of Delaware (the "General Corporation Law") shall
be to the General Corporation Law, as from time to time amended and in effect.
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CERTIFICATE OF FORMATION
OF
THE B. MANISCHEWITZ COMPANY, LLC
The undersigned, intending to form a Delaware Limited Liability
Company under the Delaware Limited Liability Company Act, executes the
following Certificate of Formation.
FIRST: The name of the limited liability company (the "company")
is: The B. Manischewitz Company, LLC.
SECOND: The address in Delaware of the registered office of the
Company is 1209 Orange Street, Wilmington, Delaware 19801, and
the name of the registered agent for service of process at such
address is The Corporation Trust Company.
By executing this Certificate of Formation, I hereby declare and certify that
this is my act and deed and the facts stated in this Certificate of Formation
are true.
DATED: April 16, 1996
/s/ROBERT KROLL
-----------------------------------
Robert Kroll, Authorized Signatory
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:30 PM 04/26/1996
960122021 - 2618144
April 15, 1996
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EXECUTION COPY
OPERATING AGREEMENT
OF
THE B. MANISCHEWITZ COMPANY, LLC
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OPERATING AGREEMENT
of
THE B. MANISCHEWITZ COMPANY, LLC
OPERATING AGREEMENT (as amended from time to time, this
"Agreement"), dated as of May 31, 1996, among The B. Manischewitz Company, LLC
(the "LLC") and each of the persons identified as a Member on Schedule A
attached hereto (such persons and their respective successors in interests
being hereinafter referred to as a "Member" and collectively, the "Members").
WHEREAS, the Members desire to form a limited liability company under
the Delaware Limited Liability Company Act.
NOW, THEREFORE, in consideration of the mutual covenants expressed
herein, the parties hereby agree as follows:
ARTICLE I
Definitions / Organization and Powers
1.1 Definitions: Rules of Construction. (a) When used
in this Agreement, the following capitalized terms shall have the meanings
ascribed to them below:
"Act" means the Delaware Limited Liability Company Act, 6
Del. C. ss. 18-101 et seq. (as amended from time to time),
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common
control with such Person.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Control" (including, with correlative meanings, the terms
"controlling", "controlled by", and "under common control with") as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract
or otherwise.
"Depreciation" shall mean. with respect to any fiscal year,
an amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for federal income tax purposes,
except that if the Gross Asset Value of the asset differs from its adjusted
tax basis, Depreciation shall be determined in accordance with the methods
used for federal income tax purposes and shall equal the amount that bears the
same ratio to the Gross Asset Value of such asset as the depreciation.
amortization or other cost recovery deduction computed for federal income
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tax purposes with respect to such asset bears to the adjusted federal income tax
bases of such asset, provided, however, that if any such asset that is
depreciable or amortizable has an adjusted federal income tax basis of zero,
the rate of Depreciation shall be as determined by the Members.
"Gross Asset Value" shall mean, with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except that (i)
the Gross Asset Value of any asset contributed to the LLC shall be its gross
fair market value (as agreed upon by the Members) at the time such asset is
contributed or deemed contributed for purposes of computing Capital Accounts,
(ii) upon a contribution of money or other property to the LLC by a new or
existing Member as consideration for Units and upon a distribution of money or
other property to a retiring or continuing Member as consideration for Units,
the Gross Asset Value of all of the assets of the LLC shall be adjusted to
equal their respective gross fair market values (as determined by the
Managers), provided that adjustments pursuant to this clause (ii) shall be
made only if and to the extent that the Managers reasonably determine that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the LLC. (iii) the Gross Asset Value of any asset
distributed in kind to any Member shall be the gross fair market value of such
asset (as determined by the Managers) on the date of such distribution, and
(iv) the Gross Asset Value of any asset determined pursuant to clauses (i) or
(ii) above shall thereafter be adjusted from time to time by the Depreciation
taken into account with respect to such asset for purposes of determining Net
Profit or Net Loss.
"Majority in Interest" means, at any time, the Members who
hold in the aggregate greater than 50% of the profits and capital interests of
the LLC.
"Member" means any person holding a Unit and who shall be
admitted as an additional or substituted Member pursuant to this Agreement, so
long as they remain Members.
"Net Profit" or "Net Loss" shall mean, with respect to any
fiscal year, the taxable income or loss of the LLC as determined for federal
income tax purposes, with the following adjustments:
(i) Such taxable income or loss shall be increased
by the amount, if any, of tax-exempt income received or accrued by the LLC;
(ii) Such taxable income or loss shall be reduced
by the amount, if any, of all expenditures of the LLC described in Section
705(a)(2)(B) of the Code, including expenditures treated as described therein
under ss. 1.704(b)(2)(iv)(i) of the Treasury Regulations;
(iii) If the Gross Asset Value of any asset is
adjusted pursuant to clause (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account, immediately
prior to the event giving rise to such adjustment, as gain or loss from the
disposition of such asset for purposes of computing Net Profit or Net Loss;
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(iv) Gain or loss resulting from any disposition of
any asset with respect to which gain or loss is recognized for Federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
asset disposed of, notwithstanding that such Gross Asset Value differs from the
adjusted tax basis of such asset; and
(v) In lieu of the depreciation, amortization, or
other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such fiscal
year.
Net profit and Net Loss shall not include any items specially allocated
pursuant to Section 6.3 or 6.4. Any such specially allocated items shall be
determined by applying rules analogous to those set forth above.
"Person" means any individual, partnership, limited
liability company, joint venture, corporation, association, trust, or any
other entity or organization, including a government or political subdivision
or any agency or instrumentality thereof.
"Unit" means, the ownership interest of a Member in the LLC,
consisting of (i) such Member's ownership of Units and right to receive a
portion of distributions, (ii) such Member's right to vote or grant or
withhold consents with respect to LLC matters as provided herein or the Act,
and (iii) such Member's other rights and privileges as herein provided.
1.2 Organization. The LLC has been formed by the filing of
its Certificate of Formation (as amended or restated from time to time, the
"Certificate") with the Secretary of State of the State of Delaware pursuant
to the Act. The Certificate may be restated by the Members as provided in the
Act or amended by the Chairman with respect to the address of the registered
office of the LLC in Delaware and the name and address of its registered agent
in Delaware. Other additions to or amendments of the Certificate shall be
authorized as provided in Section 2.5. The Chairman (as defined in Section
2.3(c)) shall deliver a copy of the Certificate and any amendment thereto to
any Member who so requests.
1.3 Purposes and Powers. The LLC shall have authority to
engage in any lawful business, purpose or activity permitted by the Act and it
shall possess and may exercise all of the powers and privileges granted by the
Act or which may be exercised by any person. together with any powers
incidental thereto, so far as such powers or privileges are necessary or
convenient to the conduct, promotion or attainment of the business, purposes
or activities of the LLC.
1.4 Principal Place of Business. The principal office and
place of business of the LLC shall initially be One Manischewitz Plaza, Jersey
City, New Jersey 07302.
1.5 Fiscal Year. The fiscal year of the LLC shall end on
December 31 in each year.
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ARTICLE II
Members
2.1 Members. The initial Members of the LLC and their
addresses shall be listed on Schedule A, and such schedule shall be amended
from time to time by the Chairman to reflect any adjustment in the number of
Units owned by each Member, new addresses for existing Members. and the
withdrawal of Members or the admission of additional Members pursuant to this
Agreement. Schedule A shall constitute the record list of the Members for all
purposes of this Agreement.
2.2 Admission of New Members. Additional persons may be
admitted to the LLC as Members and may participate in the profits, losses,
distributions and capital contributions of the LLC upon such terms as are
established by the Managers (as defined in Section 3. 1), which terms may
include, by amendment of this Agreement, the establishment of classes or
groups of Members having different relative rights, powers and duties,
including without limitation, rights and powers which are superior to those of
existing Members, or the right to vote as a separate class or group on
specified matters. New Members shall be admitted at the time when all
conditions to their admission have been satisfied, as determined by the
Managers, and their identity, ownership of Units and capital contributions
under Section 5.2 shall be established by amendment of Schedule A. Any person
awarded an option or granted a warrant under a plan approved by the Managers
and adopted by the Members shall automatically be admitted as a Member upon
the exercise of such option or warrant, and Schedule A shall be amended to
reflect such admission.
2.3 Meetings of Members.
(a) There shall not be any regular meetings of the
Members. Meetings of Members may be called for any proper purpose at any time
by any Member holding at least twenty percent (20%) of the outstanding Units.
The Member calling the meeting shall determine the date, time and place of each
meeting of Members, and written notice thereof shall be given by such Member to
each other Member not less than five (5) days nor more than sixty (60) days
prior to the date of the meeting. Notice shall be sent to Members of record on
the date when the meeting is called. The business of each meeting of Members
shall be limited to the purposes described in the notice.
(b) Persons holding not less than a Majority in
Interest of the Units shall constitute a quorum for the transaction of any
business at a meeting of Members. Members may attend a meeting in person or by
proxy. Members may also participate in a meeting by means of conference
telephone or similar communications equipment which permits all Members present
to hear each other. If less than a quorum of the Members is present, the meeting
may be adjourned by the chairman to a later date, time and place. Notice of an
adjourned meeting shall be given to all Members who did not attend the meeting
so adjourned. When an adjourned meeting is reconvened, any business may be
transacted which might have been transacted at the meeting as originally called.
(c) The chairman elected by the Managers from time
to time (the "Chairman") shall preside at each meeting of the Members and shall
determine the order of business
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and the procedures to be followed at such meeting of Members. The initial
Chairman shall be Donald S. Keller.
(d) When any notice is required to be given to any
Member, a waiver thereof in writing signed by the Person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
2.4 Action Without a Meeting. Any action required or
permitted to be taken at any meeting of Members may be taken without a meeting
if one or more written consents to such action is signed by the holders of not
less than the minimum number of Units required to approve the action being
taken. Such written consents shall be delivered to the Members at the
principal office of the LLC within sixty (60) days after the first consent is
so delivered. The President shall give prompt notice to all Members who did
not consent of any action taken by written consent of Members without a
meeting.
2.5 Voting Generally. Unless otherwise required by the Act
or provided expressly in this Agreement, all actions, approvals and consents
to be taken or given by the Members under the Act, this Agreement or otherwise
shall require the affirmative vote or written consent of the holders of a
Majority in Interest of the Units, as determined by the number of Units held
by each Member specified on Schedule A, entitled to vote thereon. Except to
the extent expressly provided in this Agreement, no Member shall have any
right to vote, or to take any action under Section 2.4, with respect to any
matter including without limitation any merger, consolidation, reorganization,
recapitalization or sale of assets of the LLC.
2.6 Voting Rights. Except as otherwise provided in this
Agreement or required by applicable law, the Members shall be entitled to vote
on each matter on which members of an LLC formed pursuant to the Act have the
right to vote. Each Member shall be entitled to one vote for each Unit held by
such Member.
2.7 Liquidation. Upon any liquidation, dissolution or
winding up of the LLC, the Members shall be entitled to participate in
accordance with the positive capital account balances of the Members, and when
such balances equal zero, ratably in accordance with the number of Units
owned.
2.8 Limitation of Liability. Except as otherwise provided in
the Act, no Member of the LLC shall be obligated personally for any debt,
obligation or liability of the LLC or of any other Member solely by reason of
being a Member of the LLC. Except as otherwise provided in the Act, by law or
expressly in this Agreement, no Member shall have any fiduciary or other duty
to another Member with respect to the business and affairs of the LLC. No
Member shall have any responsibility to restore any negative balance in his
capital account or to contribute to or in respect of the liabilities or
obligations of the LLC except as required by the Act or other applicable law.
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2.9 Liability of a Member to the LLC. When a Member has
received a distribution made by the LLC in violation of this Operating
Agreement or the Act, the Member is liable to the LLC for the amount of such
distribution.
2.10 No Right to Withdraw. No Member shall have any right to
resign or withdraw from the LLC or to receive any distribution or the
repayment of his capital contribution, except distributions provided in
Section 6.1 and Article VII upon dissolution and liquidation of the LLC.
2.11 Rights to Information. Members shall have the right to
receive from the Chairman upon request a copy of the Certificate and of this
Agreement, as amended from time to time, and such other information regarding
the LLC as is required by the Act, subject to reasonable conditions and
standards established by the Members, which may include, without limitation.
withholding or restrictions on the use of confidential information.
2.12 Priority and Return of Capital. Except as expressly
provided in this Agreement, no Member shall have priority over any other
Member, either as to the return of capital contributions or as to profits,
losses or distributions; provided that this Section 2.14 shall not apply to
loans (as distinguished from capital contributions) which a Member has made to
the LLC.
2.13 Members and Managers Business with and Loans to the
LLC. With the consent of the Managers, any Member or Manager may loan money
to, act as surety for, or transact other business with the LLC, and, subject
to other applicable laws, shall have the same rights and obligations with
respect thereto as a Person who is not a Member or a Manager (including, but
not limited to, the payment of commissions and fees), but no such transaction
shall be deemed to constitute a capital contribution to the LLC and shall not
increase the capital account of any Member engaging in any such transaction.
2.14 Outside Activity. Subject to the terms of any
applicable employment contract or other agreement, each Member and Manager may
engage in any capacity (as owner, employee, consultant, or otherwise) in any
activity, whether or not such activity competes with or is benefitted by the
business of the LLC, without being liable to the LLC or the other Members or
Managers for any income or profit derived from such activity. No Member or
Manager shall be obligated to make available to the LLC or any other Member or
Manager any business opportunity of which such Member or Manager is or becomes
aware.
2.15 Record Date. For the purpose of determining Members
entitled to notice of or to vote at any meeting of Members or any adjournment
thereof, or Members entitled to receive payment of any distribution, or in
order to make a determination of Members for any other purpose, the date on
which notice of the meeting is sent or the date on which the resolution
declaring such distribution is adopted, as the case may be, shall be the
record date for such determination of Members. When a determination of Members
entitled to vote at any meeting of Members has been made as provided in this
Section, such determination shall apply to any adjournment thereof.
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ARTICLE III
Management
3.1 Management. The business and affairs of the LLC shall be
managed by a board of managers (each a "Manager," and collectively, the
"Managers"). The Managers shall direct, manage and control the business of the
LLC to the best of such Managers' ability and, except as expressly provided in
this Agreement to the contrary, each Manager shall have full and complete
authority, power and discretion to make any and all decisions and to do any
and all things which the Managers shall deem to be reasonably required in
light of the LLC's business and objectives, and, except as may be otherwise
provided by the Managers, any Manager, Officer (appointed in accordance with
Section 3.8 hereof) and any other person designated by any Manager shall have
the power to make contracts, enter into transactions, and make and obtain any
commitments on behalf of the LLC.
3.2 Number, Tenure, Removal, Oualifications. The initial
number of Managers of the LLC shall be six. The initial Managers shall be
Samuel P. Frieder, Albert Pastino, James A. Kohlberg, George W. Peck, IV,
Robert D. Kroll and Donald Keller. The Managers shall be appointed by a
Majority in Interest of the Members. Each Manager shall hold office until so
removed by a Majority in Interest of the Members, or until such Manager's
death, dissolution or resignation. Vacancies shall be filled by a Majority In
Interest of the Members. The number of Managers of the LLC may be increased or
decreased by a Majority in Interest of the Members.
A Manager need not be a resident of the State of Delaware
nor a Member.
3.3 Liability for Certain Acts. A Manager of the LLC shall
perform such management duties in good faith, in a manner such Manager
reasonably believes to be in the best interests of the LLC, and with such care
as an ordinarily prudent person in a like position would use under similar
circumstances. A Person who so performs such Person's duties shall not have
any liability by reason of being or having been a Manager of the LLC.
In performing the management duties of a Manager, a Manager
shall be entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case prepared
or presented by persons and groups listed in Sections 3.3(a), (b) and (c)
unless such Manager has knowledge concerning the matter in question that would
cause such reliance to be unwarranted:
(a) one or more employees or other agents of the
LLC whom the Manager reasonably believes to be reliable and competent in the
matters presented;
(b) counsel, public accountants, or other persons
as to matters that the Manager reasonably believes to be within such persons'
professional or expert competence; or
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(c) a committee, upon which such Manager does not
serve, duly designated in accordance with the provisions of this Agreement, as
to matters within its designated authority, which committee the Manager
reasonably believes to merit confidence.
A Manager does not, in any way, guarantee the return of the
Members' capital contributions or a profit for the Members from the operations
of the LLC. A Manager shall not be responsible to any Member because of a loss
of their investment in the LLC or a loss in the operations of the LLC, unless
the loss shall have been the result of the Manager not acting in good faith as
provided in this Section 3.3. The Managers shall be entitled to any other
protection afforded to Managers under the Act.
3.4 Managers Have No Exclusive duty to the LLC. A Manager
shall not be required to manage the LLC as such Manager's sole and exclusive
function, and each Manager may have other, business interests and may engage
in other activities in addition to those relating to the LLC.
3.5 Resignation. Any Manager may resign at any time by
giving written notice to the Chairman, or in the case of Resignation of the
Chairman, the remaining Managers. The resignation of any Manager shall take
effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
3.6 Management Fees. The Managers shall be entitled to
receive fees or other compensation for serving as Managers as may be approved
from time to time by the Managers. In addition, (i) consistent with the terms
of this Agreement and applicable law, the LLC shall disburse the Managers for
all costs incurred by them in connection with their service as Managers, and
(ii) Managers may receive compensation as employees of or consultants to the
LLC. The fees hereunder are intended to constitute payments to partners other
than in their capacity as such under Section 707(a) of the Code.
3.7 Tax Matters Partner. The LLC hereby designates MANO
Holdings I, LLC as the "Tax Matters Partner" for the purposes of Code Section
6231 and the regulations promulgated thereunder. The Tax Matters Partner shall
promptly advise each Member of any audit proceedings to be conducted with
respect to the LLC.
3.8 Officers. The officers of the LLC shall be a Chief
Executive Officer, a President, one or more Vice-presidents, a Secretary, one
or more Assistant Secretaries, a Treasurer and one or more Assistant
Treasurers. The LLC also may have, at the discretion of the Managers, such
other officers as may be appointed in accordance with the provisions of this
Section 3.8. Any number of offices may be held by the same person. Officers
may, but need not, be Managers. Officers shall have the power to bind the LLC
and enter into contracts and other agreements on behalf of the LLC.
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(a) Election of Officers. The officers of the LLC
shall be chosen by the Managers, and each shall serve at the pleasure of the
Managers, subject to the rights, if any, of an officer under any contract of
employment.
(b) Additional Officers. The Managers may appoint
and may empower the Chief Executive Officer or the President to appoint such
additional offices as the business of the LLC may require, each of whom shall
hold office for such period, have such authority and perform such duties as are
provided in this Agreement or as the Managers (or, to the extent the power to
prescribe authorities and duties of additional officers is delegated to him or
her, the Chief Executive Officer or the President) may from time to time
determine.
(c) Removal and Resignation of Officers. Subject
to the rights, if any, of an officer under any contract of employment, any
officer may be removed, with or without cause by the Managers or by such
officer, if any, upon whom such power of removal may be conferred by the
Managers. Any officer may resign at any time by giving written notice to the
Managers. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice, and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the LLC under any contract to which the officer is a party.
(d) Vacancies in Office. A vacancy in any office
because of death, resignation, removal, disqualification or other cause shall be
filled by the Managers. The Chief Executive Officer or the President may make
temporary appointments to a vacant office reporting to the Chief Executive
Officer or the President pending action by the Managers.
(e) Chief Executive Officer. The Chief Executive
Officer shall, subject to the control of the Managers, share with the President
the general supervision, direction and control of the business and the offices
of the LLC. He or she shall have the general power and duties of management
usually vested in the office of chief executive officer of a corporation and
shall have such other powers and duties as may be prescribed by the Managers or
this Agreement.
(f) President. The President shall, subject to the
control of the Managers, share with the Chief Executive Officer the general
supervision, direction and control of the business and the officers of the LLC.
He or she shall have the general powers and duties of management usually vested
in the office of President of a corporation and shall have such other powers and
duties as may be prescribed by the Managers or this Agreement.
(g) Secretary. The Secretary shall keep or cause
to be kept at the principal place of business of the LLC, or such other place as
the Managers may direct, a book of minutes of all meetings and actions of the
Managers, committees or other delegates of the Managers and the Members. The
Secretary shall keep or cause to be kept at the principal place of business of
the LLC a register or a duplicate register showing the names of all Members and
their addresses, the class and percentage Units in the LLC held by each, the
number and date of certificates issued for the same, and
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the number and date of cancellation of every certificate surrendered for
cancellation. The Secretary shall give or cause to be given notice of all
meetings of the Members and of the Managers (or committees or other delegates
thereof) required to be given by this Agreement or by applicable law and shall
have such other powers and perform such other duties as may be prescribed by
the Managers, the Chief Executive Officer or the President or by this
Agreement. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Managers, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such
other powers as the Managers, the Chief Executive Officer, the President, or
Secretary, may, from time to time, prescribe.
(h) Treasurer. The Treasurer shall be the chief
financial officer of the LLC and shall keep and maintain or cause to be kept and
maintained, adequate and correct books and records of accounts of the properties
and business transactions of the LLC. The books of account shall at all
reasonable times be open to inspection by any Manager. The Treasurer shall
deposit all monies and other valuables in the name and to the credit of the LLC
with such depositaries as may be designated by the Managers. He or she shall
disburse the funds of the LLC as may be ordered by the Managers, shall render to
the Chief Executive Officer, the President and the Managers, whenever they
request it, an account of all of his or her transactions as chief financial
officer and of the financial conditions of the LLC and shall have other powers
and perform such other duties as may be prescribed by the Managers, the Chief
Executive Office or the President or by this Agreement. The Assistant Treasurer,
or if there be more than one, the Assistant Treasurers in the order determined
by the Managers, shall. in the absence or disability of the Treasurer, perform
the duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Managers, the Chief Executive Officer,
the President, or Treasurer, may, from time to time. prescribe.
ARTICLE IV
Indemnification
4.1 Right to Indemnification. Except as limited by law and
subject to the provisions of this Article, each Member, Officer and Manager
(an "Indemnitee") shall be entitled to be indemnified and held harmless
against any and all losses, liabilities and expenses, including attorneys'
fees, arising from proceedings in which the Indemnitee may be involved, as a
party or otherwise, by reason of its being a Member or Manager of the LLC, or
by reason of its involvement in the management of the affairs of the LLC,
whether or not it continues to be such at the time any such loss, liability or
expense is paid or incurred. The rights of indemnification provided in this
Article will be in addition to any rights to which the Indemnitee may
otherwise be entitled by contract or as a matter of law and shall extend to
its successors and assigns. In particular, and without limitation of the
foregoing, the Indemnitee shall be entitled to indemnification by the LLC
against reasonable expenses (as incurred), including attorneys' fees, incurred
by the Indemnitee in connection with the defense of any action to which the
Indemnitee may be made a party to the fullest extent permitted under the
provisions of the Act or any other applicable statute.
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<PAGE>
4.2 Advance Payments. Except as limited by law, expenses
incurred by the Indemnitee in defending any proceeding, including a proceeding
by or in the right of the LLC, shall be paid by the LLC in advance of final
disposition of the proceeding upon receipt of a written undertaking to repay
such amount if such Indemnitee is determined pursuant to this Article or
adjudicated to be ineligible for indemnification, which undertaking shall be
an unlimited general obligation of the Indemnitee but need not be secured and
may be accepted without regard to the financial ability of the Indemnitee to
make repayment.
4.3 Heirs and Personal Representatives. The indemnification
provided by this Article shall inure to the benefit of the heirs and personal
representatives of each Indemnitee.
4.4 Non-Exclusivity. The provisions of this Article shall
not be construed to limit the power of the LLC to indemnify its Members,
officers, employees or agents to the full extent permitted by law or to enter
into specific agreements, commitments or arrangements for indemnification
permitted by law. The absence of any express provision for indemnification
herein shall not limit any right of indemnification existing independently of
this Article.
4.5 Amendment. No amendment or repeal of the provisions of
this Article which adversely affects the rights of any Indemnitee under this
Article with respect to the acts or omissions of such Indeminitee at any time
prior to such amendment or shall apply to such Indemnitee without the written
consent of such Indemnitee.
ARTICLE V
Contributions and Capital Accounts
5.1 Capital Accounts. A separate capital account ("Capital
Account") shall be maintained for each Member, including a Member who
hereafter acquires an interest in the LLC, in accordance with the rules of
Section 704(b) of the Code and Treasury Regulation Sections 1. 704-1(b) and
1.704-2, including without limitation, the provisions regarding qualified
income offsets, non-recourse deductions and minimum gain.
5.2 Capital Contributions. As an initial capital
contribution to the LLC, MANO Holdings Corporation hereby contributes an
undivided interest 100% of its assets and liabilities and KBMC Acquisition
Company, L.P. hereby contributes $15,000,000. In exchange for such
contribution, each Member shall receive that number of Units indicated on
Schedule A. No Member shall be required to make any additional contribution to
the capital of the LLC.
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<PAGE>
ARTICLE VI
Distributions and Allocations
6.1 Distribution of LLC Funds. The holders of a Majority in
Interest of the then outstanding Units may in addition to any other
distributions required to be made hereunder, at any time cause the LLC to
distribute cash to the Members in proportion to the ratio that the number of
Units held by such Member bears to the total number of Units then outstanding;
provided that, in the event if it is anticipated that the Members will
recognize taxable income with respect to the LLC for any year, the Managers
shall make a good faith estimate of the amount of such taxable income to be
recognized by each of the Members, and distributions of LLC cash shall be made
to each of the Members (at such times as may be appropriate to permit timely
payment of taxes, including estimated taxes) in an amount equal to (x) the
appropriate effective tax rate (as determined by the Managers) applicable to
such Member or, in the case of taxable income that is passed through to the
shareholders or partners of a Member that is a "Subchapter S" corporation or a
partnership, such Member's shareholders or partners (in each case, such
Member's "Effective Tax Rate"), (y) multiplied by the taxable income
recognized by such Member. This Section 6.1 shall apply to all distributions
other than distributions upon liquidation.
6.2 Distribution of Assets in Kind. No Member shall have the
right to require any distribution of any assets of the LLC in kind. If any
assets of the LLC are distributed in kind, such assets shall be distributed on
the basis of their fair market value as determined by the holders of a
Majority in Interest of the then outstanding Units.
6.3 Allocation of Net Profit and Net Loss. Allocation of Net
Profit and Net Loss shall be made to the Members in accordance with Sections
704(b) and (c) of the Code. Unless otherwise required, such allocations shall
be made to the Members in proportion to the ratio that the number of Units
held by such Member bears to the total number of Units then outstanding.
6.4 Certain Tax Matters.
(a) Except as otherwise provided herein, all
items of LLC income, gain, deduction and loss shall be allocated among the
Members in the same proportion as they share in the Net Profit and Net Loss to
which such items relate. Any credits against income tax shall be allocated in
proportion to the Members' respective numbers of Units.
(b) Income, gain, loss or deductions of the LLC
shall, solely for income purposes, be allocated among the Members in accordance
with Section 704(c) of the Code and the Treasury Regulations promulgated
thereunder, so as to take account of any difference between the adjusted basis
of the assets of the LLC and their respective Gross Asset Values in accordance
with the traditional method with curative allocations set forth in Section
1.704-3(c) of the Treasury Regulations.
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ARTICLE VII
Transfers of Interests
7.1 General Restrictions on Transfer. No transfer of all or
any part of a Member's Units shall be permitted other than (i) pursuant to the
terms of the exercise by Banque Indosuez, as collateral agent, under the terms
of the pledge agreement dated as of May 31, 1996 or (ii) for so long as MANO
Holdings Corporation and KBMC Acquisition Company, L.P. are Members, with the
prior written consent of the non-transferring Members, which consent may be
withheld in their sole discretion; provided that at such time as MANO Holdings
Corporation and KBMC Acquisition Company, L.P. are no longer Members, no
transfers shall be permitted pursuant to this clause (ii).
ARTICLE VIII
Dissolution, Liquidation, and Termination
8.1 Dissolution. The LLC shall dissolve and its affairs
shall be wound up as provided for in Section 18-801 of the Act. If earlier,
the LLC shall terminate on the bankruptcy of any Member.
8.2 Liquidation and Termination. On dissolution of the LLC,
the Managers shall act as liquidating trustee or may appoint one or more
Members as liquidating trustee. The liquidating trustee shall proceed
diligently to wind up the affairs of the LLC and make final distributions as
provided herein and in the Act. The costs of liquidation shall be borne as a
LLC expense. Until final distribution, the liquidating trustee shall continue
to operate the LLC properties with all of the power and authority of the
Manager. The steps to be accomplished by the liquidating trustee are as
follows:
(a) as promptly as possible after dissolution and
again after final liquidation, the liquidating trustee shall cause an accounting
to be made by a firm of independent public accountants of the LLC's assets,
liabilities, and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable;
(b) the liquidating trustee shall pay, satisfy or
discharge from LLC funds all of the debts, liabilities and obligations of the
LLC (including, without limitation, all expenses incurred in liquidation) or
otherwise make adequate provision for payment and discharge thereof (including,
without limitation, the establishment of a cash escrow fund for contingent
liabilities in such amount and for such term as the liquidating trustee may
reasonably determine); and
(c) all remaining assets of the LLC shall be
distributed to the Members pursuant to Section 2.9.
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<PAGE>
8.3 Certificate of Cancellation. On completion of the
distribution of LLC assets as provided herein, the LLC shall be terminated, and
the Managers acting under Section 8.2 (or such other person or persons as the
Act may require or permit) shall file a Certificate of Cancellation with the
Secretary of State of Delaware under the Act, cancel any other filings made
pursuant to Section 1.1, and take such other actions as may be necessary to
terminate the existence of the LLC.
ARTICLE IX
Certificates
9.1 Issuance of LLC Certificates. The Units of each Member
in the LLC shall be represented by an LLC Certificate which shall be in the
form set forth on the attached Exhibit A. Upon the execution of this Agreement
and the payment of the capital contributions by the Members pursuant to
Section 5.2 hereof, the Managers shall cause the LLC to issue one or more LLC
Certificates in the name of each Member certifying that the Person named
therein is the record holder of the Units set forth herein.
9.2 Transfer of LLC Certificates. A Unit which is
transferred in accordance with the terms of Section 7.1 of this Agreement
shall be transferable on the books of the LLC by the record holder thereof in
person or by such record holder's duly authorized attorney, but, except as
provided in Section 9.3 hereof with respect to lost, stolen or destroyed
certificates, no transfer of a Unit shall be entered until the previously
issued LLC Certificate representing such Unit shall have been surrendered to
the LLC and canceled and a replacement LLC Certificate issued to the assignee
of such Unit in accordance with such procedures as the Managers may establish.
The Managers shall issue to the transferring Member a new LLC Certificate
representing the Units not being transferred by the Member, in the event such
Member only transferred some, but not all, of the Units represented by the
original LLC Certificate. Except as otherwise required by law, the LLC shall
be entitled to treat the record holder of an LLC Certificate on its books as
the owner thereof for all purposes regardless of any notice or assertion to
the contrary.
9.3 Lost, Stolen or Destroyed Certificates. The LLC shall
issue a new LLC Certificate in place of any LLC Certificate previously issued
if the record holder of the LLC Certificate:
(a) makes proof by affidavit, in form and
substance satisfactory to the Managers, that a previously issued LLC Certificate
has been lost, destroyed or stolen;
(b) the issuance of a new LLC Certificate before
the LLC has notice that the LLC Certificate has been acquired by a purchaser for
value in good faith and without notice of an adverse claim;
(c) if requested by the Managers, delivers to the
LLC a bond, in form and substance reasonably satisfactory to the Managers, with
such surety or sureties and with fixed or open
-18-
<PAGE>
penalty as the Managers may direct, in their reasonable discretion. to
indemnify the LLC against any claim that may be made on account of the
alleged loss, destruction or theft of the LLC Certificate; and
(d) satisfies any other reasonable requirements
imposed by the Managers.
If the Member fails to notify the LLC within a reasonable
time after it has notice of the loss, destruction or theft of an LLC
Certificate, and a transfer of the Unit represented by the LLC Certificate is
registered before receiving such notification, the LLC shall have no liability
with respect to any claim against the LLC for such transfer or for a new LLC
Certificate.
ARTICLE X
General Provisions
10.1 Notices. All notices, requests, or consents provided
for or permitted to be given under this Agreement must be in writing and shall
be deemed effective, unless earlier received, (a) if given by facsimile, when
such facsimile is transmitted to the applicable party at the facsimile number
specified on Schedule A, the appropriate answer back is received and a copy is
sent by a nationally recognized overnight courier service to such party at the
address indicated on Schedule A, (b) three (3) days after being mailed by
certified mail, return receipt requested, postage prepaid by the applicable
party at the address indicated on Exhibit A, (c) one (1) business day after
being sent by a nationally recognized overnight courier service to the
applicable party at the address indicated on Exhibit A, or (d) when delivered
either by hand or by messenger to the applicable party at the address
indicated on Exhibit A.
10.2 Effect of Waiver or Consent. A waiver or consent,
express or implied, to or of any breach or default by any person in the
performance by that person of any obligations with respect to the LLC is not a
consent or waiver to or of any other breach or default in the performance by
that person of the same or any other obligations of that person with respect
to the LLC. Failure on the part of a person to complain of any act of any
person or to declare any person in default with respect to the LLC,
irrespective of how long that failure continues, does not constitute a waiver
by that person of his rights with respect to that default until the applicable
statute-of-limitations period has run.
10.3 Amendment or Modification. This Agreement may be
amended or modified from time to time only by a written instrument signed by
the Members holding a Majority in Interest of the then outstanding Units;
provided, however, that (a) an amendment or modification reducing a Member's
Units (other than to reflect changes otherwise provided by this Agreement) is
effective only with that Member's consent, and (b) an amendment or
modification reducing the required number of Units for any consent or vote in
this Agreement is effective only with the consent or vote of Members having
the required number of Units theretofore required.
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<PAGE>
10.4 Binding Effect. Subject to the restrictions on
transfers set forth in this Agreement, this Agreement is binding on and inures
to the benefit of each of the Members and their respective heirs, legal
representatives successors and assigns.
10.5 Governing Law, Severability. This Agreement shall be
governed by, and construed in accordance with the domestic laws of the State
of Delaware, without giving effect to any choice of law or conflict of law
provision (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State of Delaware. In the event of a direct conflict between the provisions of
this Agreement and any provision of the Certificate, or any mandatory
provision of the Act, the applicable provision of the Certificate or the Act
shall control. If any provision of this Agreement or the application thereof
to any person or circumstance is held invalid or unenforceable to any extent,
the remainder of this Agreement and the application of that provision shall be
enforced to the fullest extent permitted by law.
10.6 Specific Performance. The parties agree that the
failure of any party to perform the obligations provided by this Agreement
could result in irreparable damage to the other parties, and that monetary
damages alone would not be adequate to compensate the nondefaulting party for
its or his injury. Any party shall therefore be entitled, in addition to any
other remedies that may be available, including money damages, to obtain
specific performance of the terms of this Agreement. If any action is brought
by any party to enforce this Agreement, any party against which the action is
brought shall waive the defense that there is an adequate remedy at law.
10.7 Further Assurances. In connection with this Agreement
and the transactions contemplated hereby, each Member shall execute and
deliver any additional documents and instruments and perform any additional
acts that may be necessary or appropriate to effectuate and perform the
provisions of this Agreement and those actions, as requested by the Chairman.
10.8 Waiver of Certain Rights. Each Member irrevocably
waives any right it may have to maintain any action for dissolution of the LLC
or for partition of the LLC's property.
10.9 Notice to Members of Provisions of this Agreement. By
executing this Agreement, each Member acknowledges that it has actual notice
of (a) all of the provisions of this Agreement, including, without limitations
the restrictions on the transfer of Units set forth in Article VII, and (b)
all of the provisions of the Certificate. Each Member hereby agrees that this
Agreement constitutes adequate notice of all such provisions, and each Member
hereby waives any requirement that any further notice thereunder be given.
10.10 Counterparts. This Agreement may be executed in any
number of counterparts each of which shall constitute an original but together
shall constitute but one instrument.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under as of the date set forth above.
MANO HOLDINGS CORPORATION, a Delaware
corporation
By: /s/ Richard Haine
-----------------------------
Richard Haine, Vice President
KBMC ACQUISITION COMPANY, L.P.
By: KBMC Management L.P., its general partner
By: KBMC G.P., Inc.
By: /s/ Samuel Frieder
-------------------
Samuel Frieder, V.P.
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<PAGE>
SCHEDULE A
NAMES, ADDRESSES, INITIAL CAPITAL CONTRIBUTION
AND INTERESTS OF MEMBERS
Members Interest Units
- ------- -------- -----
MANO HOLDINGS CORPORATION 39.574% 3,957.4
One Manischewitz Plaza
Jersey City, NJ 07302
KBMC Acquisition Company, L.P. 60.426% 6,042.6
111 Radio Circle
Mt. Kisco, NY 10549
<PAGE>
SCHEDULE A
(POST-MASTER CONTRIBUTION AGREEMENT)
Interest Units
-------- -----
MANO HOLDINGS I, LLC 99% 9,900
One Manischewitz Plaza
Jersey City, NJ 07302
MANO HOLDINGS II, LLC 1% 100
One Manischewitz Plaza
Jersey City, NJ 07302
<PAGE>
EXHIBIT B
(FACE OF CERTIFICATE)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
_______________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER CONTAINED IN THE ISSUER'S OPERATING
AGREEMENT, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF
AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS.
CERTIFICATE FOR LIMITED LIABILITY COMPANY INTEREST
IN
THE B. MANISCHEWITZ COMPANY, LLC
Certificate No.__________ ___________Units
_________________________________as a Manager of The B. Manischewitz Company,
LLC, a Delaware limited liability company (the "LLC") hereby certifies that
______________is the holder of ____________ Units, as that term is defined in
the Operating Agreement of the LLC, dated as of ____________, as amended and
restated from time to time (the "Agreement") (copies of which are on file at the
principal office of the LLC).
This Certificate is not negotiable or transferable except as provided in the
Agreement, and any such transfer will be valid only upon delivery of this
Certificate, together with an assignment in the form set forth on the reverse
hereof (or otherwise acceptable to the Managers and sufficient to convey an
interest in the LLC pursuant to the Delaware Limited Liability Company Act, as
it may be amended and in effect from time to time, or any successor statute
thereto) and the Agreement, duly executed, to the Managers of the LLC.
THE B. MANISCHEWITZ COMPANY, LLC, a Delaware
limited liability company
Dated:______________________ By:____________________________________________
Print Name:_______________________________
Its: Manager
B-1
<PAGE>
(REVERSE OF CERTIFICATE)
ASSIGNMENT OF LIMITED LIABILITY COMPANY INTEREST
IN
THE B. MANISCHEWITZ COMPANY, LLC
FOR VALUE RECEIVED, the undersigned ("Assignor") hereby assigns, conveys,
sells and transfers unto
_________________________________
("Assignee")
______________________________________ _____________________________________
(Please insert Social Security or other _____________________________________
identifying number of Assignee) __________________________________
(Please print or typewrite
name address of Assignee)
all rights and interest of Assignor in ____________ Units evidenced hereby
and directs that all future distributions and allocations with respect to such
specified assigned Units be paid or allocated by the LLC to such Assignee. The
Assignor hereby irrevocably constitutes and appoints the Managers, or any of
them, as Assignor's attorney-in-fact with full power of substitution in the
premises to transfer the same on the books of the LLC.
Dated:________________________ _____________________________________________
Signature of Assignor
Note: The signature to any assignment must correspond with the name as
written upon the face of this Certificate, in every particular,
without alteration or enlargement or any change whatever. If the
assignment is executed by an attorney, executor, administrator,
trustee or guardian, the person executing the assignment must give
such person's full title in such capacity, if not on file with the
LLC or its transfer agent, must be forwarded with this Certificate.
The undersigned, a Manager of the LLC, hereby consents to this Assignment
pursuant to the Agreement.
THE B. MANISCHEWITZ COMPANY, LLC, a Delaware
limited liability company
Dated:____________________ By:__________________________________________
Print Name:_____________________________
Its: Manager
THE INTEREST AND UNITS EVIDENCED HEREBY ARE SUBJECT TO ALL TERMS AND
CONDITIONS OF THE AGREEMENT AND UNLESS AND UNTIL ADMITTED TO THE LLC AS A
MEMBER . NO ASSIGNEE SHALL BE ENTITLED TO ANY OF THE RIGHTS, POWERS OR
PRIVILEGES OF THE ASSIGNOR EXCEPT THAT ASSIGNEE SHALL BE ENTITLED TO THE
DISTRIBUTIONS PAID AND ALLOCATIONS MADE WITH RESPECT TO SUCH INTEREST AS
DIRECTED BY THE ASSIGNOR ABOVE.
B-2
<PAGE>
EXECUTION COPY
================================================================================
INDENTURE
Dated as of May 1, 1998
Between
R.A.B. HOLDINGS, INC., as Issuer,
and
PNC BANK, NATIONAL ASSOCIATION, as Trustee
------------------
$48,000,000
13% Senior Notes due 2008, Series A
13% Senior Notes due 2008, Series B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture Indenture
Act Section Section
- --------------- ---------
Section 310(a)(1)....................................... 7.10
(a)(2)....................................... 7.10
(a)(3)....................................... N.A.
(a)(4)....................................... N.A.
(a)(5)....................................... 7.08, 7.10
(b).......................................... 7.08; 7.10; 10.02
(c).......................................... N.A.
Section 311(a).......................................... 7.11
(b).......................................... 7.11
(c).......................................... N.A.
Section 312(a).......................................... 2.05
(b).......................................... 11.03
(c).......................................... 11.03
Section 313(a).......................................... 7.06
(b)(1)....................................... N.A.
(b)(2)....................................... 7.06
(c).......................................... 7.06; 10.02
(d).......................................... 7.06
Section 314(a).......................................... 4.11; 4.12, 10.02
(b).......................................... N.A.
(c)(1)....................................... 10.04
(c)(2)....................................... 10.04
(c)(3)....................................... N.A.
(d).......................................... N.A.
(e).......................................... 10.05
(f).......................................... N.A.
Section 315(a).......................................... 7.01(b)
(b).......................................... 7.05; 10.02
(c).......................................... 7.01(a)
(d).......................................... 7.01(c)
(e).......................................... 6.11
Section 316(a)(last sentence)........................... 2.09
(a)(1)(A).................................... 6.05
(a)(1)(B).................................... 6.04
(a)(2)....................................... N.A.
(b).......................................... 6.07
(c).......................................... 9.04
Section 317(a)(1)....................................... 6.08
(a)(2)....................................... 6.09
(b).......................................... 2.04
Section 318(a)......................................... 10.01
- ----------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions..............................................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.......................................16
SECTION 1.03. Rules of Construction...................................................................17
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.........................................................................17
SECTION 2.02. Execution and Authentication............................................................18
SECTION 2.03. Registrar and Paying Agent..............................................................19
SECTION 2.04. Paying Agent To Hold Assets in Trust....................................................19
SECTION 2.05. Holder Lists............................................................................19
SECTION 2.06. Transfer and Exchange...................................................................20
SECTION 2.07. Replacement Securities..................................................................20
SECTION 2.08. Outstanding Securities..................................................................21
SECTION 2.09. Treasury Securities.....................................................................21
SECTION 2.10. Temporary Securities....................................................................21
SECTION 2.11. Cancellation............................................................................21
SECTION 2.12. Defaulted Interest......................................................................22
SECTION 2.13. CUSIP Number............................................................................22
SECTION 2.14. Deposit of Moneys.......................................................................22
SECTION 2.15. Book-Entry Provisions for Global Securities.............................................22
SECTION 2.16. Registration of Transfers and Exchanges.................................................23
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee......................................................................27
SECTION 3.02. Selection of Securities To Be Redeemed..................................................27
SECTION 3.03. Notice of Redemption....................................................................27
SECTION 3.04. Effect of Notice of Redemption..........................................................28
SECTION 3.05. Deposit of Redemption Price.............................................................28
SECTION 3.06. Securities Redeemed in Part.............................................................29
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities...................................................................29
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SECTION 4.02. Maintenance of Office or Agency.........................................................29
SECTION 4.03. Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock.............................................................29
SECTION 4.04. Limitation on Restricted Payments.......................................................30
SECTION 4.05. Limitation on Asset Sales...............................................................31
SECTION 4.06. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries...........................................................................33
SECTION 4.07. Limitation on Liens.....................................................................33
SECTION 4.08. Limitations on Transactions with Affiliates.............................................34
SECTION 4.09. Subsidiaries............................................................................34
SECTION 4.10. Designation of Unrestricted Subsidiaries................................................34
SECTION 4.11. Conduct of Business.....................................................................35
SECTION 4.12. Reports to Holders......................................................................35
SECTION 4.13. Payments for Consents...................................................................35
SECTION 4.14. Limitation on Investment Company Status.................................................36
SECTION 4.15. Notice of Defaults......................................................................36
SECTION 4.16. Change of Control.......................................................................36
SECTION 4.17. Compliance Certificate..................................................................38
SECTION 4.18. Existence...............................................................................38
SECTION 4.19. Maintenance of Properties and Insurance.................................................38
SECTION 4.20. Payment of Taxes and Other Claims.......................................................39
SECTION 4.21. Waiver of Stay, Extension or Usury Laws.................................................39
SECTION 4.22. Deposit of Funds with Escrow Agent......................................................39
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets................................................40
SECTION 5.02. Successor Corporation Substituted.......................................................40
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.......................................................................41
SECTION 6.02. Acceleration............................................................................42
SECTION 6.03. Other Remedies..........................................................................43
SECTION 6.04. Waiver of Past Default..................................................................43
SECTION 6.05. Control by Majority.....................................................................43
SECTION 6.06. Limitation on Suits.....................................................................44
SECTION 6.07. Rights of Holders To Receive Payment....................................................44
SECTION 6.08. Collection Suit by Trustee..............................................................44
SECTION 6.09. Trustee May File Proofs of Claim........................................................44
SECTION 6.10. Priorities..............................................................................45
SECTION 6.11. Undertaking for Costs...................................................................45
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.......................................................................45
SECTION 7.02. Rights of Trustee.......................................................................46
SECTION 7.03. Individual Rights of Trustee............................................................47
SECTION 7.04. Trustee's Disclaimer....................................................................48
SECTION 7.05. Notice of Defaults......................................................................48
SECTION 7.06. Reports by Trustee to Holders...........................................................48
SECTION 7.07. Compensation and Indemnity..............................................................48
SECTION 7.08. Replacement of Trustee..................................................................49
SECTION 7.09. Successor Trustee by Merger, etc........................................................50
SECTION 7.10. Eligibility; Disqualification...........................................................50
SECTION 7.11. Preferential Collection of Claims Against Holdings......................................51
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Holdings' Obligations....................................................51
SECTION 8.02. Legal Defeasance and Covenant Defeasance................................................52
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance...................................52
SECTION 8.04. Application of Trust Money; Trustee Acknowledgment and Indemnity........................53
SECTION 8.05. Repayment to Holdings...................................................................54
SECTION 8.06. Reinstatement...........................................................................54
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders..............................................................54
SECTION 9.02. With Consent of Holders.................................................................55
SECTION 9.03. Compliance with Trust Indenture Act.....................................................56
SECTION 9.04. Record Date for Consents and Effect of Consents.........................................56
SECTION 9.05. Notation on or Exchange of Securities...................................................57
SECTION 9.06. Trustee To Sign Amendments, etc.........................................................57
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls............................................................57
SECTION 10.02. Notices.................................................................................57
SECTION 10.03. Communications by Holders with Other Holders............................................58
SECTION 10.04. Certificate and Opinion as to Conditions Precedent......................................58
SECTION 10.05. Statements Required in Certificate......................................................59
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar...............................................59
SECTION 10.07. Governing Law...........................................................................59
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SECTION 10.08. No Personal Liability of Directors, Officers, Employees and
Stockholders...........................................................................59
SECTION 10.09. Successors..............................................................................59
SECTION 10.10. Counterpart Originals...................................................................60
SECTION 10.11. Severability............................................................................60
SECTION 10.12. No Adverse Interpretation of Other Agreements...........................................60
SECTION 10.13. Legal Holidays..........................................................................60
ARTICLE ELEVEN
COLLATERAL AND SECURITY
SECTION 11.01. Holdings Escrow Agreement...............................................................60
SECTION 11.02. Opinions................................................................................61
SECTION 11.03. Release of Escrow Collateral............................................................61
SECTION 11.04. Authorization of Actions to Be Taken by the Trustee Under the Holdings
Escrow Agreement.......................................................................62
SECTION 11.05. Authorization of Receipt of Funds by the Trustee Under the Holdings
Escrow Agreement.......................................................................62
SECTION 11.06. Termination of Security Interest........................................................62
SIGNATURES ........................................................................................S-1
EXHIBIT A Form of Series A Security.............................................................A-1
EXHIBIT B Form of Series B Security.............................................................B-1
EXHIBIT C Form of Legend for Global Securities..................................................C-1
EXHIBIT D Form of Transfer Certificate..........................................................D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited Investors...................E-1
EXHIBIT F Form of Transfer Certificate for Regulation S Transfers...............................F-1
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NOTE: This Table of Contents shall not, for any purpose, be deemed to be a
part of this Indenture.
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INDENTURE dated as of May 1, 1998, between R.A.B. HOLDINGS, INC., a
Delaware corporation ("Holdings"), and PNC BANK, NATIONAL ASSOCIATION, as
trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party and
for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with Holdings or any of its Restricted
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who, directly or indirectly, through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or by contract; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.08.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"amend" means amend, modify, supplement, restate or amend and restate,
including successively; and "amending" and "amended" have correlative meanings.
"Asset Acquisition" means (a) an Investment by Holdings or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary, or shall be merged with or into Holdings or any
Restricted Subsidiary, or (b) the acquisition by Holdings or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary)
which constitutes all or substantially all of the assets of such Person or
comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer by Holdings or any of its Restricted
Subsidiaries (including any Sale and Leaseback Transaction) to any Person other
than Holdings or a Restricted Subsidiary of (a) any Capital Stock of any
Restricted Subsidiary; or (b) any other property or assets of Holdings or any
Restricted Subsidiary other than in the ordinary course of business; provided,
however, that Asset Sales shall not include (i) the sale or disposition of
inventory in the ordinary course of business, (ii) the sale or other disposition
of obsolete, worn out, damaged or otherwise unsuitable or unnecessary equipment
or other obsolete assets, (iii) the exchange of assets for other non-cash assets
that are (a) useful in the Permitted
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Business and (b) have a fair market value at least equal to the fair market
value of the assets being exchanged (as determined by the Board of Directors in
good faith), (iv) the sale or other disposition of Cash Equivalents, (v) the
grant of any license of intellectual property rights in the ordinary course of
business, (vi) any transaction or series of related transactions in any fiscal
year for which Holdings or its Restricted Subsidiaries receive aggregate
consideration of less than $1.0 million and (vii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of
Holdings as permitted under Article Five.
"Bankruptcy Law" means Title 11, United States Code or any similar federal,
state or foreign law for the relief of debtors.
"Basket" has the meaning provided in Section 4.04.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Borrowing Base Amount" means, as of the date of determination, an amount
equal to the sum, without duplication, of (i) 80% of the book value of the
accounts receivable and (ii) 55% of the book value of the inventories of
Holdings and its Restricted Subsidiaries, taken as a whole, as set forth in the
most recent monthly consolidated financial statements of Holdings prepared and
determined in accordance with GAAP.
"Business Day means any day other than a Saturday, Sunday or day on which
banking institutions in the City of New York or in New Jersey are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, equity interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
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;
provided, however, that securities deposited in the Escrow Account may have
longer maturities; (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 one of the two
highest ratings obtainable from either Standard & Poor's Corporation or any
successor thereto ("S&P") or Moody's Investors Service, Inc. or any successor
thereto ("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 (or the equivalent successor rating) from S&P or at least P-1 (or
the equivalent
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successor rating) from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof issued
by any bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $250,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of
Holdings to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of this Indenture) other than
to the Permitted Holders; (ii) the approval by the holders of Capital Stock of
Holdings of any plan or proposal for the liquidation or dissolution of Holdings
(whether or not otherwise in compliance with the provisions of this Indenture);
(iii) any Person or Group (other than the Permitted Holders) shall become the
owner, directly or indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of Holdings; or (iv) the replacement of a majority
of the Board of Directors of Holdings over a two-year period from the directors
who constituted the Board of Directors of Holdings at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of Holdings then still in office who either
were members of such Board of Directors at the beginning of such period or whose
election as a member of such Board of Directors was previously so approved.
"Change of Control Date" has the meaning provided in Section 4.16.
"Change of Control Offer" has the meaning provided in Section 4.16.
"Change of Control Payment Date" has the meaning provided in Section 4.16.
"Chase" means Chase Securities Inc. or any successor corporation thereto.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means R.A.B. Enterprises, Inc., a Delaware corporation.
"Company Notes" means the 10 1/2% Senior Notes due 2005 of the Company.
"Company Notes Indenture" means the indenture dated May 1, 1998, among the
Company, the guarantors named therein and the trustee thereunder relating to the
Company Notes.
"Company Request" or "Company Order" means a written request or order
signed in the name of Holdings by its Chairman of the Board, its Vice Chairman
of the Board, its President, a Vice President, its Treasurer, its Assistant
Treasurer, its Secretary or its Assistant Secretary, and delivered to the
Trustee.
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"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense and (C) Consolidated Non-Cash Charges less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or the
repayment, repurchase, defeasance or other discharge of any Indebtedness of such
Person or any of its Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or the repayment, repurchase, defeasance
or other discharge, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including or
excluding, as applicable, any Consolidated EBITDA (including any pro forma
expense and cost reductions), whether positive or negative attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale, as the case
may be, during the Four Quarter Period) occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such Asset Sale or Asset Acquisition
(including the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Restricted
Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements. For purposes of this
definition, whenever pro forma effect is to be given to an Asset Acquisition,
the amount of Consolidated Net Income relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of Holdings.
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"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person or its Subsidiaries (other than dividends paid in
Qualified Capital Stock) paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local tax rate
of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
and (c) the interest portion of any deferred payment obligation; and (ii) the
interest component of Capitalized Lease Obligations paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract or operation of law, (e) the net income of any Person, other than
a Restricted Subsidiary of the referent Person, except, for purposes of Section
4.04, to the extent of cash dividends or distributions paid to the referent
Person or to a Wholly Owned Restricted Subsidiary of the referent Person by such
Person, (f) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date, and (g) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued).
"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"Corporate Trust Office of the Trustee" means the office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of original execution of this Indenture is located at
Two Tower Center Boulevard, 20th Floor, East Brunswick, New Jersey 08816.
"Corporate Trust Operations Office of the Trustee" means the Trustee's
offices located in Pittsburgh, Pennsylvania.
"Credit Agreement" means the Amended and Restated Credit Agreement dated as
of May 1, 1998, by and among Millbrook Distribution Services Inc., The B.
Manischewitz Company, LLC, The Chase Manhattan Bank, as agent, and NationsBank,
N.A., as co-agent, and the lenders party thereto in their capacities as lenders
thereunder, together with the related agreements entered into in connection
therewith (including,
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without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by Section
4.03) or adding Restricted Subsidiaries of Holdings as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, co-agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in the form of
one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by Holdings, which must be a clearing agency registered
under the Exchange Act.
"Designation" has the meaning provided in Section 4.10.
"Designation Amount" has the meaning provided in Section 4.10.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Securities.
"Escrow Account" has the meaning set forth in Section 2 of the Holdings
Escrow Agreement.
"Escrow Agent" means PNC Bank, National Association, as escrow agent under
the Holdings Escrow Agreement, until a successor replaces it in accordance with
the provisions of the Holdings Escrow Agreement and thereafter means such
successor.
"Escrow Collateral" has the meaning set forth in Section 6 of the Holdings
Escrow Agreement.
"Escrow Funds" has the meaning set forth in Section 6 of the Holdings
Escrow Agreement.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto and the rules and regulations
promulgated thereunder.
"Exchange Securities" means the 13% Senior Notes due 2008, Series B, to be
issued in exchange for the Initial Securities pursuant to the Registration
Rights Agreement.
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"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of Holdings acting reasonably and
in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of Holdings delivered to the Trustee.
"Final Maturity Date" means May 1, 2008.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect as of the Issue
Date.
"Global Securities" means one or more 144A Global Securities, Regulation S
Global Securities or IAI Global Securities.
"Guarantees" means the guarantees of Millbrook Distribution Services Inc.
and The B. Manischewitz Company, LLC of the Company Notes in accordance with the
Company Notes Indenture.
"Holders" means the registered holders of the Securities.
"Holdings" means the Person named as "Holdings" in the first paragraph of
this Indenture until a successor shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Holdings" shall mean
such successor.
"Holdings Escrow Agreement" means the escrow agreement dated as of May 1,
1998 among Holdings, PNC Bank, National Association, as escrow agent and
securities intermediary, and PNC Bank, National Association as trustee under
this Indenture.
"IAI Global Security" means a permanent global security in
registered form representing the aggregate principal amount at maturity of
Securities transferred after the Issue Date to Institutional Accredited
Investors.
"incur" means, with respect to any Indebtedness, to create, issue, incur
(including by conversion, exchange or otherwise), assume, guarantee or otherwise
become liable in respect of such Indebtedness (and "incurrence," "incurred" and
"incurring" shall have meanings correlative to the foregoing). Indebtedness of a
Person existing at the time such Person becomes a Restricted Subsidiary or is
merged or consolidated with or into Holdings or any Restricted Subsidiary shall
be deemed to be incurred at such time. The accrual of interest or the accretion
of original issue discount shall not be deemed to be an incurrence.
"Indebtedness" means with respect to any Person, without duplication, (i)
the principal amount of all indebtedness of such Person for borrowed money, (ii)
the principal amount of all indebtedness of such Person evidenced by bonds,
debentures, the Securities or other similar instruments, (iii) all Capitalized
Lease Obligations of such Person, (iv) all indebtedness of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not overdue by 90 days or more or are being
contested in good faith), (v) reimbursement obligations of such Person on any
letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other similar
<PAGE>
-8-
contingent obligations in respect of indebtedness or obligations referred to in
clauses (i) through (v) above and clause (viii) below, (vii) all obligations of
any other Person of the type referred to in clauses (i) through (vi) which are
secured by any lien on any property or asset of such Person, the amount of such
obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the obligation so secured and (viii) all
obligations of such Person under Currency Agreements and Interest Swap
Obligations.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indentures" means this Indenture and the Company Notes Indenture.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in Holdings (excluding an interest consisting solely
of monies owed for services rendered) and (ii) which, in the judgment of the
Board of Directors of Holdings, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Purchaser" means Chase Securities Inc.
"Initial Securities" means the 13% Senior Notes due 2008, Series A, of
Holdings.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest" means, with respect to the Securities, the sum of any cash
interest and any Liquidated Damages (as defined in the Registration Rights
Agreement) on the Securities.
"Interest Payment Date" means May 1 and November 1 of each year, commencing
on November 1, 1998.
"Interest Record Date" for the interest payable on any Interest Payment
Date (except a date for payment of defaulted interest) means the April 15 or
October 15 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, Securities, debentures or other securities or evidences of Indebtedness
issued by, any other Person. "Investment" shall exclude extensions of trade
credit and advances to customers by Holdings and its Restricted Subsidiaries in
accordance with normal trade practices of Holdings or such Restricted
Subsidiary, as the case may be. For the purposes of Section 4.04, (i)
"Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the fair
<PAGE>
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market value of the net assets of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by Holdings or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions in connection with such Investment or
any other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If Holdings or any Restricted Subsidiary sells or otherwise disposes
of any Common Stock of any direct or indirect Restricted Subsidiary such that,
after giving effect to any such sale or disposition, Holdings no longer owns,
directly or indirectly, greater than 50% of the outstanding Common Stock of such
Restricted Subsidiary, Holdings shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Initial Securities.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
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).
"Net Cash Proceeds" means, with respect to any Asset Sale, the aggregate
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) and cash and Cash Equivalents received upon the disposition of
non-cash consideration received in any Asset Sale received by Holdings or any of
its Restricted Subsidiaries from such Asset Sale net of (a) reasonable
out-of-pocket expenses and fees incurred in connection with such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset Sale and (d) appropriate
amounts to be provided by Holdings or any Restricted Subsidiary, as the case may
be, as a reserve, in accordance with GAAP, against any liabilities associated
with such Asset Sale and retained by Holdings or any Restricted Subsidiary, as
the case may be, after such Asset Sale.
"Net Proceeds Offer" has the meaning provided in Section 4.05.
"Net Proceeds Offer Amount" has the meaning provided in Section 4.05.
"Net Proceeds Offer Payment Date" has the meaning provided in Section 4.05.
"Net Proceeds Offer Trigger Date" has the meaning provided in Section 4.05.
"Obligations" means, with respect to any Indebtedness, all obligations for
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any such
Indebtedness.
"Offerings" means the initial offerings of the Securities and the Company
Notes.
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"Offering Memorandum" means the final offering memorandum dated April 28,
1998 setting forth information concerning the Company, Holdings, Millbrook
Distribution Services Inc., The B. Manischewitz Company, LLC, the Securities and
the Senior Notes.
"Officer" means the Chairman, any Vice Chairman, the President, any Vice
President, the Chief Financial Officer, the Treasurer or the Secretary of
Holdings or any other officer designated by the Board of Directors serving in a
similar capacity.
"Officers' Certificate" means a certificate signed by two Officers or by an
Officer and an Assistant Treasurer or an Assistant Secretary of Holdings
complying with Sections 10.04 and 10.05.
"144A Global Security" means a permanent global security in registered form
representing the aggregate principal amount at maturity of Initial Securities
sold in reliance on Rule 144A.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The legal counsel may be an employee of or
counsel to Holdings or the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of Holdings ranking pari
passu in right of payment with the Securities.
"Participants" has the meaning provided in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Business" means the business of food manufacturing and
processing, food distribution and other businesses similar thereto or reasonably
related thereto, including without limitation, providing merchandising services.
"Permitted Holders" means (i) Mr. Richard A. Bernstein, (ii) trusts for the
benefit of Mr. Bernstein and/or members of his immediate family and (iii) in the
event of the incompetence or death of Mr. Bernstein, his estate, executor,
administrator or other personal representative.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Securities, the Company Notes and the
Guarantees; and Permitted Refinancings thereof;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount, at any time outstanding, not to exceed the
greater of (x) $55.0 million and (y) the Borrowing Base Amount, in each
case, less mandatory, permanent repayments (excluding amounts refinanced as
permitted under the Credit Agreement) actually made in respect of any
Indebtedness thereunder (which are accompanied by a permanent reduction in
commitment in the case of the Revolving Credit Facility);
(iii) Permitted Refinancings of (x) other Indebtedness of Holdings or
any Restricted Subsidiary to the extent outstanding on the Issue Date
reduced by the amount of any scheduled amortization payments or mandatory
prepayments when actually paid or permanent reductions thereon and (y)
Indebtedness incurred under the Consolidated Fixed Charge Coverage Ratio
test of Section 4.03;
(iv) Interest Swap Obligations of Holdings covering Indebtedness of
Holdings or any Restricted Subsidiary and Interest Swap Obligations of any
Restricted Subsidiary covering Indebtedness
<PAGE>
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of such Restricted Subsidiary; provided, however, that such Interest Swap
Obligations are entered into to protect Holdings and/or its Restricted
Subsidiaries from fluctuations in interest rates on Indebtedness incurred
in accordance with the Indentures to the extent the notional principal
amount of such Interest Swap Obligation does not exceed the principal
amount of the Indebtedness to which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements are designed to protect Holdings or any Restricted Subsidiary
against fluctuations in currency values and do not increase the
Indebtedness of Holdings and its Restricted Subsidiaries outstanding other
than as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary to Holdings
or to a Wholly Owned Restricted Subsidiary for so long as such Indebtedness
is held by Holdings or a Wholly Owned Restricted Subsidiary, in each case
subject to no Lien being held by a Person other than Holdings or a Wholly
Owned Restricted Subsidiary; provided that if as of any date any Person
other than Holdings or a Wholly Owned Restricted Subsidiary owns or holds
any such Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of Holdings to a Wholly Owned Restricted Subsidiary
for so long as such Indebtedness is held by a Wholly Owned Restricted
Subsidiary, in each case subject to no Lien; provided that (a) any
Indebtedness of Holdings to any Wholly Owned Restricted Subsidiary is
unsecured and subordinated, pursuant to a written agreement, to Holdings'
obligations under this Indenture and the Securities and (b) if as of any
date any Person other than a Wholly Owned Restricted Subsidiary owns or
holds any such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Indebtedness permitted by this clause (vii);
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of Holdings or any Restricted Subsidiary (a)
represented by letters of credit for the account of Holdings or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business
and (b) in respect of performance, surety or appeal bonds incurred in the
ordinary course of business;
(x) Indebtedness of Holdings or any Restricted Subsidiary (other than
for borrowed money) pursuant to agreements providing for indemnification,
purchase price adjustments and similar obligations that is incurred in the
ordinary course of business or in connection with the sale of a business,
assets or a Subsidiary;
(xi) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of Holdings and its Restricted Subsidiaries
incurred in the ordinary course of business not to exceed $2.0 million at
any one time outstanding; and
(xii) Additional Indebtedness of Holdings or any Restricted Subsidiary
in an amount not to exceed $25.0 million at any one time outstanding;
provided that such amount is incurred on or before the nine month
anniversary of the Issue Date; and provided further that, on or prior to
the nine month
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anniversary of the Issue Date, such amount is used to consummate the
acquisition of one or more Permitted Businesses that becomes upon the
closing of such acquisition a Restricted Subsidiary of Holdings or any
Restricted Subsidiary.
"Permitted Investments" means (i) Investments by Holdings or any Restricted
Subsidiary in any Person that is or will become immediately after such
Investment a Restricted Subsidiary or that will merge or consolidate into
Holdings or a Restricted Subsidiary; (ii) Investments in Holdings by any
Restricted Subsidiary; provided that any Indebtedness evidencing such Investment
is unsecured and subordinated, pursuant to a written agreement, to Holdings'
obligations under the Securities and this Indenture; (iii) investments in cash
and Cash Equivalents; (iv) loans and advances to employees and officers of
Holdings and its Restricted Subsidiaries (other than to Permitted Holders) in
the ordinary course of business for bona fide business purposes not in excess of
$250,000 at any one time outstanding; (v) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of Holdings' or its Restricted
Subsidiaries' businesses and otherwise in compliance with this Indenture; (vi)
Investments in securities of trade creditors or customers received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers; (vii) Investments made by
Holdings or its Restricted Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with Section 4.05; and (viii)
Investments existing on the Issue Date.
"Permitted Liens" means (a) Liens securing Acquired Indebtedness; provided,
however, that such Liens were in existence prior to the contemplation of such
acquisition, merger or consolidation and do not secure any property or assets of
Holdings or any Restricted Subsidiary of Holdings other than the property or
assets subject to the Liens prior to such acquisition, merger or consolidation;
(b) Liens imposed by law such as carriers', warehousemen's and mechanic's Liens
and other similar Liens arising in the ordinary course of business which secure
payment of obligations not more than 30 days past due or which are being
contested in good faith and by appropriate proceedings; (c) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings; provided,
however, that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (d) easements, reservation
of rights of way, licenses of intellectual property in the ordinary course and
other similar restrictions on the use of properties or assets, or minor
imperfections of title that in the aggregate are not material in amount and do
not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of Holdings and its
Restricted Subsidiaries; (e) Liens resulting from the deposit of cash or
Securities in connection with contracts, tenders or expropriation proceedings,
or to secure workers' compensation, surety or appeal bonds, costs of litigation
when required by law and public and statutory obligations or obligations under
franchise arrangements entered into in the ordinary course of business; (f)
Liens securing Indebtedness incurred pursuant to clause (xii) of the definition
of "Permitted Indebtedness" in an aggregate amount not to exceed $15.0 million
at any one time outstanding; (g) Liens securing Indebtedness consisting of
Capitalized Lease Obligations or industrial revenue bonds, in each case incurred
solely for the purpose of financing all or any part of the purchase price or
cost of construction or installation of assets used in the business of Holdings
or its Restricted Subsidiaries, or repairs, additions or improvements to such
assets; provided, however, that (i) such Liens secure Indebtedness in an amount
not in excess of the original purchase price or the original cost of any such
assets or repairs, additions or improvements thereto (plus an amount equal to
the reasonable fees and expenses, including attorneys fees and expenses,
incurred in connection with the incurrence of such Indebtedness), (ii) such
Liens do not extend to any other assets of Holdings or its Restricted
Subsidiaries (and, in the case of repairs, additions or improvements to any such
assets, such Lien extends only to the assets repaired, added to or improved),
(iii) the Incurrence of such Indebtedness is permitted under this Indenture and
(iv) such Liens attach within 60 days of such purchase, construction,
installation, repair, addition or improvement; and (h) Liens arising under the
Holdings Escrow Agreement.
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"Permitted Refinancing" means, with respect to any Indebtedness of any
Person, any Refinancing of such Indebtedness; provided, however, that (i) such
Refinancing shall not result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing (plus
the amount of any premium required to be paid under the terms of the instrument
governing such Indebtedness and plus the amount of reasonable expenses incurred
by Holdings in connection with such Refinancing), (ii) such Indebtedness shall
not have a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or a final
maturity earlier than the final maturity of the Indebtedness being Refinanced,
(iii) if the Indebtedness being Refinanced is Indebtedness of Holdings, then
such Refinancing Indebtedness shall be Indebtedness solely of Holdings and (iv)
if the Indebtedness being Refinanced is subordinate or junior to the Securities,
then such Refinancing Indebtedness shall be subordinate to the Securities at
least to the same extent and in the same manner as the Indebtedness being
Refinanced.
"Person" means an individual, partnership, corporation, unincorporated
organization, limited liability company, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Physical Securities" means one or more certificated Securities in
registered form.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Private Exchange Securities" has the meaning provided in the Registration
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Initial Securities in the form set forth on Exhibit A hereto.
"Public Equity Offering" means an underwritten public offering of Qualified
Capital Stock pursuant to a registration statement filed with the Commission in
accordance with the Securities Act generating gross cash proceeds of at least
$50.0 million.
"Purchase Money Indebtedness" means Indebtedness of Holdings and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property, equipment or other
assets; provided, however, (A) the Indebtedness shall not exceed the cost of
such property, equipment or assets and shall not be secured by any property,
equipment or assets of Holdings or any Restricted Subsidiary other than the
property, equipment and assets so acquired or constructed and (B) the Lien
securing such Indebtedness shall be created within 180 days of such acquisition
or construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Institutional Buyer" or "QIB" means a "qualified institutional
buyer" as that term is defined in Rule 144A under the Securities Act.
"redeem" means redeem, repurchase, defease or otherwise acquire or retire
for value; and "redemption" and "redeemed" have correlative meanings.
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"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture as set
forth in the form of Security annexed hereto as Exhibit A.
"Reference Date" has the meaning provided in Section 4.04.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement dated as of the Issue Date by and between Holdings and the Initial
Purchaser.
"Registration" means a registered exchange offer for the Securities by
Holdings or other registration of the Securities under the Securities Act
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" means a permanent global security in
registered form representing the aggregate principal amount at maturity of
Securities sold in reliance on Regulation S under the Securities Act.
"Replacement Assets" means (i) properties and assets that replace the
properties and assets that were the subject of such Asset Sale or in properties
and assets that will be used in a Permitted Business or (ii) all of the Capital
Stock of a Person whose assets are of the type described in clause (i), provided
that such Person becomes a Restricted Subsidiary of Holdings.
"Restricted Payment" has the meaning provided in Section 4.04.
"Restricted Security" means a Security that is a "restricted security"
within the meaning set forth in Rule 144(a)(3) under the Securities Act;
provided, however, that the Trustee shall be entitled to request and
conclusively rely upon an Opinion of Counsel with respect to whether any
Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of Holdings which at the time
of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means one or more revolving credit facilities
under the Credit Agreement.
"Rule 144A" means Rule 144A under the Securities Act.
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"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to Holdings or a Restricted Subsidiary of any property, whether owned by
Holdings or any Restricted Subsidiary at the Issue Date or later acquired, which
has been or is to be sold or transferred by Holdings or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means, collectively, the Initial Securities, the Private
Exchange Securities and the Unrestricted Securities treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and any
other successor statute or statutes thereto and the rules and regulations
promulgated thereunder.
"Stated Maturity" means with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" has the meaning provided in Section 5.01.
"Term Loan Facility" means one or more term loan facilities under the
Credit Agreement.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture (except as
provided in Section 9.03) until such time as this Indenture is qualified under
the TIA, and thereafter as in effect on the date on which this Indenture is
qualified under the TIA.
"Trust Officer" means any officer within the corporate trust department (or
any successor group of the Trustee) including any vice president, assistant vice
president, assistant secretary or any other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by the
persons who at that time shall be such officers, and also means, with respect to
a particular corporate trust matter, any other officer to whom such trust matter
is referred because of his knowledge of and familiarity with the particular
subject.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
this Indenture and thereafter means such successor.
"Unrestricted Securities" means one or more Securities that do not and are
not required to bear the Private Placement Legend in the form set forth in
Exhibit A hereto, including, without limitation, the Ex-
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change Securities and any Securities registered under the Securities Act
pursuant to and in accordance with the Registration Rights Agreement.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" means Holdings or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
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SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with generally accepted accounting principles in effect from time
to time, and any other reference in this Indenture to "generally accepted
accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Initial Securities and the Trustee's certificate of authentication
thereof shall be substantially in the form of Exhibit A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and the Trustee's certificate of authentication thereof shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage. Holdings
and the Trustee shall approve the form of the Securities and any notation,
legend or endorsement on them. Each Security shall be dated the date of its
issuance and shall show the date of its authentication.
Securities offered and sold in reliance on Rule 144A and Securities offered
and sold in reliance on Regulation S shall be issued initially in the form of
one or more Global Securities, substantially in the form set forth in Exhibit A
hereto, deposited with the Trustee, as custodian for the Depository, duly
executed by Holdings and authenticated by the Trustee as hereinafter provided
and shall bear the legend set forth in Exhibit C hereto. The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for the
Depository, as hereinafter provided.
SECTION 2.02. Execution and Authentication.
An Officer who has been duly authorized by all requisite corporate action
shall sign the Securities for Holdings by manual or facsimile signature.
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If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Securities for original issue in
an aggregate principal amount at maturity not to exceed $48,000,000, (ii)
Private Exchange Securities from time to time only in exchange for a like
principal amount at maturity of Initial Securities and (iii) Unrestricted
Securities from time to time only in exchange for (A) a like principal amount at
maturity of Initial Securities or (B) a like principal amount at maturity of
Private Exchange Securities, in each case upon a written order of Holdings in
the form of an Officers' Certificate. Each such written order shall specify the
amount of Securities to be authenticated and the date on which the Securities
are to be authenticated, whether the Securities are to be Initial Securities,
Private Exchange Securities or Unrestricted Securities and whether the
Securities are to be issued as Physical Securities or Global Securities and such
other information as the Trustee may reasonably request. The aggregate principal
amount at maturity of Securities outstanding at any time may not exceed
$48,000,000, except as provided in Sections 2.07 and 2.08.
Notwithstanding the foregoing, all Securities issued under this Indenture
shall vote and consent together on all matters (as to which any of such
Securities may vote or consent) as one class and no series of Securities will
have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably acceptable to
Holdings to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent shall
have the same rights as an Agent to deal with Holdings and Affiliates of
Holdings.
The Securities shall be issuable only in registered form, without coupons,
in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
Holdings shall maintain an office or agency, which may be in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange (the "Registrar"), (b)
Securities may be presented or surrendered for payment (the "Paying Agent") and
(c) notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. Holdings, upon written notice to the Trustee, may appoint
one or more co-Registrars and one or more additional Paying Agents. The term
"Paying Agent" includes any additional Paying Agent. Except as provided herein,
Holdings may act as Paying Agent, Registrar or co-Registrar.
Holdings shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which shall incorporate the provisions of the
TIA. The agreement shall implement the provisions of this Indenture that relate
to such Agent. Holdings shall notify the Trustee in writing of the name and
address of
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any such Agent. If Holdings fails to maintain a Registrar or Paying Agent, or
fails to give the foregoing notice, the Trustee shall act as such and shall be
entitled to appropriate compensation in accordance with Section 7.07.
Holdings initially appoints the Trustee as Registrar and Paying Agent until
such time as the Trustee has resigned or a successor has been appointed. The
Securities may be presented for registration of transfer and exchange at the
offices of the Registrar, which initially will be the Corporate Trust Operations
Office of the Trustee. The Company will pay principal (and premium, if any) on
the Securities at the Corporate Trust Operations Office of the Trustee. Holdings
will maintain an office in New York, New York and will also pay principal (and
premium, if any) on the Securities at the Company's offices in New York, New
York.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
Holdings shall require each Paying Agent other than the Trustee to agree in
writing that each Paying Agent shall hold in trust for the benefit of Holders or
the Trustee all assets held by the Paying Agent for the payment of principal of,
or interest on, the Securities, and shall notify the Trustee of any Default by
Holdings in making any such payment. Holdings at any time may require a Paying
Agent to distribute all assets held by it to the Trustee and account for any
assets disbursed and the Trustee may at any time during the continuance of any
payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by Holdings to the Paying Agent (if other than Holdings),
the Paying Agent shall have no further liability for such assets. If Holdings or
any of its Affiliates acts as Paying Agent, it shall, on or before each due date
of the principal of or interest on the Securities, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient to pay the
principal or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee in writing of its action or failure so to act.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, Holdings shall furnish to the
Trustee before each Interest Record Date and at such other times as the Trustee
may request in writing a list as of such date and in such form as the Trustee
may reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the same
series, the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to Holdings and the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney-in-fact duly authorized in writing. To
permit registrations of transfers and exchanges, Holdings shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any registration of
transfer or exchange, but Holdings may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other governmental charge
payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, or
9.05). The Registrar or co-Registrar
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shall not be required to register the transfer or exchange of any Security (i)
during a period beginning at the opening of business 15 days before the mailing
of a notice of redemption of Securities and ending at the close of business on
the day of such mailing and (ii) selected for redemption in whole or in part
pursuant to Article Three hereof, except the unredeemed portion of any Security
being redeemed in part.
Prior to the registration of any transfer by a Holder as provided herein,
Holdings, the Trustee and any Agent of Holdings shall treat the person in whose
name the Security is registered as the owner thereof for all purposes whether or
not the Security shall be overdue, and none of Holdings, the Trustee nor any
such Agent shall be affected by notice to the contrary. Any consent, waiver or
actions of a Holder shall be binding upon any subsequent Holders of such
Security or a Security received upon transfer. Any Holder of a beneficial
interest in a Global Security shall, by acceptance of such beneficial interest
in a Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained by
the Depository (or its agent), and that ownership of a beneficial interest in a
Global Security shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully taken,
Holdings shall issue and the Trustee shall authenticate a replacement Security
if the Trustee's requirements for replacement of Securities are met. If required
by Holdings or the Trustee, such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of Holdings and the Trustee, to protect
Holdings, the Trustee and any Agent from any loss which any of them may suffer
if a Security is replaced. Holdings may charge such Holder for their reasonable
out-of-pocket expenses in replacing a Security, including reasonable fees and
expenses of counsel.
Every replacement Security is an obligation of Holdings.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section 2.08 as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because
Holdings or any Affiliates of Holdings holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a mutilated
Security surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Security is held by
a bona fide purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Final Maturity Date the Paying Agent holds
money sufficient to pay all of the principal and interest due on the Securities
payable on that date, and is not prohibited from paying such money to the
Holders pursuant to the terms of this Indenture, then on and after that date
such Securities cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by Holdings or any of its Affiliates shall be disre-
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garded, except that, for the purposes of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only
Securities that a Trust Officer of the Trustee actually knows are so owned shall
be disregarded. Holdings shall notify the Trustee, in writing, when Holdings or
any of its Affiliates repurchases or otherwise acquires Securities, of the
aggregate principal amount of such Securities so repurchased or otherwise
acquired.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, Holdings may prepare
and the Trustee shall authenticate temporary Securities upon receipt of a
written order of Holdings in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Securities to be authenticated
and the date on which the temporary Securities are to be authenticated.
Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that Holdings considers appropriate for
temporary Securities. Without unreasonable delay, Holdings shall prepare and the
Trustee shall authenticate upon receipt of a written order of Holdings pursuant
to Section 2.02 definitive Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation.
Holdings at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel, and at the written direction of Holdings, dispose
of and deliver evidence of such disposal of all Securities surrendered for
transfer, exchange, payment or cancellation. Subject to Section 2.07, Holdings
may not issue new Securities to replace Securities that they have paid or
delivered to the Trustee for cancellation. If Holdings shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
Holdings shall pay interest on overdue principal from time to time on
demand at the rate of interest then borne by the Securities. Holdings shall, to
the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Securities.
If Holdings defaults in a payment of interest on the Securities, it shall
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest to the Persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day preceding the date fixed by
Holdings for the payment of defaulted interest or the next succeeding Business
Day if such date is not a Business Day. At least 15 days before the subsequent
special record date, Holdings shall mail to each Holder, with a copy to the
Trustee, a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
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Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.01(a) shall be paid to
Holders as of the Interest Record Date for the Interest Payment Date for which
interest has not been paid.
SECTION 2.13. CUSIP Number.
Holdings in issuing the Securities will use a "CUSIP" number and the
Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided, however, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities. Holdings shall
promptly notify the Trustee in writing of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
On the Business Day immediately preceding each Interest Payment Date,
Redemption Date, and the Final Maturity Date, Holdings shall deposit with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date, Redemption Date or Final
Maturity Date, as the case may be, in a timely manner which permits the Paying
Agent to remit payment to the Holders on such Interest Payment Date, Redemption
Date or Final Maturity Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit C.
Members of, or participants in, the Depository ("Participants") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depository, or the Trustee as its custodian, or under the Global
Security, and the Depository may be treated by Holdings, the Trustee and any
agent of Holdings or the Trustee as the absolute owner of the Global Security
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent Holdings, the Trustee or any agent of Holdings or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and
Participants, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Securities may be transferred or
exchanged for Physical Securities in accordance with the rules and procedures of
the Depository and the provisions of Section 2.16; provided, however, that
Physical Securities shall be transferred to all beneficial owners in exchange
for their beneficial interests in Global Securities if (i) the Depository
notifies Holdings that it is unwilling or unable to continue as Depository for
any Global Security and a successor Depository is not appointed by Holdings
within 90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depository to issue
Physical Securities.
(c) In connection with the transfer of Global Securities as an entirety to
beneficial owners pursuant to paragraph (b) of this Section 2.15, the Global
Securities shall be deemed to be surrendered to the Trustee for cancellation,
and Holdings shall execute, and the Trustee shall upon written instructions from
Hold-
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ings authenticate and deliver, to each beneficial owner identified by the
Depository in exchange for its beneficial interest in the Global Securities, an
equal aggregate principal amount of Physical Securities of authorized
denominations.
(d) Any Physical Security constituting a Restricted Security delivered in
exchange for an interest in a Global Security pursuant to paragraph (c) of this
Section 2.15 shall, except as otherwise provided by Section 2.16, bear the
Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Participants and Persons that may hold interests
through Participants, to take any action which a Holder is entitled to take
under this Indenture or the Securities.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical Securities
are presented to the Registrar (so long as the Trustee is the Registrar, such
presentment to be made at the Corporate Trust Operations Office of the Trustee)
or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal principal amount of
Physical Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for registration of transfer or exchange:
(A) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney-in-fact duly authorized in
writing; and
(B) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act, such Physical Securities
shall be accompanied, in the sole discretion of Holdings, by the following
additional information and documents, as applicable:
(I) if such Physical Security is being delivered to the
Registrar or co-Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (substantially in the form of Exhibit D
hereto); or
(II) if such Physical Security is being transferred to a
QIB in accordance with Rule 144A, a certification to
that effect (substantially in the form of Exhibit D
hereto); or
(III) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a transferee letter of
representation (substantially in the form of Exhibit
E hereto) and, at the option of Holdings, an Opinion
of Counsel reasonably satisfactory to Holdings to the
effect that such transfer is in compliance with the
Securities Act; or
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(IV) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of Holdings, an Opinion of Counsel
reasonably satisfactory to Holdings to the effect
that such transfer is in compliance with the
Securities Act; or
(V) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of Exhibit
D hereto) and a transferor certificate for Regulation
S transfers (substantially in the form of Exhibit F
hereto) and, at the option of Holdings, an Opinion of
Counsel reasonably satisfactory to Holdings to the
effect that such transfer is in compliance with the
Securities Act; or
(VI) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of Holdings, an Opinion
of Counsel reasonably acceptable to Holdings to the
effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security the offer and sale of which
has not been registered under the Securities Act may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(i) certification, substantially in the form of Exhibit D hereto, that
such Physical Security is being transferred (A) to a QIB, (B) to an
Institutional Accredited Investor or (C) in an offshore transaction in
reliance on Regulation S and, with respect to (B) or (C), at the option of
Holdings, an Opinion of Counsel reasonably acceptable to Holdings to the
effect that such transfer is in compliance with the Securities Act; and
(ii) written instructions directing the Registrar or co-Registrar to
make, or to direct the Depository to make, an endorsement on the applicable
Global Security to reflect an increase in the aggregate amount of the
Securities represented by the Global Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no 144A Global Security, IAI
Global Security or Regulation S Global Security, as the case may be, is then
outstanding, Holdings shall, unless either of the events in the proviso to
Section 2.15(b) have occurred and are continuing, issue and the Trustee shall,
upon written instructions from Holdings in accordance with Section 2.02,
authenticate such a Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and exchange
of Global Securities or beneficial interests therein shall be effected through
the Depository in accordance with this Indenture (including the restrictions on
transfer set forth herein) and the procedures of the Depository therefor. Upon
receipt by the Registrar or Co-Registrar of written instructions, or such other
instruction as is customary for the Depository, from the Depository or its
nominee, requesting the registration of transfer of an interest in a 144A Global
Security, an IAI Global Security or a Regulation S Global Security, as the case
may be, to another type of Global Security, together with the applicable Global
Securities (or, if the applicable type of Global Security re-
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quired to represent the interest as requested to be obtained is not then
outstanding, only the Global Security representing the interest being
transferred), the Registrar or Co-Registrar shall reflect on its books and
records (and the applicable Global Security) the applicable increase and
decrease of the principal amount of Securities represented by such types of
Global Securities, giving effect to such transfer. If the applicable type of
Global Security required to represent the interest as requested to be obtained
is not outstanding at the time of such request, Holdings shall issue and the
Trustee shall, upon written instructions from Holdings in accordance with
Section 2.02, authenticate a new Global Security of such type in principal
amount equal to the principal amount of the interest requested to be
transferred.
(d) Transfer of a Beneficial Interest in a Global Security for a Physical
Security.
(i) Any Person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Physical Security;
provided, however, that prior to the Registration, a transferee that is a
QIB or Institutional Accredited Investor may not exchange a beneficial
interest in Global Security for a Physical Security. Upon receipt by the
Registrar or co-Registrar of written instructions, or such other form of
instructions as is customary for the Depository, from the Depository or its
nominee on behalf of any Person having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written order or such other
form of instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest
containing registration instructions and, in the case of any such transfer
or exchange of a beneficial interest in Securities the offer and sale of
which have not been registered under the Securities Act, the following
additional information and documents:
(A) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of Holdings, an Opinion of Counsel
reasonably satisfactory to Holdings to the effect
that such transfer is in compliance with the
Securities Act; or
(B) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of Holdings, an Opinion
of Counsel reasonably satisfactory to Holdings to the
effect that such transfer is in compliance with the
Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository and
the Registrar or co-Registrar, the aggregate principal amount of the
applicable Global Security to be reduced and, following such reduction,
Holdings will execute and, upon receipt of an authentication order in the
form of an Officers' Certificate in accordance with Section 2.02, the
Trustee will authenticate and deliver to the transferee a Physical Security
in the appropriate principal amount.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized denominations as the Depository, pursuant
to instructions from its direct or indirect participants or otherwise,
shall instruct the Registrar or co-Registrar in writing. The Registrar or
co-Registrar shall deliver such Physical Securities to the Persons in whose
names such Physical Securities are so registered.
<PAGE>
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(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or replacement of
Securities not bearing the Private Placement Legend, the Registrar or
co-Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar or co-Registrar shall deliver only
Securities that bear the Private Placement Legend unless, and the Trustee is
hereby authorized to deliver Securities without the Private Placement Legend if,
(i) there is delivered to the Trustee an Opinion of Counsel reasonably
satisfactory to Holdings and the Trustee to the effect that neither such legend
nor the related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act; (ii) such Security has
been sold pursuant to an effective registration statement under the Securities
Act (including pursuant to a Registration); or (iii) the date of such transfer,
exchange or replacement is two years after the later of (x) the Issue Date and
(y) the last date that Holdings or any affiliate (as defined in Rule 144 under
the Securities Act) of Holdings was the owner of such Securities (or any
predecessor thereto).
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Participants or
beneficial owners of interest in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.15 or this Section 2.16. Holdings
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If Holdings elects to redeem Securities pursuant to paragraph 5 of the
Securities at the applicable redemption price set forth thereon, it shall notify
the Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed. Holdings shall give such notice to the Trustee at
least 45 days before
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the Redemption Date (unless a shorter notice shall be agreed to by the Trustee
in writing), together with an Officers' Certificate stating that such redemption
will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to paragraph
5 of the Securities, the Trustee shall select the Securities to be redeemed in
compliance with the requirements of the national securities exchange, if any, on
which the Securities are listed or, in the absence of such requirements or if
the Securities are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as may be required pursuant to this
Indenture or otherwise as the Trustee shall deem fair and appropriate. The
Trustee shall make the selection from the Securities then outstanding, subject
to redemption and not previously called for redemption.
The Trustee may select for redemption pursuant to paragraph 5 of the
Securities portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
Holdings shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at such Holder's registered address.
Each notice of redemption shall identify the Securities to be redeemed
(including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, as long as Holdings has deposited with the Paying Agent
funds in satisfaction of the applicable redemption price pursuant to this
Indenture, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the Paying
Agent;
(6) in the case of any redemption pursuant to paragraph 5 of the
Securities, if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued; and
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(7) that no representation is made as to the accuracy of the CUSIP
number listed in such notice or printed on such Security.
At Holdings' written request, the Trustee shall give the notice of
redemption on behalf of Holdings, in Holdings' name and at Holdings' expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the redemption price. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price, plus accrued interest thereon, if any, to the Redemption Date.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the Redemption Date, Holdings shall
deposit with the Paying Agent (or if Holdings is its own Paying Agent, it shall,
on or before the Redemption Date, segregate and hold in trust) money sufficient
to pay the redemption price of and accrued interest, if any, on all Securities
to be redeemed on that date other than Securities or portions thereof called for
redemption on that date which have been delivered by Holdings to the Trustee for
cancellation.
If any Security surrendered for redemption in the manner provided in the
Securities shall not be so paid on the Redemption Date due to the failure of
Holdings to deposit with the Paying Agent money sufficient to pay the redemption
price thereof, the principal and accrued and unpaid interest, if any, thereon
shall, until paid or duly provided for, bear interest as provided in Sections
2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee shall
authenticate for the Holder a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
Holdings shall pay the principal of and interest on the Securities in the
manner provided in this Indenture, the Securities and the Registration Rights
Agreement. An installment of principal or interest shall be considered paid on
the date due if the Trustee or Paying Agent (other than Holdings or any
Affiliates of Holdings) holds on that date money designated for and sufficient
to pay the installment in full and is not prohibited from paying such money to
the Holders of the Securities pursuant to the terms of this Indenture.
Holdings shall pay cash interest on overdue principal at the same rate per
annum borne by the Securities. Holdings shall pay cash interest on overdue
installments of interest at the same rate per annum borne by the Securities, to
the extent lawful, as provided in Section 2.12.
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SECTION 4.02. Maintenance of Office or Agency.
Holdings shall give prompt written notice to the Trustee of the location,
and any change in the location, of any office or agency required by Section
2.03. If at any time Holdings shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Article 10. Holdings hereby initially
designates the Trustee at its address set forth in Section 10.02 as its office
for such purposes.
SECTION 4.03. Limitation on Incurrence of Additional Indebtedness and
Issuance of Disqualified Capital Stock.
Holdings shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (other than Permitted Indebtedness) and
Holdings will not issue any Disqualified Capital Stock and will not permit its
Restricted Subsidiaries to issue any Preferred Stock except Preferred Stock of a
Restricted Subsidiary issued to (and as long as it is held by) Holdings or a
Wholly Owned Restricted Subsidiary of Holdings; provided, however, that if no
Default or Event of Default shall have occurred and be continuing at the time of
or as a consequence of the incurrence of any such Indebtedness, Holdings may
incur Indebtedness (including, without limitation, Acquired Indebtedness) and
Holdings may issue Disqualified Capital Stock of Holdings, if, in either case,
at the time of and immediately after giving pro forma effect to such incurrence
of such Indebtedness or the issuance of such Disqualified Capital Stock, as the
case may be, and the use of proceeds therefrom, Holdings' Consolidated Fixed
Charge Coverage Ratio is greater than 2.0 to 1.0.
Holdings shall not incur any Indebtedness that purports to be by its terms
(or by the terms of any agreement governing such Indebtedness) subordinated to
any other Indebtedness of Holdings unless such Indebtedness is also by its terms
(or by the terms of any agreement governing such Indebtedness) made expressly
subordinated to the Securities to the same extent and in the same manner as such
Indebtedness is subordinated to such other Indebtedness.
For purposes of determining compliance with this Section 4.03, in the event
that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the various clauses of the definition of Permitted
Indebtedness, Holdings, in its sole discretion, shall classify such item of
Indebtedness and shall only be required to include the amount and type of such
Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments.
Holdings shall not, and shall not cause or permit any Restricted Subsidiary
to, directly or indirectly, (a) declare or pay any dividend or make any
distribution (other than dividends or distributions payable in Qualified Capital
Stock of Holdings) on or in respect of shares of Holdings' Capital Stock, (b)
redeem any Capital Stock of Holdings or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock, or (c) make any
Investment (other than Permitted Investments) (each of the foregoing actions set
forth in clauses (a), (b), and (c) being referred to as a "Restricted Payment"),
if at the time of such Restricted Payment or immediately after giving effect
thereto, (i) a Default shall have occurred and be continuing or (ii) Holdings is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.03 or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purposes, if other
than in
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cash, being the fair market value of such property as determined reasonably and
in good faith by the Board of Directors of Holdings) shall exceed the sum (the
"Basket"), without duplication, of: (v) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of Holdings earned subsequent to the Issue Date and on or prior to
the date the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (w) 100% of the aggregate net cash
proceeds received by Holdings from any Person (other than a Restricted
Subsidiary of Holdings) from the issuance and sale subsequent to the Issue Date
and on or prior to the Reference Date of Qualified Capital Stock of Holdings
(other than Qualified Capital Stock, the proceeds of which are to be used to
redeem Company Notes pursuant to the provisions described in paragraph 5(b) of
the Company Notes); plus (x) 100% of the net cash proceeds received by Holdings
from any Person (other than a Restricted Subsidiary of Holdings) from the
issuance subsequent to the Issue Date of Indebtedness convertible or
exchangeable into Qualified Capital Stock of Holdings that has actually been so
converted or exchanged, together with the aggregate net cash proceeds received
by Holdings (other than from a Restricted Subsidiary of Holdings) at the time of
such conversion or exchange; plus (y) without duplication of any amounts
included in clause (iii) (x) above, 100% of the aggregate net cash proceeds of
any equity contribution received by Holdings from a holder of Capital Stock;
plus (z) the amount equal to the net reduction in Investments (other than
Permitted Investments) made by Holdings or any of its Restricted Subsidiaries in
any Person resulting from, and without duplication, (i) repurchases or
redemptions of such Investments by such Person, proceeds realized upon the sale
of such Investment to an unaffiliated purchaser and repayments of loans or
advances or other transfers of assets by such Person to Holdings or any
Restricted Subsidiary of Holdings or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment") not to exceed, in the case of any Restricted
Subsidiary, the amount of Investments previously made by Holdings or any
Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included
in the calculation of Restricted Payments; provided, however, that no amount
shall be included under this clause (z) to the extent it is already included in
Consolidated Net Income.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default shall have occurred
and be continuing, (i) the acquisition of any shares of Capital Stock of
Holdings solely in exchange for shares of Qualified Capital Stock of Holdings or
(ii) the making of any Restricted Payment from the net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of Holdings)
of shares of Qualified Capital Stock of Holdings; (3) so long as no Default
shall have occurred and be continuing, repurchases by Holdings of Common Stock
of Holdings from employees of Holdings or any of its Subsidiaries or their
authorized representatives (other than Permitted Holders) upon the death,
disability or termination of employment of such employees, in an aggregate
amount not to exceed 5% of the cumulative Consolidated Net Income of the Company
earned subsequent to the Issue Date and on or prior to the date such repurchase
occurs; and (4) any repurchase of equity interests deemed to occur upon the
exercise of stock options if such equity interest represents a portion of the
exercise price of such option. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant to clauses (1),
(2)(ii), (3) and (4) shall be included in such calculation and amounts expended
pursuant to clause (2)(i) shall not be included in such calculation.
The amount of any non-cash Restricted Payment shall be the fair market
value, on the date such Restricted Payment is made, of the assets or securities
proposed to be transferred or issued by Holdings or such Restricted Subsidiary,
as the case may be, pursuant to such Restricted Payment. The fair market value
of any non-cash Restricted Payment shall be determined by the Board of Directors
of Holdings whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or ap-
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praisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $1.5 million. Not later than
60 days after the end of any fiscal quarter (100 days in the case of the last
fiscal quarter of the fiscal year) during which any Restricted Payment is made,
Holdings shall deliver to the Trustee an Officers' Certificate stating that all
Restricted Payments made during such fiscal quarter were permitted and setting
forth the basis upon which the calculations required by this Section 4.04 were
computed, together with a copy of any opinion or appraisal required by this
Indenture.
SECTION 4.05. Limitation on Asset Sales.
Holdings shall not, and shall not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless (i) Holdings or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by the Board of Directors of Holdings
or such Restricted Subsidiary), (ii) at least 80% of the consideration received
by Holdings or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of (x) cash or Cash Equivalents, (y) Replacement
Assets or (z) any combination of the foregoing and is received at the time of
such disposition; and (iii) upon the consummation of an Asset Sale, Holdings
shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 270 days of receipt thereof either (A) to
prepay any Indebtedness incurred pursuant to clause (ii) or clause (xii) of the
definition of "Permitted Indebtedness" (other than subordinated Indebtedness) or
any Indebtedness for borrowed money of any Restricted Subsidiary and effect a
permanent reduction thereunder, (B) to make an investment in Replacement Assets
or (C) a combination of prepayment and investment permitted by the foregoing
clauses (iii)(A) and (iii)(B). On the 271st day after an Asset Sale or such
earlier date, if any, as the Board of Directors of Holdings or of such
Restricted Subsidiary determines, as the case may be, not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B)
and (iii)(C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each a "Net
Proceeds Offer Amount") shall be applied by Holdings or such Restricted
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all holders of
Securities and Pari Passu Indebtedness (to the extent required by the terms of
such Pari Passu Indebtedness) on a pro rata basis based on the aggregate
outstanding amount of Securities and Pari Passu Indebtedness, that amount of
Securities and Pari Passu Indebtedness in the aggregate equal to the Net
Proceeds Offer Amount at a price equal to, with respect to the Securities, 100%
of the principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the date of purchase, and with respect to any Pari Passu Indebtedness,
an amount not greater than 100% of the principal amount or accreted value of
such Pari Passu Indebtedness; provided, however, that if at any time any
non-cash consideration received by Holdings or any Restricted Subsidiary, as the
case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to any
such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. Holdings may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount
equal to or in excess of $5,000,000 resulting from one or more Asset Sales (at
which time, the entire unutilized Net Proceeds Offer Amount, and not just the
amount in excess of $5,000,000, shall be applied as required pursuant to this
paragraph). Pending the final application of such Net Cash Proceeds, Holdings
may temporarily cause the Company to cause the Guarantors to reduce Indebtedness
under the Revolving Credit Facility or invest such Net Cash Proceeds in Cash
Equivalents.
For purposes of clause (ii)(x) of the immediately preceding paragraph, the
term "cash" shall include the amount of any Indebtedness for borrowed money or
any Capitalized Lease Obligations (A) that is
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assumed by the transferee of any assets or property which constitutes the Asset
Sale or (B) with respect to the sale or disposition of all of the Capital Stock
of a Restricted Subsidiary, that remains the liability of such Restricted
Subsidiary subsequent to such sale or other disposition, in each case provided
that there is no further recourse to Holdings or any of its Restricted
Subsidiaries with respect to such Indebtedness.
In the event of the transfer of substantially all (but not all) of the
property and assets of Holdings and its Restricted Subsidiaries as an entirety
to a Person in a transaction permitted under Article Five, the successor
corporation shall be deemed to have sold the properties and assets of Holdings
and its Restricted Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market value
of such properties and assets of Holdings or its Restricted Subsidiaries deemed
to be sold shall be deemed to be Net Cash Proceeds for purposes of this Section
4.05.
Each Net Proceeds Offer shall be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in this Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Securities in whole or in part in integral multiples of
$1,000 in exchange for cash. To the extent Holders properly tender Securities in
an amount exceeding the Net Proceeds Offer Amount, Securities of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 business days or such longer
period as may be required by applicable law.
Holdings shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.05, Holdings shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached or violated any of its obligations
under this Section 4.05 by virtue thereof.
SECTION 4.06. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
Holdings shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on or
in respect of its Capital Stock; (b) make loans or advances or to pay any
Indebtedness or other obligation owed to Holdings or any other Restricted
Subsidiary; or (c) transfer any of its property or assets to Holdings or any
other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) the Indentures; (3)
customary non-assignment provisions of any contract or any lease governing a
leasehold interest of any Restricted Subsidiary; (4) any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired; (5) agreements existing on the
Issue Date, including, without limitation, the Credit Agreement, to the extent
and in the manner such agreements are in effect on the Issue Date; (6) an
agreement governing Indebtedness incurred to Refinance the Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clause (2), (4) or
(5) above; provided, however, that the provisions relating to such encumbrance
or restriction contained in any such Indebtedness are no less favorable, taken
as a whole, to Holdings in any material respect as determined by the Board of
Directors of Holdings in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (4), (5); or (7) restrictions imposed by any
agreement to sell, or otherwise dispose of, assets pending the closing of such
sale.
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SECTION 4.07. Limitation on Liens.
Holdings shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets of
Holdings or any of its Restricted Subsidiaries whether owned on the Issue Date
or acquired after the Issue Date, or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom unless (i) in
the case of Liens securing Indebtedness that is expressly subordinate or junior
in right of payment to the Securities, the Securities are secured by a Lien on
such property, assets or proceeds that is senior in priority to such Liens and
(ii) in all other cases, the Securities are equally and ratably secured, except
for (1) Liens existing as of the Issue Date to the extent and in the manner such
Liens are in effect on the Issue Date; (2) Indebtedness incurred pursuant to
clause (ii) of the definition of "Permitted Indebtedness"; (3) Liens securing
the Securities, the Senior Notes and the Guarantees; (4) Liens of Holdings or a
Wholly Owned Restricted Subsidiary on assets of any Restricted Subsidiary; (5)
Liens securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under this Indenture and
which has been incurred in accordance with the provisions of this Indenture;
provided, however, that such Liens (x) are no less favorable, taken as a whole,
to the Holders and are not more favorable to the lienholders with respect to
such Liens than the Liens in respect of the Indebtedness being Refinanced and
(y) do not extend to or cover any property or assets of Holdings or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (6)
Permitted Liens.
SECTION 4.08. Limitations on Transactions with Affiliates.
(a) Holdings shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
(b) below and (y) Affiliate Transactions on terms that are no less favorable,
taken as a whole, than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person that
is not an Affiliate of Holdings or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $500,000 shall be approved by the Board of
Directors of Holdings or such Restricted Subsidiary, as the case may be, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If Holdings or any Restricted Subsidiary enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate fair market value of more than $1,500,000,
Holdings or such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to Holdings or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of Holdings or any Restricted
Subsidiary in the ordinary course as determined in good faith by the Board of
Directors of Holdings or such Restricted Subsidiary; (ii) transactions
exclusively between or among Holdings and any of its Wholly Owned Restricted
Subsidiaries or exclusively between or among such Wholly Owned Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by the
Indentures; (iii) any written agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including pursuant to
any amendment thereto so long as any such amendment is not more disadvantageous
to the Holders
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in any material respect than the agreement as in effect on the Issue Date); (iv)
loans or advances to employees of Holdings or any Restricted Subsidiary (other
than Permitted Holders) in the ordinary course and in an aggregate amount not to
exceed $250,000 at any one time outstanding; (v) payments (A) to P&E Properties,
Inc. or any of its Affiliates in an aggregate amount not to exceed $600,000 in
any fiscal year to pay management fees and (B) to reimburse P&E Properties, Inc.
or any of its Affiliates for reasonable services and out-of-pocket and other
costs and expenses actually incurred in connection with such services; and (vi)
payments permitted by Section 4.04.
SECTION 4.09. Subsidiaries.
Holdings shall not have any Subsidiaries except Wholly Owned Restricted
Subsidiaries and Unrestricted Subsidiaries.
SECTION 4.10. Designation of Unrestricted Subsidiaries.
Holdings may designate after the Issue Date any Subsidiary of Holdings as
an "Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation; and
(ii) Holdings would be permitted to make an Investment (other than a
Permitted Investment) at the time of such Designation (assuming the
effectiveness of such Designation) pursuant to Section 4.04 in an amount
(the "Designation Amount") equal to the fair market value of Holdings'
proportionate interest in the net worth of such Subsidiary on such date
calculated in accordance with GAAP.
Neither Holdings nor any Restricted Subsidiary shall at any time (x)
provide credit support for or guarantee any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness); provided, that Holdings may pledge equity interests or
Indebtedness of any Unrestricted Subsidiary on a nonrecourse basis such that the
pledgee has no claim whatsoever against Holdings other than to obtain such
pledged property, (y) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary,
except for any nonrecourse guarantee given solely to support the pledge by
Holdings of the Capital Stock of any Unrestricted Subsidiary. For purposes of
the foregoing, the Designation of a Subsidiary of Holdings as an Unrestricted
Subsidiary shall be deemed to include the Designation of all of the Subsidiaries
of such Subsidiary.
Any such Designation by Holdings shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of a Board Resolution of Holdings giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
SECTION 4.11. Conduct of Business.
Holdings and its Restricted Subsidiaries shall not engage in any businesses
other than Permitted Businesses.
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SECTION 4.12. Reports to Holders.
Holdings shall deliver to the Trustee within 15 days after the filing of
the same with the Commission, copies of the quarterly and annual reports and of
the information, documents and other reports, if any, which Holdings is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
Notwithstanding that Holdings may not be subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, Holdings shall file with the
Commission, to the extent permitted, and provide the Trustee and Holders with
such annual reports and such information, documents and other reports specified
in Sections 13 and 15(d) of the Exchange Act. For so long as any Securities
remain outstanding, Holdings shall furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to
any beneficial holder of Securities, if not obtainable from the SEC, information
of the type that would be filed with the SEC pursuant to the foregoing
provisions, upon the request of any such holder. The first such report that
Holdings shall be required to deliver shall be for the period ending June 30,
1998.
SECTION 4.13. Payments for Consents.
Neither Holdings nor any of its Subsidiaries shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Securities for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid or is paid to
all Holders of the Securities that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
SECTION 4.14. Limitation on Investment Company Status.
Holdings and its Subsidiaries shall not take any action, or otherwise
permit to exist any circumstance, that would require Holdings to register as an
"investment company" under the Investment Company Act of 1940, as amended.
SECTION 4.15. Notice of Defaults.
(a) In the event that any Indebtedness of Holdings or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any Default (or any event which, with notice or lapse of time, or
both, would constitute such a Default) under such Indebtedness, Holdings shall
promptly give written notice to the Trustee of such declaration, the status of
such Default or event and what action Holdings is taking or proposes to take
with respect thereto.
(b) Upon becoming aware of the occurrence and continuation of any Default
or Event of Default, Holdings shall promptly deliver an Officers' Certificate to
the Trustee specifying the Default or Event of Default.
SECTION 4.16. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall have the
right to require that Holdings purchase all or a portion of such Holder's
Securities pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price equal to 101% of the principal amount at maturity
plus accrued and unpaid interest, if any, to the date of purchase.
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(b) Prior to the mailing of the notice referred to below, but in any event
within 30 days following the date on which Holdings becomes aware that a Change
of Control has occurred (the "Change of Control Date"), Holdings covenants that
if the purchase of the Securities would violate or constitute a default under
any other Indebtedness of Holdings, then Holdings shall, to the extent needed to
permit such purchase of Securities, either (i) repay all such Indebtedness and
terminate all commitments outstanding thereunder or (ii) obtain the requisite
consents, if any, under any such Indebtedness to permit the purchase of the
Securities as provided below. Holdings shall first comply with the covenant in
the preceding sentence before it will be required to make the Change of Control
Offer or purchase the Securities pursuant to the provisions described below.
(c) Within 30 days following the date on which a Change of Control has
occurred, Holdings shall send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. The notice to the Holders shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.16 and that all Securities validly tendered and not withdrawn
will be accepted for payment;
(2) the purchase price (including the amount of accrued interest, if
any), and the purchase date (which shall be a Business Day no earlier than
30 days nor later than 60 days from the date such notice is mailed, other
than as may be required by law) (the "Change of Control Payment Date");
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless Holdings defaults in making payment therefor, any
Security accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant to a
Change of Control Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent for the Securities at the
address specified in the notice prior to the close of business on the third
Business Day prior to the Change of Control Payment Date;
(6) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than three Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased;
(7) that Holders whose Securities are purchased only in part shall be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; provided, however, that each
Security purchased and each new Security issued shall be in a principal
amount of $1,000 or integral multiples thereof; and
(8) the circumstances and relevant facts regarding such Change of
Control.
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(d) On or before the Change of Control Payment Date, Holdings shall (i)
accept for payment Securities or portions thereof (in integral multiples of
$1,000) validly tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent in accordance with Section 2.14 cash in U.S. dollars or
United States Government Obligations sufficient to pay the purchase price plus
accrued and unpaid interest, if any, of all Securities so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by
Holdings. Upon receipt by the Paying Agent of the monies specified in clause
(ii) above and a copy of the Officers' Certificate specified in clause (iii)
above, the Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price plus accrued and
unpaid interest, if any, out of the funds deposited with the Paying Agent in
accordance with the immediately preceding sentence. The Trustee shall promptly
authenticate and mail to such Holders new Securities equal in principal amount
to any unpurchased portion of the Securities surrendered. Upon the payment of
the purchase price for the Securities accepted for purchase, the Trustee shall
return the Securities purchased to Holdings for cancellation. Any monies
remaining after the purchase of Securities pursuant to a Change of Control Offer
shall be returned within three Business Days by the Trustee to Holdings except
with respect to monies owed as obligations to the Trustee pursuant to Article
Eight. For purposes of this Section 4.16, the Trustee shall, except with respect
to monies owed as obligations to the Trustee pursuant to Article Seven, act as
the Paying Agent.
(e) Holdings shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of the Securities pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Indenture relating to a Change of Control Offer, Holdings shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations relating to such Change of Control Offer by virtue
thereof.
SECTION 4.17. Compliance Certificate.
Holdings shall deliver to the Trustee within 120 days after the close of
each fiscal year a certificate signed by the principal executive officer,
principal financial officer or principal accounting officer stating that a
review of the activities of Holdings has been made under the supervision of the
signing officer with a view to determining whether a Default or Event of Default
has occurred and whether or not the signers know of any Default or Event of
Default by Holdings that occurred during such fiscal year. If they do know of
such a Default or Event of Default, their status and the action Holdings is
taking or proposes to take with respect thereto. The first certificate to be
delivered by Holdings pursuant to this Section 4.17 shall be for the fiscal year
ending March 31, 1999.
SECTION 4.18. Existence.
Subject to Article Five, Holdings shall do or shall cause to be done all
things necessary to preserve and keep in full force and effect its existence and
the corporate, partnership or other existence of each Subsidiary in accordance
with the respective organizational documents of each such Subsidiary and the
rights (charter and statutory) and material franchises of Holdings and the
Subsidiaries; provided, however, that Holdings shall not be required to preserve
any such right or franchise, or the corporate or other existence of any
Subsidiary, if the Board of Directors of Holdings shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
Holdings and the Subsidiaries, taken as a whole; provided, further, however,
that a determination of the Board of Directors of Holdings shall not be required
in the event of a merger of one or more Restricted Subsidiaries of Holdings with
or into another Restricted Subsidiary of Holdings or another Person, if the
surviving Person is a Restricted Subsidiary of Holdings organized under the laws
of the United
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States or a State thereof or of the District of Columbia. This Section 4.18
shall not prohibit Holdings from taking any other action otherwise permitted by,
and made in accordance with, the provisions of this Indenture.
SECTION 4.19. Maintenance of Properties and Insurance.
(a) Holdings shall, and shall cause each of its Restricted Subsidiaries to,
maintain its material properties in normal condition (subject to ordinary wear
and tear) and make all reasonably necessary repairs, renewals or replacements
thereto as in the judgment of Holdings may be reasonably necessary to the
conduct of the business of Holdings and its Restricted Subsidiaries; provided,
however, that nothing in this Section 4.19 shall prevent Holdings or any of its
Restricted Subsidiaries from discontinuing the operation and maintenance of any
of its properties, if such properties are, in the reasonable and good faith
judgment of the Board of Directors of Holdings or the Restricted Subsidiary, as
the case may be, no longer reasonably necessary in the conduct of their
respective businesses.
(b) Holdings shall provide or cause to be provided, for itself and each of
its Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of Holdings, are reasonably adequate and appropriate for the conduct of the
business of Holdings and such Restricted Subsidiaries.
SECTION 4.20. Payment of Taxes and Other Claims.
Holdings shall pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Restricted
Subsidiaries or properties of it or any of its Restricted Subsidiaries and (ii)
all material lawful claims for labor, materials, supplies and services that, if
unpaid, might by law become a Lien upon the property of it or any of its
Restricted Subsidiaries; provided, however, that there shall not be required to
be paid or discharged any such tax, assessment, charge or claim, the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made or where
the failure to effect such payment or discharge is not adverse in any material
respect to the financial condition of Holdings and its Restricted Subsidiaries,
taken as a whole.
SECTION 4.21. Waiver of Stay, Extension or Usury Laws.
Holdings covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive Holdings from paying all or any portion of
the principal of, premium or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
obligations or the performance of this Indenture; and (to the extent that it may
lawfully do so) Holdings hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 4.22. Deposit of Funds with Escrow Agent.
(a) On the Issue Date, Holdings shall deposit, or shall cause to be
deposited, with the Escrow Agent funds that together with the proceeds from the
investment thereof will be sufficient to pay the first six scheduled interest
payments on the Securities (excluding any additional amounts which may become
due
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pursuant to the Registration Rights Agreement). All Escrow Collateral shall be
held in the Escrow Account until permitted to be disbursed pursuant to the
Holdings Escrow Agreement and then shall be disbursed strictly in accordance
with the terms thereof.
(b) Pending release of the Escrow Funds as provided in the Holdings Escrow
Agreement, the Escrow Funds will be invested in accordance with the Holdings
Escrow Agreement as directed in writing by Holdings. Any interest or other
profit resulting from such investment will be deposited in the Escrow Account.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
(a) Holdings shall not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of Holdings' assets (determined on a
consolidated basis for Holdings and Holdings' Restricted Subsidiaries) whether
as an entirety or substantially as an entirety to any Person unless: (i) either
(1) Holdings shall be the surviving or continuing corporation or (2) the Person
(if other than Holdings) formed by such consolidation or into which Holdings is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of Holdings and of
Holdings' Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any state thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
reasonably satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any, and
interest on all of the Securities and the performance of every covenant of the
Securities, this Indenture and the Holdings Escrow Agreement on the part of
Holdings to be performed or observed; (ii) immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction), Holdings or such Surviving Entity, as the case may be, shall be
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.03; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
and any Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing; and (iv)
Holdings or the Surviving Entity shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with the applicable provisions
of this Indenture and that all conditions precedent in this Indenture relating
to such transaction have been satisfied.
(b) For purposes of the foregoing subsection (a), the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of Holdings the Capital Stock of which constitutes
all or substantially all of the properties and assets of Holdings, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of Holdings.
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SECTION 5.02. Successor Corporation Substituted.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in Section 5.01 in which Holdings is not
the surviving person and the surviving person is to assume all the Obligations
of Holdings under the Securities, this Indenture, the Holdings Escrow Agreement
and the Registration Rights Agreement pursuant to a supplemental indenture, such
surviving person shall succeed to, and be substituted for, and may exercise
every right and power of Holdings, and Holdings shall be discharged from its
Obligations under this Indenture, the Securities, the Holdings Escrow Agreement
and the Registration Rights Agreement.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of this
Indenture:
(a) the failure to pay interest on any Securities when the same
becomes due and payable and the default continues for a period of 30 days;
(b) the failure to pay the principal on any Securities, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Securities
tendered pursuant to Section 4.05 or 4.16);
(c) a default in the observance or performance of any other covenant
or agreement contained in this Indenture which default continues for a
period of 30 days after Holdings receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Securities (except in the case of a default with respect to Article Five,
which will constitute an Event of Default with such notice requirement but
without such passage of time requirement);
(d) a default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of Holdings or its Restricted
Subsidiaries having an outstanding principal amount of $2,000,000 or more
individually or in the aggregate that has resulted in the acceleration of
the payment of such Indebtedness or failure by Holdings or such Restricted
Subsidiary to pay principal when due at the stated maturity of any such
Indebtedness and such default or defaults shall have continued after any
applicable grace period and shall not have been cured or waived;
(e) one or more judgments in an aggregate amount in excess of
$2,000,000 shall have been rendered against Holdings or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable;
(f) Holdings or any of its Restricted Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law: (i) admits in writing its
inability to pay its debts generally as they become due; (ii) commences a
voluntary case or proceeding; (iii) consents to the entry of an order for
relief against it
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in an involuntary case or proceeding; (iv) consents or acquiesces in the
institution of a bankruptcy or insolvency proceeding against it; (v)
consents to the appointment of a Custodian of it or for all or
substantially all of its property; or (vi) makes a general assignment for
the benefit of its creditors, or any of them takes any action to authorize
or effect any of the foregoing;
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against Holdings or any of its
Restricted Subsidiaries in an involuntary case or proceeding; (ii) appoints
a Custodian of Holdings or any such Restricted Subsidiary for all or
substantially all of its property; or (iii) orders the liquidation of
Holdings or any of its Restricted Subsidiaries; and in each case the order
or decree remains unstayed and in effect for 60 days; provided, however,
that if the entry of such order or decree is appealed and dismissed on
appeal, then the Event of Default hereunder by reason of the entry of such
order or decree shall be deemed to have been cured; or
(h) the Holdings Escrow Agreement ceases to be in full force and
effect (other than pursuant to its terms), or is declared by a court of
competent jurisdiction to be null and void, or Holdings shall deny in
writing or fail to perform any of its obligations under the Holdings Escrow
Agreement, which failure shall continue for a period of 30 days after
Holdings receives written notice of such failure from the escrow agent.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other than an Event
of Default specified in clause (f) or (g) of Section 6.01 with respect to
Holdings or any of its Restricted Subsidiaries) shall occur and be continuing,
the Trustee may, or the Trustee upon the request of Holders of at least 25% in
principal amount of the outstanding Securities shall, or the Holders of at least
25% in aggregate principal amount of the outstanding Securities may declare the
principal of all the Securities, together with all accrued and unpaid interest
and premium, if any, to be due and payable by notice in writing to Holdings and
the Trustee specifying the respective Event of Default and that it is a "notice
of acceleration" (the "Acceleration Notice"), and the same shall become
immediately due and payable (unless all Events of Default specified in such
Acceleration Notice have been cured or waived).
If an Event of Default specified in clause (f) or (g) of Section 6.01 with
respect to Holdings or any of its Restricted Subsidiaries occurs and is
continuing, then all unpaid principal of, and premium, if any, and accrued and
unpaid interest on all of the outstanding Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Securities as described in this Section 6.02, the Holders of a majority in
principal amount of the Securities may rescind and cancel such declaration and
its consequences (i) if the rescission would not conflict with any outstanding
judgment or judicial decree, (ii) if all existing Events of Default have been
cured or waived except nonpayment of principal or accrued and unpaid interest
that has become due solely because of the acceleration, (iii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iv) if Holdings has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (f) or (g) of Section 6.01, the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto. The
Holders of a majority in principal amount of the Securities may waive any
existing Default or
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Event of Default under this Indenture, and its consequences, except a Default in
the payment of the principal of or accrued and unpaid interest on any
Securities.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities, this Indenture or the Holdings Escrow Agreement.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy maturing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
Upon a declaration of acceleration of the Securities in accordance with
Section 6.02, the Trustee shall foreclose on all Escrow Collateral and take all
other actions permitted of a secured party under the applicable Uniform
Commercial Code or otherwise.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 9.02, prior to the declaration of
acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount of the outstanding Securities by written notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (a) and (b) of Section 6.01 or a Default in
respect of any term or provision of this Indenture that may not be amended or
modified without the consent of each Holder affected as provided in Section
9.02. Holdings shall deliver to the Trustee an Officers' Certificate stating
that the requisite percentage of Holders have consented to such waiver and
attaching copies of such consents. In case of any such waiver, Holdings, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder and under the Securities, respectively. This paragraph of this Section
6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section
316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Securities, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal amount of
the outstanding Securities may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law, this Indenture or the Holdings Escrow
Agreement that the Trustee determines may be unduly prejudicial to the rights of
another Holder, it being understood that the Trustee shall have no duty (subject
to Section 7.01) to ascertain whether or not such actions or forebearances are
unduly prejudicial to such Holders, or that may involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction. In the
event the Trustee
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takes any action or follows any direction pursuant to this Indenture, the
Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against any loss or expense caused by taking such action or following
such direction. This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of
the TIA, and such ss. 316(a)(1)(A) of the TIA is hereby expressly excluded from
this Indenture and the Securities, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of the
outstanding Securities make a written request to the Trustee to pursue a
remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(iv) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(v) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of or interest on a Security, on or after
the respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against Holdings or
any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover reasonable
costs and expenses of collection which would be out-of-pocket, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and legal counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and legal counsel) and the Holders
allowed in any judicial proceedings relative to Holdings (or any other obligor
upon the Securities), its creditors or its prop-
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erty and shall be entitled and empowered to collect and receive any monies or
other property payable or deliverable on any such claims and to distribute the
same, and any Custodian in any such judicial proceedings is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agent and counsel, and
any other amounts due the Trustee under Section 7.07. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding; provided, however, that the Trustee may, on
behalf of the Holders, vote for the election of a trustee in bankruptcy or
similar official and may be a member of the creditors' committee.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article Six
or the Holdings Escrow Agreement, it shall pay out the money or property in the
following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
Third: to Holdings.
The Trustee, upon prior written notice to Holdings, may fix a record date
and payment date for any payment to the Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit other than the Trustee of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture and use the same
degree of care and skill in their exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
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(b) Except during the continuance of a Default:
(i) The Trustee agrees and undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions conforming to
the requirements of this Indenture or the Holdings Escrow Agreement;
provided, however, that in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall examine such certificates and opinions to
determine whether or not they conform to the requirements of this Indenture
or the Holdings Escrow Agreement.
(c) The Trustee shall not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02, 6.04 and 6.05.
(d) No provision of this Indenture or the Holdings Escrow Agreement shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or to take
or omit to take any action under this Indenture or take any action at the
request or direction of Holders if it shall have reasonable grounds for
believing that repayment of such funds is not assured to it or it does not
receive from such Holders an indemnity satisfactory to it in its sole discretion
against such risk, liability, loss, fee or expense which might be incurred by it
in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with Holdings. Money held in trust
by the Trustee need not be segregated from other funds except to the extent
required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely, and shall be protected in acting or
refraining from acting, on any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel, which shall conform to
the provisions of Section 10.05. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
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(c) The Trustee may act through attorneys and agents of its selection
and shall not be responsible for the misconduct or negligence of any agent
or attorney (other than an agent who is an employee of the Trustee)
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) Before the Trustee acts or refrains from acting, it may consult
with legal counsel and the advice or opinion of such legal counsel as to
matters of law shall be full and complete authorization and protection from
liability in respect of any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such legal counsel.
(f) Any request or direction of Holdings mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture or the Holdings Escrow
Agreement at the request or direction of any of the Holders pursuant to
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or direction.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of Holdings,
personally or by agent or attorney.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge thereof
or unless the Trustee shall have received written notice thereof at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture.
(j) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(k) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not
be answerable for other than its gross negligence or willful misconduct.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with Holdings or its Affiliates
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to Sections 7.10 and
7.11.
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This Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of Holdings, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict within 30 days, obtain permission within 30 days from
the Commission to continue as Trustee or resign.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, the Holdings Escrow Agreement or the
Securities, it shall not be accountable for Holdings' use of the proceeds from
the Securities, and it shall not be responsible for any statement of Holdings in
this Indenture or any document issued in connection with the sale of Securities
or any statement in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and the
Trustee has actual knowledge of such Defaults or Events of Default, the Trustee
shall mail to each Holder notice of the Default or Event of Default within 30
days after obtaining such knowledge. Except in the case of a Default or an Event
of Default in payment of principal of or interest on any Security or a Default
or Event of Default in complying with Section 5.01, the Trustee may withhold the
notice if and so long as a Trust Officer in good faith determines that
withholding the notice is in the interest of the Holders. This Section 7.05
shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso to
ss. 315(b) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each November 1
beginning with November 1, 1998, the Trustee shall mail to each Holder a report
dated as of such November 1 that complies with TIA Section 313(a). If required
by law, the Trustee also shall comply with TIA ss. 313(b), (c) and (d).
A copy of each such report at the time of its mailing to Holders shall be
filed with the Commission and each stock exchange, if any, on which the
Securities are listed.
Holdings shall promptly notify the Trustee in writing if the Securities
become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
Holdings shall pay to the Trustee and the Agents from time to time, and the
Trustee and the Agents shall be entitled to, such compensation as Holdings and
the Trustee and the Agents shall from time to time agree in writing for their
respective services. The Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. Holdings shall reimburse the
Trustee and the Agents upon request for all reasonable disbursements, expenses
and advances, including all reasonable costs and expenses of collection which
would be out-of-pocket and reasonable fees, disbursements and expenses of its
agents and outside legal counsel incurred or made by any of them in addition to
the compensation for their respective services except any such disbursements,
expenses and advances as may be attributable to negligence or willful miscon-
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duct of the party to be reimbursed. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and outside legal counsel and any taxes or other expenses incurred by a
trust created pursuant to Section 8.01 hereof.
Holdings shall indemnify the Trustee and the Agents and each of their
directors, officers, attorneys and agents for, and hold them harmless against
any and all loss, damage, claims, liability or expense, including taxes (other
than franchise taxes imposed on the indemnified party and taxes based upon,
measured by or determined by the income of the indemnified party) and reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses of defending
themselves against or investigating any claim or liability in connection with
the exercise or performance of any of their powers or duties hereunder, except
to the extent that such loss, damage, claim, liability or expense is due to
negligence or willful misconduct of the indemnified party. The indemnified party
shall notify Holdings promptly of any claim asserted against the indemnified
party for which it may seek indemnity. However, the failure by the indemnified
party to so notify Holdings shall not relieve Holdings of its obligations
hereunder unless Holdings has been materially prejudiced thereby. Holdings shall
defend the claim and the indemnified party shall cooperate in the defense at the
expense of Holdings; provided the Trustee may, if it so elects, have separate
legal counsel of its own choosing and Holdings shall pay the reasonable fees and
expenses of such legal counsel; provided, that Holdings will not be required to
pay such fees and expenses if they assume the Trustee's defense and there is no
conflict of interest between Holdings (on the one hand) and the Trustee (on the
other hand) in connection with such defense; provided further, however, that in
any such event, the reimbursement obligation of Holdings with respect to
separate counsel of the indemnified party will be limited to the reasonable fees
and expenses of such legal counsel.
Holdings need not pay for any settlement made without its written consent,
which consent shall not be unreasonably withheld. Holdings need not reimburse
any expense or indemnify against any loss or liability incurred by the Trustee
or an Agent as a result of its own negligence or willful misconduct.
To secure the payment obligations of Holdings in this Section 7.07, the
Trustee shall have a Lien prior to the Securities against all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (f) or (g) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and legal counsel) and
the compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying Holdings in writing. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Trustee and Holdings in writing and may
appoint a successor Trustee with Holdings' consent. Holdings may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
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(c) a Custodian or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), Holdings shall promptly appoint a successor Trustee.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the Securities may appoint a successor Trustee
to replace the successor Trustee appointed by Holdings.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to Holdings. As promptly as practicable after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Holdings or the
Holders of at least 25% in principal amount of the outstanding Securities may
petition, at the expense of Holdings, any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
Holdings' obligations under Section 7.07 shall continue for the benefit of the
retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation or
banking corporation, the resulting, surviving or transferee corporation or
banking corporation without any further act shall be the successor Trustee;
provided, however, that such corporation shall be otherwise qualified and
eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to act
as Trustee under TIA Sections 310(a)(1) and 310(a)(2). The Trustee shall have a
combined capital and surplus of at least U.S.$50,000,000 as set forth in its
most recent published annual report of condition. If the Trustee has or shall
acquire any "conflicting interest" within the meaning of TIA Section 310(b), the
Trustee and Holdings shall comply with the provisions of TIA Sectiion 310(b);
provided, however, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of Holdings are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10, the Trustee shall resign
immediately in the manner and with the effect hereinbefore specified in this
Article Seven. The provisions of TIA Section 310 shall apply to Holdings and any
other obligor of the Securities.
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SECTION 7.11. Preferential Collection of Claims Against Holdings.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Holdings' Obligations.
Holdings may, at its option and at any time, terminate its obligations
under the Securities and this Indenture, except those obligations referred to in
the penultimate paragraph of this Section 8.01, if:
(a) either (i) all the Securities theretofore authenticated and
delivered (except lost, stolen or destroyed Securities which have been
replaced or paid and Securities for whose payment money has theretofore
been deposited in trust or segregated and held in trust by Holdings and
thereafter repaid to Holdings or discharged from such trust) have been
delivered to the Trustee for cancellation or (ii) all Securities not
theretofore delivered to the Trustee for cancellation have become due and
payable or have been called for redemption and Holdings has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Securities
not theretofore delivered to the Trustee for cancellation, for principal
of, premium, if any, and interest on the Securities to the date of deposit
together with irrevocable instructions from Holdings directing the Trustee
to apply such funds to the payment thereof at maturity or redemption, as
the case may be;
(b) Holdings has paid all other sums payable under this Indenture by
Holdings; and
(c) Holdings has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel stating that all conditions precedent under this
Indenture relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the first paragraph of this Section 8.01, Holdings'
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05 and 8.06
shall survive until the Securities are no longer outstanding pursuant to Section
2.08. After the Securities are no longer outstanding, Holdings' obligations in
Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of Holdings' obligations under the
Securities and this Indenture, except for those surviving obligations specified
above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance
(a) Holdings may, at its option and at any time, terminate its obligations
in respect of the Securities by delivering all outstanding Securities to the
Trustee for cancellation and paying all sums payable by it on account of
principal of and interest on all Securities or otherwise. In addition to the
foregoing, Holdings
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may, at its option and at any time, elect to have either paragraph (b) or (c)
below be applied to all outstanding Securities, subject in either case to
compliance with the conditions set forth in Section 8.03.
(b) Upon Holdings' exercise under paragraph (a) hereof of the option
applicable to this paragraph (b), Holdings shall, subject to the satisfaction of
the conditions set forth in Section 8.03, be deemed to have paid and discharged
the entire indebtedness represented by the outstanding Securities, except for
(i) the rights of Holders to receive payments in respect of the principal of,
premium, if any, and interest on the Securities when such payments are due, (ii)
Holdings' obligations with respect to the Securities under Sections 2.03 through
2.07, inclusive, and 4.02, (iii) the rights, powers, trust, duties and
immunities of the Trustee under this Indenture and Holdings' obligations in
connection therewith and (iv) this Article Eight of this Indenture (hereinafter,
"Legal Defeasance"). Subject to compliance with this Article Eight, Holdings may
exercise its option under this paragraph (b) notwithstanding the prior exercise
of its option under paragraph (c) hereof.
(c) Upon Holdings' exercise under paragraph (a) hereof of the option
applicable to this paragraph (c), Holdings shall, subject to the satisfaction of
the conditions set forth in Section 8.03, be released from its obligations under
Sections 4.03 through 4.16, inclusive, 4.19, 4.20 and Article Five with respect
to the outstanding Securities (hereinafter, "Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or an Event of Default with respect to the Securities.
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.
In order to exercise either Legal Defeasance pursuant to Section 8.02(b) or
Covenant Defeasance pursuant to Section 8.02(c):
(a) Holdings must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in U.S. dollars or United States
Government Obligations, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the Securities on the stated date for payment thereof or on
the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02(b), Holdings shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable
to the Trustee confirming that (A) Holdings has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the
date of this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c), Holdings shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable
to the Trustee confirming that the Holders will not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be ap-
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plied to such deposit) or insofar as clauses (f) and (g) of Section 6.01
are concerned, at any time in the period ending on the 91st day after the
date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance, as the case may be,
shall not result in a breach or violation of or constitute a Default under
this Indenture or any other material agreement or instrument to which
Holdings or any of its Restricted Subsidiaries is a party or by which
Holdings or any of its Restricted Subsidiaries is bound;
(f) Holdings shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by Holdings with the
intent of preferring the Holders over any other creditors of Holdings or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of Holdings or others;
(g) Holdings shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with; and
(h) Holdings shall have delivered to the Trustee an Opinion of Counsel
to the effect that assuming no intervening bankruptcy or insolvency of
Holdings between the date of deposit and the 91st day following the deposit
and that no Holder is an insider of Holdings, after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar law affecting
creditors' rights generally.
Notwithstanding the foregoing, the Opinion of Counsel required by clause
(b) above need not be delivered if all Securities not theretofore delivered to
the Trustee for cancellation (x) have become due and payable, (y) will become
due and payable on the Final Maturity Date within one year or (z) are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of Holdings.
SECTION 8.04. Application of Trust Money; Trustee Acknowledgment and
Indemnity.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 8.03, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of, premium,
if any, and interest on the Securities.
After such delivery or irrevocable deposit and delivery of an Officers'
Certificate and Opinion of Counsel, the Trustee upon request shall acknowledge
in writing the discharge of Holdings' obligations under the Securities and this
Indenture except for those surviving obligations specified above.
Holdings shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the United States Government Obligations
deposited pursuant to Section 8.03 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of outstanding Securities.
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SECTION 8.05. Repayment to Holdings.
Subject to Sections 7.07 and 8.04, the Trustee shall promptly pay to
Holdings upon written request any excess money held by it at any time. The
Trustee shall pay to Holdings upon written request any money held by it for the
payment of principal or interest that remains unclaimed for two years; provided,
however, that the Trustee before being required to make any payment may at the
expense of Holdings cause to be published once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that, after a date specified
therein which shall be at least 30 days from the date of such publication or
mailing, any unclaimed balance of such money then remaining shall be repaid to
Holdings. After payment to Holdings, Holders entitled to money must look solely
to Holdings for payment as general creditors unless an applicable abandoned
property law designates another person and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.06. Reinstatement.
If the Trustee is unable to apply any money or United States Government
Obligations in accordance with Section 8.02 by reason of any legal proceeding or
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, Holdings'
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 until such
time as the Trustee is permitted to apply all such money or United States
Government Obligations in accordance with Section 8.02; provided, however, that
if Holdings has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, Holdings shall be subrogated to
the rights of the Holders of such Securities to receive such payment from the
money or United States Government Obligations held by the Trustee.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
Holdings and the Trustee may amend this Indenture or the Securities without
the consent of the Holders:
(a) to cure any ambiguity, defect or inconsistency; provided, however,
that such amendment or supplement does not, in the opinion of the Trustee,
adversely affect the rights of any Holder in any material respect;
(b) to effect the assumption by a successor Person of all obligations
of Holdings under the Securities, this Indenture and the Holdings Escrow
Agreement in connection with any transaction complying with Article Five of
this Indenture;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
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(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights to the Holders;
(f) to make any other change that does not adversely affect the rights
of any Holder under this Indenture;
(g) to add to the covenants of Holdings for the benefit of the
Holders, or to surrender any right or power herein conferred upon Holdings;
or
(h) to secure the Securities pursuant to the requirements of Section
4.07 or otherwise;
provided, however, that Holdings has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, Holdings and the Trustee may modify, amend or
supplement, or waive compliance by Holdings with any provision of, this
Indenture or the Securities with the written consent of the Holders of at least
a majority in principal amount of the outstanding Securities. However, without
the consent of each Holder affected, no such modification, amendment, supplement
or waiver, including a waiver pursuant to Section 6.04, may:
(a) reduce the principal amount of or change the Stated Maturity of
any Security or alter the provisions with respect to the repurchase or
redemption of the Securities (other than provisions relating to Section
4.05 or 4.16);
(b) reduce the rate of or change the time for payment of interest on
any Security;
(c) make any Security payable in money other than that stated in the
Securities;
(d) make any change in the provisions of this Indenture relating to
the rights of Holders of Securities to receive payments of principal of or
premium, if any, or interest on the Securities;
(e) modify any provisions of Section 6.04 (other than to add sections
of this Indenture or the Securities subject thereto) or 6.07 or this
Section 9.02 (other than to add sections of this Indenture or the
Securities which may not be modified, amended, supplemented or waived
without the consent of each Holder affected);
(f) reduce the percentage of the principal amount of outstanding
Securities necessary for amendment to or waiver of compliance with any
provision of this Indenture or the Securities or for waiver of any Default
in respect thereof;
(g) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Securities (except a rescission of
acceleration of the Securities by the Holders thereof as provided in
Section 6.02 and a waiver of the payment default that resulted from such
acceleration);
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(h) waive a mandatory repurchase or redemption payment with respect to
any Security required by Section 4.05 or 4.16;
(i) modify the ranking or priority of any Security in any manner
adverse to the Holders of the Securities; or
(j) modify the provisions of the Holdings Escrow Agreement or this
Indenture relating to the Escrow Collateral or release the Escrow
Collateral from the Lien under the Holdings Escrow Agreement or permit any
other obligation to be secured by the Escrow Collateral.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, Holdings shall mail to the Holders affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of Holdings to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such amendment, supplement or waiver.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. Record Date for Consents and Effect of Consents.
Holdings may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders of Securities entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then those persons
who were Holders of Securities at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date. The Trustee is entitled to rely upon any electronic
instruction from beneficial owners to the Holders of any Global Security.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it makes a change described in any of clauses (a) through
(i) of Section 9.02. In that case the amendment, supplement or waiver shall bind
each Holder of a Security who has consented to it and every subsequent Holder of
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if Holdings or the Trustee so
determine, Holdings in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms. Failure to
make the appropriate notation or issue a new Security shall not affect the
validity and effect of such amendment, supplement or waiver.
<PAGE>
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SECTION 9.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture and that such amendment, supplement or waiver
constitutes the legal, valid and binding obligation of Holdings, enforceable in
accordance with its terms (subject to customary exceptions). The Trustee may,
but shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. In signing any amendment, supplement or waiver, the
Trustee shall be entitled to receive an indemnity reasonably satisfactory to it.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are required to
be a part of this Indenture, and shall, to the extent applicable, be governed by
such provisions. If any provision of this Indenture modifies any TIA provision
that may be so modified, such TIA provision shall be deemed to apply to this
Indenture as so modified. If any provision of this Indenture excludes any TIA
provision that may be so excluded, such TIA provision shall be excluded from
this Indenture.
The provisions of TIA Sections 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 10.02. Notices.
Any notice or communication shall be sufficiently given if in writing and
delivered in person, by facsimile and confirmed by overnight courier, or mailed
by first-class mail addressed as follows:
if to Holdings:
R.A.B. Holdings, Inc.
444 Madison Avenue, Suite 601
New York, New York 10022
Attn: Mr. Richard A. Bernstein
James A. Cohen, Esq.
Facsimile: (212) 888-5025
Telephone: (212) 688-4500
<PAGE>
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if to the Trustee:
PNC Bank, National Association
Two Tower Center Boulevard
20th Floor, Corporate Trust Department
East Brunswick, New Jersey 08816
Facsimile: (732) 220-3745
Telephone: (732) 220-3733
Holdings or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed to
him at his address as set forth on the Security register and shall be
sufficiently given to him if so mailed within the time prescribed. To the extent
required by the TIA, any notice or communication shall also be mailed to any
Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, if a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 10.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. Holdings,
the Trustee, the Registrar and any other person shall have the protection of TIA
Section 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Holdings to the Trustee to take or
refrain from taking any action under this Indenture, Holdings shall furnish to
the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with; provided, however,
that with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 10.05. Statements Required in Certificate.
Each certificate with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
<PAGE>
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(1) a statement that the person making such certificate has read such
covenant or condition;
(2) a statement that, in the opinion of such person, such person has
made such examination or investigation as is necessary to enable such
person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(3) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 10.07. Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE
SECURITIES WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 10.08. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee or stockholder, as such, of Holdings or any
of its Affiliates, or any of their respective heirs, estates or personal
representatives, shall have any liability for any obligations of Holdings under
the Securities or this Indenture or for any claim based on, or in respect of, or
by reason of, such obligations or their creation. Each holder of Securities by
accepting a Security unconditionally and irrevocably waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Securities.
SECTION 10.09. Successors.
All agreements of Holdings in this Indenture and the Securities shall bind
its successor. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 10.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.11. Severability.
In case any provision in this Indenture, in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
<PAGE>
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SECTION 10.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of Holdings or a Subsidiary of Holdings. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 10.13. Legal Holidays.
If a payment date is not a Business Day at a place of payment, payment may
be made at that place on the next succeeding Business Day.
ARTICLE ELEVEN
COLLATERAL AND SECURITY
SECTION 11.01. Holdings Escrow Agreement.
The due and punctual payment of the first six scheduled interest payments
on the Securities when and as the same shall be due and payable on an Interest
Payment Date or by acceleration shall be secured as provided in the Holdings
Escrow Agreement which Holdings and the Trustee shall have entered into
simultaneously with the execution of this Indenture. Upon the acceleration of
the maturity of the Securities, the Trustee shall foreclose upon the Escrow
Collateral. Each Holder of Securities, by its acceptance thereof, consents and
agrees to the terms of the Holdings Escrow Agreement (including, without
limitation, the provisions providing for foreclosure and disbursement of Escrow
Collateral) as the same may be in effect or may be amended from time to time in
accordance with its terms and the terms hereof and authorizes and directs the
Escrow Agent and the Trustee to enter into the Holdings Escrow Agreement and to
perform their respective obligations and exercise their respective rights
thereunder in accordance therewith. The Trustee is hereby empowered and directed
to act as a secured party under the Holdings Escrow Agreement for the benefit of
the Holders. Holdings shall deliver to the Trustee copies of the Holdings Escrow
Agreement, and shall do or cause to be done all such acts and things as may be
required by the provisions of the Holdings Escrow Agreement, to assure and
confirm to the Trustee the security interest in the Escrow Collateral
contemplated by the Holdings Escrow Agreement so as to render the same available
for the security and benefit of this Indenture with respect to, and of, the
Securities, according to the intent and purposes expressed in the Holdings
Escrow Agreement. Holdings shall take any and all actions reasonably required to
cause the Holdings Escrow Agreement to create and maintain (to the extent
possible under applicable law), as security for the obligations of Holdings
hereunder, a first priority security interest in and on all the Escrow
Collateral, in favor of the Trustee for the benefit of the Holders of
Securities, superior to and prior to the rights of all third Persons and subject
to no other Liens. The Trustee shall have no responsibility for perfecting or
maintaining the perfection of the Trustee's security interest in the Escrow
Collateral or for filing any instrument, document or notice in any public office
at any time or times.
SECTION 11.02. Opinions.
Holdings shall furnish to the Trustee on each anniversary of the Issue Date
(upon receipt of written notice from the Escrow Agent) until the date upon which
the balance of Escrow Funds shall have been reduced to zero, an Opinion of
Counsel, dated as of such date, either (i) stating that (A) in the opinion of
such
<PAGE>
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counsel, action has been taken with respect to the recording, registering,
filing, re-recording, re-registering and refiling of all supplemental
indentures, financing statements, continuation statements or other instruments
of further assurance as is necessary to maintain the Lien created by the
Holdings Escrow Agreement and reciting the details of such action or referring
to prior Opinions of Counsel in which such details are given and (B) based on
relevant laws as in effect on the date of such Opinion of Counsel, all financing
statements and continuation statements have been executed and filed that are
necessary as of such date and during the succeeding 12 months fully to preserve,
to the extent such preservation is possible by filing, the Lien created by the
Holdings Escrow Agreement with respect to the security interest in the Escrow
Collateral or (ii) stating that, in the opinion of such counsel, no such action
is necessary to maintain such Lien and assignment.
SECTION 11.03. Release of Escrow Collateral.
(a) Subject to subsections (b) and (c) of this Section 11.03, the Escrow
Collateral may be released from the security interest created by the Holdings
Escrow Agreement only in accordance with the provisions of the Holdings Escrow
Agreement.
(b) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Securities shall have been accelerated
(whether by declaration or otherwise), no Escrow Collateral shall be released
pursuant to the provisions of the Holdings Escrow Agreement, and no release of
Escrow Collateral in contravention of this Section 11.03(b) shall be effective
as against the Holders of Securities, except for the disbursement of all Escrow
Funds (as defined in the Holdings Escrow Agreement) and other Escrow Collateral
to the Trustee pursuant to Section 6(c) of the Holdings Escrow Agreement.
(c) The release of any Escrow Collateral from the security interests
created by this Indenture and the Holdings Escrow Agreement shall not be deemed
to impair the security under this Indenture in contravention of the provisions
hereof if and to the extent the Escrow Collateral is released pursuant to the
terms hereof or pursuant to the terms of the Holdings Escrow Agreement. To the
extent applicable, Holdings shall cause TIA Section 314(d) relating to the
release of property or securities from the security interest of the Holdings
Escrow Agreement to be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an Officer of Holdings except in cases where TIA
Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Trustee in the exercise of reasonable
care.
SECTION 11.04. Authorization of Actions to Be Taken by the Trustee Under the
Holdings Escrow Agreement.
Subject to the provisions of Section 7.01 and Section 7.02, the Trustee
may, without the consent of the Holders of Securities, on behalf of the Holders
of Securities, take all actions it deems necessary or appropriate in order to
(a) enforce any of the terms of the Holdings Escrow Agreement and (b) collect
and receive any and all amounts payable in respect of the obligations of
Holdings hereunder. The Trustee shall have power to institute and maintain such
suits and proceedings as it may deem expedient to prevent any impairment of the
Escrow Collateral by any acts that may be unlawful or in violation of the
Holdings Escrow Agreement or this Indenture, and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its security interest in
the Escrow Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders of Securities or of the Trustee).
<PAGE>
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SECTION 11.05. Authorization of Receipt of Funds by the Trustee Under the
Holdings Escrow Agreement.
The Trustee is authorized to receive any funds for the benefit of the
Holders of Securities disbursed under the Holdings Escrow Agreement, and to make
further distributions of such funds to the Holders of Securities according to
the provisions of this Indenture.
SECTION 11.06. Termination of Security Interest.
Upon the earliest to occur of (i) the date upon which the balance of Escrow
Funds and other Escrow Collateral shall have been reduced to zero, (ii) the
payment of the first six scheduled interest payments on the Securities, (iii)
legal defeasance pursuant to Section 8.01 and (iv) covenant defeasance pursuant
to Section 8.01, the Trustee shall, at the written request of Holdings, release
the security interest in the Escrow Collateral pursuant to this Indenture and
the Holdings Escrow Agreement upon Holdings' compliance with the provisions of
the TIA pertaining to release of collateral.
[Signature Pages Follow]
<PAGE>
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
R.A.B. HOLDINGS, INC.
By:
---------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION, as Trustee
By:
---------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO
THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR
OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
A-1
<PAGE>
R.A.B. HOLDINGS, INC.
13% Senior Note due 2008
CUSIP No.: [ ]
$[ ]
No.[ ]
R.A.B. HOLDINGS, INC., a Delaware corporation ("Holdings," which term
includes any successor corporation), for value received, promises to pay to [ ]
or registered assigns the principal sum of [ ] Dollars, on May 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing on November 1,
1998.
Interest Record Dates: April 15 and October 15.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, Holdings has caused this Security to be signed manually
or by facsimile by its duly authorized officer.
R.A.B. HOLDINGS, INC.
By:
----------------------------------------
Name:
Title:
Dated: May 1, 1998
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<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 13% Senior Notes due 2008, described in the
within-mentioned Indenture.
Dated: May, 1998
PNC BANK, NATIONAL ASSOCIATION, as Trustee
By:
---------------------------------------
Authorized Signatory
A-3
<PAGE>
(REVERSE OF SECURITY)
R.A.B. HOLDINGS, INC.
13% Senior Note due 2008
1. Interest.
R.A.B. HOLDINGS, INC., a Delaware corporation ("Holdings"), promises to pay
cash interest on the principal amount of this Security at the rate per annum
shown above. Cash interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from May
1, 1998. Holdings will pay interest semi-annually in arrears on each Interest
Payment Date, commencing on November 1, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time on
demand and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful from time to time on demand, in each case at
the rate borne by the Securities.
2. Method of Payment.
Holdings shall pay interest on the Securities (except defaulted interest)
to the persons who are the registered Holders at the close of business on the
Interest Record Date immediately preceding the Interest Payment Date even if the
Securities are canceled on registration of transfer or registration of exchange
after such Interest Record Date. Holders must surrender the Securities to a
Paying Agent to collect principal payments. Holdings shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
Holdings may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. Holdings may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, PNC Bank, National Association (the "Trustee") will act as
Paying Agent and Registrar. Holdings may change any Paying Agent or Registrar
without notice to the Holders. Holdings may, subject to certain exceptions, act
as Registrar.
4. Indenture.
Holdings issued the Securities under an Indenture, dated as of May 1, 1998
(the "Indenture"), by and between Holdings and the Trustee. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
This Security is one of a duly authorized issue of Securities of Holdings
designated as its 13% Senior Notes due 2008, Series A (the "Initial
Securities"), limited in aggregate principal amount to $48,000,000, which may be
issued under the Indenture. The Securities include the Initial Securities, the
Private Exchange Securities (as defined in the Indenture) and the Unrestricted
Securities (as defined in the Indenture). All Securities issued under the
Indenture are treated as a single class of securities under the Indenture. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to
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<PAGE>
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture (except as otherwise indicated in the
Indenture) until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of them. The Securities are general unsecured obligations of
Holdings.
5. Optional Redemption.
The Securities will be redeemable, at Holdings' option, in whole or in part
at any time, on and after May 1, 2003, upon not less than 30 nor more than 60
days notice, at the following redemption prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period commencing
on May 1 of the year set forth below, plus, in each case, accrued and unpaid
interest thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2003 106.500%
2004 104.333%
2005 102.167%
2006 and thereafter 100.000%
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Security. On and after the Redemption Date,
interest will cease to accrue on Securities or portions thereof called for
redemption so long as Holdings has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
7. Change of Control Offer.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), Holdings shall, within 30 days
after the Change of Control Date, be required to offer to purchase all
Securities then outstanding at a purchase price equal to 101% of the principal
amount at maturity plus accrued and unpaid interest to the date of purchase.
8. Limitation on Disposition of Assets.
Holdings is, subject to certain conditions and certain exceptions,
obligated to offer to purchase the Securities and any Pari Passu Indebtedness at
a purchase price equal to, with respect to the Securities, 100% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
purchase, and
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<PAGE>
with respect to any Pari Passu Indebtedness, an amount not greater than 100% of
the principal amount or accreted value of such Pari Passu Indebtedness with the
proceeds of certain asset dispositions.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall register the transfer of
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities or
portions thereof selected for redemption, except the unredeemed portion of any
security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it for
all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to Holdings at its
written request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
Holdings may be discharged from its obligations under the Indenture and the
Securities, except for certain provisions thereof, and may be discharged from
obligations to comply with certain covenants contained in the Indenture and the
Securities, in each case upon satisfaction of certain conditions specified in
the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in principal amount of the Securities then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of the
Holders, the parties thereto may amend or supplement the Indenture and the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of Holdings and the Restricted Subsidiaries to make restricted
payments, to incur indebtedness, to sell assets, to permit restrictions on
dividends and other payments by Subsidiaries to Holdings, to consolidate, merge
or sell all or substantially all of its assets and to engage in transactions
with affiliates. The limitations are subject to a number
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<PAGE>
of important qualifications and exceptions. Holdings must report annually to the
Trustee on compliance with such limitations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
is not obligated to enforce the Indenture or the Securities unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of certain continuing Defaults or Events of Default if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Holdings.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with
Holdings, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.
17. No Personal Liability of Directors, Officers, Employees and Stockholders.
No director, officer, employee or stockholder, as such, of Holdings or any
of its Affiliates, or any of their respective heirs, estates or personal
representatives, shall have any liability for any obligations of Holdings under
the Securities or the Indenture or for any claim based on, or in respect of, or
by reason of, such obligations or their creation. Each holder of Securities by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Holdings has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
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<PAGE>
21. Registration Rights.
Pursuant to the Registration Rights Agreement, Holdings will be obligated
to consummate an exchange offer pursuant to which the Holder of this Security
shall have the right to exchange this Security for a 13% Senior Note due 2008 of
Holdings which has been registered under the Securities Act, in like principal
amount and having terms identical in all material respects to the Initial
Securities. The Holders shall be entitled to receive certain liquidated damages
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
22. Governing Law.
The laws of the State of New York shall govern the Indenture and this
Security without regard to principles of conflicts of laws to the extent that
the application of the laws of another jurisdiction would be required thereby.
A-8
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint_________________________________________________________
agent to transfer this Security on the books of Holdings. The agent may
substitute another to act for him.
Dated:___________________ Signed: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by Holdings pursuant
to Section 4.05 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.05 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
Holdings pursuant to Section 4.05 or Section 4.16 of the Indenture, state the
amount: $_____________
Dated:___________________ Your Signature: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT B
[FORM OF SERIES B SECURITY]
R.A.B. HOLDINGS, INC.
13% Senior Note due 2008, Series B
CUSIP No.: [ ]
No. [ ] $[ ]
R.A.B. HOLDINGS, INC., a Delaware corporation ("Holdings," which term
includes any successor corporation), for value received, promises to pay to [ ]
or registered assigns the principal sum of [ ] Dollars, on May 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing on November 1,
1998.
Interest Record Dates: April 15 and October 15.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, Holdings has caused this Security to be signed manually
or by facsimile by its duly authorized officer.
R.A.B. HOLDINGS, INC.
By:
----------------------------------------
Name:
Title:
Dated:
B-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 13% Senior Notes due 2008, Series B, described in the
within-mentioned Indenture.
Dated:
PNC BANK, NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------------
Authorized Signatory
B-2
<PAGE>
(REVERSE OF SECURITY)
R.A.B. HOLDINGS, INC.
13% Senior Note due 2008, Series B
1. Interest.
R.A.B. HOLDINGS, INC., a Delaware corporation ("Holdings"), promises to pay
cash interest on the principal amount of this Security at the rate per annum
shown above. Cash interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from May
1, 1998. Holdings will pay interest semi-annually in arrears on each Interest
Payment Date, commencing on November 1, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time on
demand and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful from time to time on demand, in each case at
the rate borne by the Securities.
2. Method of Payment.
Holdings shall pay interest on the Securities (except defaulted interest)
to the persons who are the registered Holders at the close of business on the
Interest Record Date immediately preceding the Interest Payment Date even if the
Securities are canceled on registration of transfer or registration of exchange
after such Interest Record Date. Holders must surrender the Securities to a
Paying Agent to collect principal payments. Holdings shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
Holdings may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. Holdings may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, PNC Bank, National Association (the "Trustee") will act as
Paying Agent and Registrar. Holdings may change any Paying Agent or Registrar
without notice to the Holders. Holdings may, subject to certain exceptions, act
as Registrar.
4. Indenture.
Holdings issued the Securities under an Indenture, dated as of May 1, 1998
(the "Indenture"), by and between Holdings and the Trustee. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
This Security is one of a duly authorized issue of Securities of Holdings
designated as its 13% Senior Notes due 2008, Series B limited in aggregate
principal amount at maturity to $48,000,000, which may be issued under the
Indenture. The Securities include the Initial Securities (as defined in the
Indenture), the Private Exchange Securities (as defined in the Indenture) and
the Unrestricted Securities (as defined in the Indenture). All Securities issued
under the Indenture are treated as a single class of securities under the
Indenture. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture
B-3
<PAGE>
by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture (except as
otherwise indicated in the Indenture) until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders are referred
to the Indenture and the TIA for a statement of them. The Securities are general
unsecured obligations of Holdings.
5. Optional Redemption.
The Securities will be redeemable, at Holdings' option, in whole or in part
at any time, on and after May 1, 2003, upon not less than 30 nor more than 60
days notice, at the following redemption prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period commencing
on of the year set forth below, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2003 106.500%
2004 104.333%
2005 102.167%
2006 and thereafter 100.000%
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Security. On and after the Redemption Date,
interest will cease to accrue on Securities or portions thereof called for
redemption so long as Holdings has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
7. Change of Control Offer.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), Holdings shall, within 30 days
after the Change of Control Date, offer to purchase all Securities then
outstanding at a purchase price equal to 101% of the principal amount plus
accrued and unpaid interest to the date of purchase.
8. Limitation on Disposition of Assets.
Holdings is, subject to certain conditions and certain exceptions,
obligated to offer to purchase the Securities and any Pari Passu Indebtedness at
a purchase price equal to, with respect to the Securities, 100%
B-4
<PAGE>
of the principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the date of purchase, and with respect to any Pari Passu Indebtedness,
an amount not greater than 100% of the principal amount or accreted value of
such Pari Passu Indebtedness with the proceeds of certain asset dispositions.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall register the transfer of
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities or
portions thereof selected for redemption, except the unredeemed portion of any
security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it for
all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to Holdings at its
written request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
Holdings may be discharged from its obligations under the Indenture and the
Securities, except for certain provisions thereof, and may be discharged from
obligations to comply with certain covenants contained in the Indenture and the
Securities, in each case upon satisfaction of certain conditions specified in
the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in principal amount of the Securities then outstanding, and any
existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of the
Holders, the parties thereto may amend or supplement the Indenture and the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of Holdings and the Restricted Subsidiaries to make restricted
payments, to incur indebtedness, to sell assets, to permit restrictions on
dividends and other payments by Subsidiaries to Holdings, to consolidate, merge
or sell all or
B-5
<PAGE>
substantially all of its assets and to engage in transactions with affiliates.
The limitations are subject to a number of important qualifications and
exceptions. Holdings must report annually to the Trustee on compliance with such
limitations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
is not obligated to enforce the Indenture or the Securities unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Securities then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of certain continuing Defaults or Events of Default if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Holdings.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with
Holdings, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.
17. No Personal Liability of Directors, Officers, Employees and Stockholders.
No director, officer, employee or stockholder, as such, of Holdings or any
of its Affiliates, or any of their respective heirs, estates or personal
representatives, shall have any liability for any obligations of Holdings under
the Securities or the Indenture or for any claim based on, or in respect of, or
by reason of, such obligations or their creation. Each holder of Securities by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Holdings has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
B-6
<PAGE>
21. Governing Law.
The laws of the State of New York shall govern the Indenture and this
Security without regard to principles of conflicts of laws to the extent that
the application of the laws of another jurisdiction would be required thereby.
B-7
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint_________________________________________________________
agent to transfer this Security on the books of Holdings. The agent may
substitute another to act for him.
Dated:___________________ Signed: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by Holdings pursuant
to Section 4.05 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.05 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
Holdings pursuant to Section 4.05 or Section 4.16 of the Indenture, state the
amount: $_____________
Dated:___________________ Your Signature: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUERS OR
THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 13% Senior Notes due 2008
(the "Securities") of R.A.B. Holdings, Inc.
This Certificate relates to $_______ principal amount of Securities held in
the form of* ___ a beneficial interest in a Global Security or* _______ Physical
Securities by ______ (the "Transferor").
The Transferor:*
has requested by written order that the Registrar deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Physical Security or Physical Securities in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
has requested that the Registrar by written order exchange or register
the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such Security, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Securities and the restrictions on
transfers thereof as provided in Section 2.16 of such Indenture, and that the
transfer of the Securities does not require registration under the Securities
Act of 1933, as amended (the "Act"), because*:
Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
Such Security is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Act), in reliance on Rule 144A.
Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Act) which delivers a certificate to the Trustee in the form of
Exhibit E to the Indenture.
Such Security is being transferred in reliance on Rule 144 under the
Act.
Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." [An Opinion of Counsel to the effect that such transfer
does not require registration under the Securities Act accompanies this
certification.]
-----------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------
[Authorized Signatory]
Date: ___________________
*Check applicable box.
D-1
<PAGE>
EXHIBIT E
Form of Transferee Letter of Representation
R.A.B. HOLDINGS, INC.
444 Madison Avenue, Suite 601
New York, New York 10022
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $________ aggregate
principal amount of the 13% Senior Notes due 2008 (the "Notes") of R.A.B.
HOLDINGS, INC., a Delaware corporation ("Holdings"). Upon transfer, the Notes
would be registered in the name of the new beneficial owner as follows:
Name:_______________________________
Address:____________________________
Taxpayer ID Number:_________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risk of our investment in the Notes and we invest
in or purchase securities similar to the Notes in the normal course of our
business. We and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Notes to offer, sell or otherwise transfer
such Notes prior to the date which is two years after the later of the date of
original issue and the last date on which Holdings or any affiliate of Holdings
was the owner of such Notes (or any predecessor thereto) (the "Resale
Restriction Termination Date") only (a) to Holdings, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") that purchases for its own account or for the
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) to an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Notes of
$250,000, (e) pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act or (f) pursuant to
any other available exemption from the registration requirements of the
Securities Act, subject in each of the foregoing cases to any requirement of law
that the disposition of our property or the property of such investor account or
accounts be at all times within our or their control and in compliance
E-1
<PAGE>
with any applicable state securities laws. The foregoing restrictions on resale
will not apply subsequent to the Resale Restriction Termination Date. If any
resale or other transfer of the Notes is proposed to be made pursuant to clause
(d) above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
Holdings and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring
such Notes for investment purposes and not for distribution in violation of the
Securities Act. Each purchaser acknowledges that Holdings and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Notes pursuant to clause (d), (e) or (f)
above to require the delivery of an opinion of counsel, certificates and/or
other information satisfactory to Holdings and the Trustee.
Dated: ______________________ TRANSFEREE:________________________
By:________________________________
E-2
<PAGE>
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
---------------, ----
PNC Bank, National Association
Two Tower Center Boulevard
20th Floor
East Brunswick, New Jersey 08816
Attention: Corporate Trust Department
Re: R.A.B. HOLDINGS, INC. ("Holdings")
13% Senior Notes due 2008, Series A and
13% Senior Notes due 2008, Series B (collectively, the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $____________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
F-1
<PAGE>
You and Holdings are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Defined terms used herein without definition have the
respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:________________________________
[Authorized Signatory]
F-2
<PAGE>
Exhibit 4.4
================================================================================
INDENTURE
Dated as of May 1, 1998
Among
R.A.B. ENTERPRISES, INC., as Issuer,
and
The Guarantors Named Herein
and
PNC BANK, NATIONAL ASSOCIATION, as Trustee
------------------
$120,000,000
10 1/2% Senior Notes due 2005, Series A
10 1/2% Senior Notes due 2005, Series B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture Indenture
Act Section Section
-------------- ---------
ss.310(a)(1).............................................. 7.10
(a)(2).............................................. 7.10
(a)(3).............................................. N.A.
(a)(4).............................................. N.A.
(a)(5).............................................. 7.08, 7.10
(b)................................................. 7.08; 7.10; 11.02
(c)................................................. N.A.
ss.311(a)................................................. 7.11
(b)................................................. 7.11
(c)................................................. N.A.
ss.312(a)................................................. 2.05
(b)................................................. 11.03
(c)................................................. 11.03
ss.313(a)................................................. 7.06
(b)(1).............................................. N.A.
(b)(2).............................................. 7.06
(c)................................................. 7.06; 11.02
(d)................................................. 7.06
ss.314(a)................................................. 4.11; 4.12; 11.02
(b)................................................. N.A.
(c)(1).............................................. 11.04
(c)(2).............................................. 11.04
(c)(3).............................................. N.A.
(d)................................................. N.A.
(e)................................................. 11.05
(f)................................................. N.A.
ss.315(a)................................................. 7.01(b)
(b)................................................. 7.05; 11.02
(c)................................................. 7.01(a)
(d)................................................. 7.01(c)
(e)................................................. 6.11
ss.316(a)(last sentence).................................. 2.09
(a)(1)(A)........................................... 6.05
(a)(1)(B)........................................... 6.04
(a)(2).............................................. N.A.
(b)................................................. 6.07
(c)................................................. 9.04
ss.317(a)(1).............................................. 6.08
(a)(2).............................................. 6.09
(b)................................................. 2.04
ss.318(a)................................................. 11.01
- ----------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.........16
SECTION 1.03. Rules of Construction.....................................17
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating...........................................17
SECTION 2.02. Execution and Authentication..............................18
SECTION 2.03. Registrar and Paying Agent................................19
SECTION 2.04. Paying Agent To Hold Assets in Trust......................19
SECTION 2.05. Holder Lists..............................................19
SECTION 2.06. Transfer and Exchange.....................................20
SECTION 2.07. Replacement Securities....................................20
SECTION 2.08. Outstanding Securities....................................21
SECTION 2.09. Treasury Securities.......................................21
SECTION 2.10. Temporary Securities......................................21
SECTION 2.11. Cancellation..............................................21
SECTION 2.12. Defaulted Interest........................................22
SECTION 2.13. CUSIP Number..............................................22
SECTION 2.14. Deposit of Moneys.........................................22
SECTION 2.15. Book-Entry Provisions for Global Securities...............22
SECTION 2.16. Registration of Transfers and Exchanges...................23
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee........................................27
SECTION 3.02. Selection of Securities To Be Redeemed....................27
SECTION 3.03. Notice of Redemption......................................28
SECTION 3.04. Effect of Notice of Redemption............................28
SECTION 3.05. Deposit of Redemption Price...............................29
SECTION 3.06. Securities Redeemed in Part...............................29
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.....................................29
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SECTION 4.02. Maintenance of Office or Agency...........................29
SECTION 4.03. Limitation on Incurrence of Additional Indebtedness and
Issuance of Disqualified Capital Stock..................30
SECTION 4.04. Limitation on Restricted Payments.........................30
SECTION 4.05. Limitation on Asset Sales.................................32
SECTION 4.06. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries..................................33
SECTION 4.07. Limitation on Liens.......................................34
SECTION 4.08. Limitations on Transactions with Affiliates...............34
SECTION 4.09. Additional Guarantees.....................................35
SECTION 4.10. Subsidiaries..............................................35
SECTION 4.11. Designation of Unrestricted Subsidiaries..................35
SECTION 4.12. Conduct of Business.......................................36
SECTION 4.13. Reports to Holders........................................36
SECTION 4.14. Payments for Consents.....................................36
SECTION 4.15. Limitation on Investment Company Status...................37
SECTION 4.16. Notice of Defaults........................................37
SECTION 4.17. Change of Control.........................................37
SECTION 4.18. Compliance Certificate....................................39
SECTION 4.19. Existence.................................................39
SECTION 4.20. Maintenance of Properties and Insurance...................39
SECTION 4.21. Payment of Taxes and Other Claims.........................40
SECTION 4.22. Waiver of Stay, Extension or Usury Laws...................40
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets..................40
SECTION 5.02. Successor Corporation Substituted.........................41
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.........................................42
SECTION 6.02. Acceleration..............................................45
SECTION 6.03. Other Remedies............................................46
SECTION 6.04. Waiver of Past Default....................................46
SECTION 6.05. Control by Majority.......................................47
SECTION 6.06. Limitation on Suits.......................................47
SECTION 6.07. Rights of Holders To Receive Payment......................48
SECTION 6.08. Collection Suit by Trustee................................48
SECTION 6.09. Trustee May File Proofs of Claim..........................48
SECTION 6.10. Priorities................................................48
SECTION 6.11. Undertaking for Costs.....................................49
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.........................................49
SECTION 7.02. Rights of Trustee.........................................50
SECTION 7.03. Individual Rights of Trustee..............................52
SECTION 7.04. Trustee's Disclaimer......................................52
SECTION 7.05. Notice of Defaults........................................52
SECTION 7.06. Reports by Trustee to Holders.............................52
SECTION 7.07. Compensation and Indemnity................................53
SECTION 7.08. Replacement of Trustee....................................54
SECTION 7.09. Successor Trustee by Merger, etc..........................55
SECTION 7.10. Eligibility; Disqualification.............................55
SECTION 7.11. Preferential Collection of Claims Against the Company.....55
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations..................56
SECTION 8.02. Legal Defeasance and Covenant Defeasance..................56
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.....57
SECTION 8.04. Application of Trust Money; Trustee Acknowledgment and
Indemnity...............................................59
SECTION 8.05. Repayment to the Company..................................59
SECTION 8.06. Reinstatement.............................................59
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders................................60
SECTION 9.02. With Consent of Holders...................................61
SECTION 9.03. Compliance with Trust Indenture Act.......................62
SECTION 9.04. Record Date for Consents and Effect of Consents...........62
SECTION 9.05. Notation on or Exchange of Securities.....................63
SECTION 9.06. Trustee To Sign Amendments, etc...........................63
ARTICLE TEN
GUARANTEES
SECTION 10.01. Unconditional Guarantee...................................63
SECTION 10.02. Severability..............................................64
SECTION 10.03. Release of a Guarantor....................................64
SECTION 10.04. Limitation of Guarantor's Liability.......................65
SECTION 10.05. Contribution..............................................65
SECTION 10.06. Execution of Guarantee....................................65
SECTION 10.07. Subordination of Subrogation and Other Rights.............66
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls..............................66
SECTION 11.02. Notices...................................................66
SECTION 11.03. Communications by Holders with Other Holders..............67
SECTION 11.04. Certificate and Opinion as to Conditions Precedent........67
SECTION 11.05. Statements Required in Certificate........................68
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.................68
SECTION 11.07. Governing Law.............................................68
SECTION 11.08. No Personal Liability of Directors, Officers, Employees
and Stockholders........................................68
SECTION 11.09. Successors................................................69
SECTION 11.10. Counterpart Originals.....................................69
SECTION 11.11. Severability..............................................69
SECTION 11.12. No Adverse Interpretation of Other Agreements.............69
SECTION 11.13. Legal Holidays............................................69
SIGNATURES...................................................................S-1
EXHIBIT A Form of Series A Security.....................................A-1
EXHIBIT B Form of Series B Security.....................................B-1
EXHIBIT C Form of Legend for Global Securities..........................C-1
EXHIBIT D Form of Transfer Certificate..................................D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited
Investors..................................................E-1
EXHIBIT F Form of Transfer Certificate for Regulation S Transfers.......F-1
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NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of this Indenture.
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<PAGE>
INDENTURE dated as of May 1, 1998, among R.A.B. ENTERPRISES,
INC., a Delaware corporation (the "Company"), the Guarantors named herein, and
PNC BANK, NATIONAL ASSOCIATION, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any
other Person who, directly or indirectly, through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or by contract; and
the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Affiliate Transaction" has the meaning provided in Section
4.08.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"amend" means amend, modify, supplement, restate or amend and
restate, including successively; and "amending" and "amended" have correlative
meanings.
"Asset Acquisition" means (a) an Investment by the Company or
any Restricted Subsidiary in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or any Restricted Subsidiary, or shall be
merged with or into the Company or any Restricted Subsidiary, or (b) the
acquisition by the Company or any Restricted Subsidiary of the assets of any
Person (other than a Restricted Subsidiary) which constitute all or
substantially all of the assets of such Person or comprise any division or line
of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer by the Company or any
of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of (a) any Capital
Stock of any Restricted Subsidiary; or (b) any other property or assets of the
Company or any Restricted Subsidiary other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) the sale or
disposition of inventory in the ordinary course of business, (ii) the sale or
other disposition of obsolete, worn out, damaged or otherwise unsuitable or
unnecessary
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equipment or other obsolete assets, (iii) the exchange of assets for other
non-cash assets that are (a) useful in the Permitted Business and (b) have a
fair market value at least equal to the fair market value of the assets being
exchanged (as determined by the Board of Directors in good faith), (iv) the sale
or other disposition of Cash Equivalents, (v) the grant of any license of
intellectual property rights in the ordinary course of business, (vi) any
transaction or series of related transactions in any fiscal year for which the
Company or its Restricted Subsidiaries receive aggregate consideration of less
than $1.0 million and (vii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as permitted
under Article Five.
"Bankruptcy Law" means Title 11, United States Code or any
similar federal, state or foreign law for the relief of debtors.
"Basket" has the meaning provided in Section 4.04.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"Borrowing Base Amount" means, as of the date of
determination, an amount equal to the sum, without duplication, of (i) 80% of
the book value of the accounts receivable and (ii) 55% of the book value of the
inventories of the Company and its Restricted Subsidiaries, taken as a whole, as
set forth in the most recent monthly consolidated financial statements of the
Company prepared and determined in accordance with GAAP.
"Business Day" means any day other than a Saturday, Sunday or
day on which banking institutions in The City of New York or in New Jersey are
required or authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, equity interests, participations or other
equivalents (however designated and whether or not voting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or 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 one of the two
highest ratings obtainable from either Standard & Poor's Corporation or any
successor thereto ("S&P") or Moody's Investors Service, Inc. or any successor
thereto ("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 (or the equivalent successor rating) from S&P or at least P-1
<PAGE>
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(or the equivalent successor rating) from Moody's; (iv) certificates of deposit
or bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States of
America or any state thereof or the District of Columbia or any U.S. branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; (v) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture) other than to Holdings or a wholly owned Subsidiary of Holdings (or
any successor thereto) or any Permitted Holder; (ii) the approval by the holders
of Capital Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the
provisions of this Indenture); (iii) any Person or Group (other than the
Permitted Holders) shall become the owner, directly or indirectly, beneficially
or of record, of shares representing more than 50% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock of the
Company; or (iv) the replacement of a majority of the Board of Directors of the
Company over a two-year period from the directors who constituted the Board of
Directors of the Company at the beginning of such period, and such replacement
shall not have been approved by a vote of at least a majority of the Board of
Directors of the Company then still in office who either were members of such
Board of Directors at the beginning of such period or whose election as a member
of such Board of Directors was previously so approved.
"Change of Control Date" has the meaning provided in Section
4.17.
"Change of Control Offer" has the meaning provided in Section
4.17.
"Change of Control Payment Date" has the meaning provided in
Section 4.17.
"Chase" means Chase Securities Inc. or any successor
corporation thereto.
"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman of the Board, its President, a Vice President, its Treasurer, its
Assistant Treasurer, its Secretary or its Assistant Secretary, and delivered to
the Trustee.
"Consolidated EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced
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thereby, (A) all income taxes of such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or taxes
attributable to sales or dispositions outside the ordinary course of business),
(B) Consolidated Interest Expense and (C) Consolidated Non-Cash Charges less any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person during the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or the
repayment, repurchase, defeasance or other discharge of any Indebtedness of such
Person or any of its Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or the repayment, repurchase, defeasance
or other discharge, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including or
excluding, as applicable, any Consolidated EBITDA (including any pro forma
expense and cost reductions) whether positive or negative attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale, as the case
may be, during the Four Quarter Period) occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such Asset Sale or Asset Acquisition
(including the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Restricted
Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements. For purposes of this
definition, whenever pro forma effect is to be given to an Asset Acquisition,
the amount of Consolidated Net Income relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Company.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person or its Subsidiaries (other than
dividends paid in Quali-
<PAGE>
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fied Capital Stock) paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
and (c) the interest portion of any deferred payment obligation; and (ii) the
interest component of Capitalized Lease Obligations paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided that there shall be excluded therefrom (a)
after-tax gains from Asset Sales or abandonments or reserves relating thereto,
(b) after-tax items classified as extraordinary or nonrecurring gains, (c) the
net income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary of the referent
Person or is merged or consolidated with the referent Person or any Restricted
Subsidiary of the referent Person, (d) the net income (but not loss) of any
Restricted Subsidiary of the referent Person to the extent that the declaration
of dividends or similar distributions by that Restricted Subsidiary of that
income is restricted by a contract or operation of law, (e) the net income of
any Person, other than a Restricted Subsidiary of the referent Person, except,
for purposes of Section 4.04, to the extent of cash dividends or distributions
paid to the referent Person or to a Wholly Owned Restricted Subsidiary of the
referent Person by such Person, (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, and (g)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued).
"Consolidated Non-Cash Charges" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP (excluding
any such charges constituting an extraordinary item or loss or any such charge
which requires an accrual of or a reserve for cash charges for any future
period).
"Corporate Trust Office of the Trustee" means the office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date of original execution of this
Indenture is located at Two Tower Center Boulevard, 20th Floor, Corporate Trust
Department, East Brunswick, New Jersey 08816.
"Corporate Trust Operations Office of the Trustee" means the
Trustee's offices located in Pittsburgh, Pennsylvania.
"Credit Agreement" means the Amended and Restated Credit
Agreement dated as of May 1, 1998, by and among Millbrook Distribution Services
Inc., The B. Manischewitz Company, LLC, The Chase Manhattan Bank, as agent, and
NationsBank, N.A., as co-agent, and the lenders party thereto in their
capacities as lenders thereunder, together with the related agreements entered
into in connection therewith (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to
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time, including any agreement extending the maturity of, refinancing, replacing
or otherwise restructuring (including increasing the amount of available
borrowings thereunder (provided that such increase in borrowings is permitted by
Section 4.03) or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, co-agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be, an Event
of Default.
"Depository" means, with respect to the Securities issued in
the form of one or more Global Securities, The Depository Trust Company or
another Person designated as Depository by the Company, which must be a clearing
agency registered under the Exchange Act.
"Designation" has the meaning provided in Section 4.11.
"Designation Amount" has the meaning provided in Section 4.11.
"Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Securities.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto and the rules and
regulations promulgated thereunder.
"Exchange Securities" means the 10 1/2% Senior Notes due 2005,
Series B, to be issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement.
"fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company delivered to the
Trustee.
"Final Maturity Date" means May 1, 2005.
"Funding Guarantor" has the meaning provided in Section 10.05.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and
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statements and pronouncements of the Financial Accounting Standards Board, which
are in effect as of the Issue Date.
"Global Securities" means one or more 144A Global Securities,
Regulation S Global Securities or IAI Global Securities.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantees" means the Form of Guarantee of each Guarantor to
be endorsed on each of the Securities in the form of Exhibit A (in the case of
an Initial Security) or Exhibit B (in the case of an Exchange Security) hereto.
"Guarantor" means (i) each of the Company's Restricted
Subsidiaries existing on the Issue Date and (ii) each of the Company's
Subsidiaries that in the future executes a supplemental indenture in which such
Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall cease
to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of this Indenture.
"Holders" means the registered holders of the Securities.
"Holdings" means R.A.B. Holdings, Inc., a Delaware
corporation.
"Holdings Notes" means the 13% Senior Notes due 2008 of
Holdings.
"Holdings Notes Indenture" means the indenture dated May 1,
1998, between Holdings and the trustee thereunder relating to the Holdings
Notes.
"IAI Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities
transferred after the Issue Date to Institutional Accredited Investors.
"incur" means, with respect to any Indebtedness, to create,
issue, incur (including by conversion, exchange or otherwise), assume, guarantee
or otherwise become liable in respect of such Indebtedness (and "incurrence,"
"incurred" and "incurring" shall have meanings correlative to the foregoing).
Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary or is merged or consolidated with or into the Company or any
Restricted Subsidiary shall be deemed to be incurred at such time. The accrual
of interest or the accretion of original issue discount shall not be deemed to
be an incurrence.
"Indebtedness" means with respect to any Person, without
duplication, (i) the principal amount of all indebtedness of such Person for
borrowed money, (ii) the principal amount of all indebtedness of such Person
evidenced by bonds, debentures, the Securities or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all indebtedness of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith), (v) reimbursement obligations of
such Person on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other similar
<PAGE>
-8-
contingent obligations in respect of indebtedness or obligations referred to in
clauses (i) through (v) above and clause (viii) below, (vii) all obligations of
any other Person of the type referred to in clauses (i) through (vi) which are
secured by any lien on any property or asset of such Person, the amount of such
obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the obligation so secured and (viii) all
obligations of such Person under Currency Agreements and Interest Swap
Obligations.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indentures" means this Indenture and the Holdings Notes
Indenture.
"Independent Financial Advisor" means a firm (i) which does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company (excluding an interest
consisting solely of monies owed for services rendered) and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchaser" means Chase Securities Inc.
"Initial Securities" means the 10 1/2% Senior Notes due 2005,
Series A, of the Company.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"interest" means, with respect to the Securities, the sum of
any cash interest and any Liquidated Damages (as defined in the Registration
Rights Agreement) on the Securities.
"Interest Payment Date" means May 1 and November 1 of each
year, commencing on November 1, 1998.
"Interest Record Date" for the interest payable on any
Interest Payment Date (except a date for payment of defaulted interest) means
the April 15 or October 15 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date.
"Interest Swap Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, Securities, debentures or other securities or evidences of
Indebtedness issued by, any other Person. "Investment" shall exclude extensions
of trade credit and advances to customers by the Company and its Restricted
Subsidiaries in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. For the purposes of Section 4.04, (i)
"Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidi-
<PAGE>
-9-
ary at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the net assets of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary and (ii) the amount of any Investment shall
be the original cost of such Investment plus the cost of all additional
Investments by the Company or any of its Restricted Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If the
Company or any Restricted Subsidiary sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary such that, after giving
effect to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the
Initial Securities.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, 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).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
aggregate proceeds in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (other than the portion of any such deferred payment
constituting interest) and cash and Cash Equivalents received upon the
disposition of non-cash consideration received in any Asset Sale received by the
Company or any of its Restricted Subsidiaries from such Asset Sale net of (a)
reasonable out-of-pocket expenses and fees incurred in connection with such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking into
account any reduction in consolidated tax liability due to available tax credits
or deductions and any tax sharing arrangements, (c) repayment of Indebtedness
that is required to be repaid in connection with such Asset Sale and (d)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale.
"Net Proceeds Offer" has the meaning provided in Section 4.05.
"Net Proceeds Offer Amount" has the meaning provided in
Section 4.05.
"Net Proceeds Offer Payment Date" has the meaning provided in
Section 4.05.
"Net Proceeds Offer Trigger Date" has the meaning provided in
Section 4.05.
"Obligations" means, with respect to any Indebtedness, all
obligations for principal, premium, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing any such Indebtedness.
"Offerings" means the initial offerings of the Securities and
the Senior Discount Notes.
<PAGE>
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"Offering Memorandum" means the final offering memorandum
dated April 28, 1998 setting forth information concerning the Company, Holdings,
the Guarantors, the Securities and the Holdings Notes.
"Officer" means the Chairman, any Vice Chairman, the
President, any Vice President, the Chief Financial Officer, the Treasurer or the
Secretary of the Company or any other officer designated by the Board of
Directors serving in a similar capacity.
"Officers' Certificate" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer or an Assistant Secretary
of the Company complying with Sections 11.04 and 11.05.
"144A Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Initial
Securities sold in reliance on Rule 144A.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee. The legal counsel may be an
employee of or counsel to the Company or the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the
Company ranking pari passu in right of payment with the Securities.
"Participants" has the meaning provided in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Business" means the business of food manufacturing
and processing, food distribution and other businesses similar thereto or
reasonably related thereto, including without limitation, providing
merchandising services.
"Permitted Holders" means (i) Mr. Richard A. Bernstein, (ii)
trusts for the benefit of Mr. Bernstein and/or members of his immediate family
and (iii) in the event of the incompetence or death of Mr. Bernstein, his
estate, executor, administrator or other personal representative.
"Permitted Indebtedness" means, without duplication, each of
the following:
(i) Indebtedness under the Securities, the Guarantees and the
Holdings Notes, and Permitted Refinancings thereof;
(ii) Indebtedness incurred pursuant to the Credit Agreement in
an aggregate principal amount, at any time outstanding, not to
exceed the greater of (x) $55.0 million and (y) the Borrowing
Base Amount, in each case, less mandatory, permanent repayments
(excluding amounts refinanced as permitted under the Credit
Agreement) actually made in respect of any Indebtedness
thereunder (which are accompanied by a permanent reduction in
commitment in the case of the Revolving Credit Facility);
(iii) Permitted Refinancings of (x) other Indebtedness of the
Companyor any Restricted Subsidiary to the extent outstanding on
the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon and (y) Indebtedness incurred
under the Consolidated Fixed Charge Coverage Ratio test of
Section 4.03;
(iv) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any Restricted Subsidiary and
Interest Swap Obligations of any Restricted Subsidiary covering
Indebtedness of such Restricted Subsidiary; provided, however,
that such Interest Swap Obligations are en-
<PAGE>
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tered into to protect the Company and its Restricted Subsidiaries
from fluctuations in interest rates on Indebtedness incurred in
accordance with this Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed
the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in
the case of Currency Agreements which relate to Indebtedness,
such Currency Agreements are designed to protect the Company or
any Restricted Subsidiary against fluctuations in currency values
and do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary to
the Company or to a Wholly Owned Restricted Subsidiary for so
long as such Indebtedness is held by the Company or a Wholly
Owned Restricted Subsidiary, in each case subject to no Lien
being held by a Person other than the Company or a Wholly Owned
Restricted Subsidiary; provided that if as of any date any Person
other than the Company or a Wholly Owned Restricted Subsidiary
owns or holds any such Indebtedness or holds a Lien in respect of
such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary for so long as such Indebtedness is held by a Wholly
Owned Restricted Subsidiary, in each case subject to no Lien;
provided that (a) any Indebtedness of the Company to any Wholly
Owned Restricted Subsidiary is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations
under this Indenture and the Securities and (b) if as of any date
any Person other than a Wholly Owned Restricted Subsidiary owns
or holds any such Indebtedness or any Person holds a Lien in
respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Indebtedness
permitted by this clause (vii);
(viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any Restricted Subsidiary
(a) represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in
order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business and (b) in
respect of performance, surety or appeal bonds incurred in the
ordinary course of business;
(x) Indebtedness of the Company or any Restricted Subsidiary
(other than for borrowed money) pursuant to agreements providing
for indemnification, purchase price adjustments and similar
obligations that is incurred in the ordinary course of business
or in connection with the sale of a business, assets or a
Subsidiary;
(xi) Indebtedness represented by Capitalized Lease Obligations
and Purchase Money Indebtedness of the Company and its Restricted
Subsidiaries incurred in the ordinary course of business not to
exceed $2.0 million at any one time outstanding; and
(xii) Additional Indebtedness of the Company or any Restricted
Subsidiary in an amount not to exceed $25.0 million at any one
time outstanding; provided that such amount is incurred on or
before the nine month anniversary of the Issue Date; and provided
further that, on or prior to the nine
<PAGE>
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month anniversary of the Issue Date, such amount is used to
consummate the acquisition of one or more Permitted Businesses
that becomes, upon the closing of such acquisition, a Restricted
Subsidiary of the Company.
"Permitted Investments" means (i) Investments by the Company
or any Restricted Subsidiary in any Person that is or will become immediately
after such Investment a Restricted Subsidiary or that will merge or consolidate
into the Company or a Restricted Subsidiary; (ii) Investments in the Company by
any Restricted Subsidiary; provided that any Indebtedness evidencing such
Investment is unsecured and subordinated, pursuant to a written agreement, to
the Company's obligations under the Securities and this Indenture; (iii)
investments in cash and Cash Equivalents; (iv) loans and advances to employees
and officers of the Company and its Restricted Subsidiaries (other than to
Permitted Holders) in the ordinary course of business for bona fide business
purposes not in excess of $250,000 at any one time outstanding; (v) Currency
Agreements and Interest Swap Obligations entered into in the ordinary course of
the Company's or its Restricted Subsidiaries' businesses and otherwise in
compliance with this Indenture; (vi) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (vii) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale made in
compliance with Section 4.05; and (viii) Investments existing on the Issue Date.
"Permitted Liens" means (a) Liens securing Acquired
Indebtedness; provided, however, that such Liens were in existence prior to the
contemplation of such acquisition, merger or consolidation and do not secure any
property or assets of the Company or any Restricted Subsidiary of the Company
other than the property or assets subject to the Liens prior to such
acquisition, merger or consolidation; (b) Liens imposed by law such as
carriers', warehousemen's and mechanic's Liens and other similar Liens arising
in the ordinary course of business which secure payment of obligations not more
than 30 days past due or which are being contested in good faith and by
appropriate proceedings; (c) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith; provided, however, that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (d)
easements, reservation of rights of way, licenses of intellectual property in
the ordinary course and other similar restrictions on the use of properties or
assets, or minor imperfections of title that in the aggregate are not material
in amount and do not in any case materially detract from the properties subject
thereto or interfere with the ordinary conduct of the business of the Company
and its Restricted Subsidiaries; (e) Liens resulting from the deposit of cash or
Securities in connection with contracts, tenders or expropriation proceedings,
or to secure workers' compensation, surety or appeal bonds, costs of litigation
when required by law and public and statutory obligations or obligations under
franchise arrangements entered into in the ordinary course of business; (f)
Liens securing Indebtedness incurred pursuant to clause (xii) of the definition
of "Permitted Indebtedness" in an aggregate amount not to exceed $15.0 million
at any one time outstanding; and (g) Liens securing Indebtedness consisting of
Capitalized Lease Obligations or industrial revenue bonds, in each case incurred
solely for the purpose of financing all or any part of the purchase price or
cost of construction or installation of assets used in the business of the
Company or its Restricted Subsidiaries, or repairs, additions or improvements to
such assets; provided, however, that (1) such Liens secure Indebtedness in an
amount not in excess of the original purchase price or the original cost of any
such assets or repairs, additions or improvements thereto (plus an amount equal
to the reasonable fees and expenses, including attorneys fees and expenses,
incurred in connection with the incurrence of such Indebtedness), (2) such Liens
do not extend to any other assets of the Company or its Restricted Subsidiaries
(and, in the case of repairs, additions or improvements to any such assets, such
Lien extends only to the assets repaired, added to or improved), (3) the
Incurrence of such Indebtedness is permitted under this Indenture and (4) such
Liens attach within 60 days of such purchase, construction, installation,
repair, addition or improvement.
<PAGE>
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"Permitted Refinancing" means, with respect to any
Indebtedness of any Person, any Refinancing of such Indebtedness; provided,
however, that (i) such Refinancing shall not result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of such
proposed Refinancing (plus the amount of any premium required to be paid under
the terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such
Refinancing), (ii) such Indebtedness shall not have a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or a final maturity earlier than the final
maturity of the Indebtedness being Refinanced, (iii) if the Indebtedness being
Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and (iv) if the Indebtedness being
Refinanced is subordinate or junior to the Securities, then such Refinancing
Indebtedness shall be subordinate to the Securities at least to the same extent
and in the same manner as the Indebtedness being Refinanced.
"Person" means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust or joint venture,
or a governmental agency or political subdivision thereof.
"Physical Securities" means one or more certificated
Securities in registered form.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"Private Exchange Securities" has the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Initial Securities in the form set forth on Exhibit A hereto.
"Public Equity Offering" means an underwritten public offering
of Qualified Capital Stock pursuant to a registration statement filed with the
Commission in accordance with the Securities Act generating gross cash proceeds
of at least $50.0 million.
"Purchase Money Indebtedness" means Indebtedness of the
Company and its Restricted Subsidiaries incurred in the normal course of
business for the purpose of financing all or any part of the purchase price, or
the cost of installation, construction or improvement, of property, equipment or
other assets; provided, however, (A) the Indebtedness shall not exceed the cost
of such property, equipment or assets and shall not be secured by any property,
equipment or assets of the Company or any Restricted Subsidiary other than the
property, equipment and assets so acquired or constructed and (B) the Lien
securing such Indebtedness shall be created within 180 days of such acquisition
or construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 180 days of such refinancing.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"redeem" means redeem, repurchase, defease or otherwise
acquire or retire for value; and "redemption" and "redeemed" have correlative
meanings.
<PAGE>
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"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to this
Indenture.
"redemption price," when used with respect to any Security to
be redeemed, means the price fixed for such redemption pursuant to this
Indenture as set forth in the form of Security annexed hereto as Exhibit A.
"Reference Date" has the meaning provided in Section 4.04.
"Refinance" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Exchange and
Registration Rights Agreement dated as of the Issue Date by and among the
Company, the Guarantors and the Initial Purchaser.
"Registration" means a registered exchange offer for the
Securities by the Company or other registration of the Securities under the
Securities Act pursuant to and in accordance with the terms of the Registration
Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" means a permanent global
security in registered form representing the aggregate principal amount of
Securities sold in reliance on Regulation S under the Securities Act.
"Replacement Assets" means (i) properties and assets that
replace the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in a Permitted Business or (ii) all of
the Capital Stock of a Person whose assets are of the type described in clause
(i), provided that such Person becomes a Restricted Subsidiary of the Company.
"Restricted Payment" has the meaning provided in Section 4.04.
"Restricted Security" means a Security that is a "restricted
security" within the meaning set forth in Rule 144(a)(3) under the Securities
Act; provided, however, that the Trustee shall be entitled to request and
conclusively rely upon an Opinion of Counsel with respect to whether any
Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company
which at the time of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means one or more revolving credit
facilities under the Credit Agreement.
"Rule 144A" means Rule 144A under the Securities Act.
<PAGE>
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"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
"SEC" or "Commission" means the Securities and Exchange
Commission.
"Securities" means, collectively, the Initial Securities, the
Private Exchange Securities and the Unrestricted Securities treated as a single
class of securities, as amended or supplemented from time to time in accordance
with the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
and any other successor statute or statutes thereto and the rules and
regulations promulgated thereunder.
"Significant Subsidiary," with respect to any Person, means
any Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Securities Act.
"Stated Maturity" means with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary," with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a majority of
the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such Person
or (ii) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned by
such Person.
"Surviving Entity" has the meaning provided in Section 5.01.
"Term Loan Facility" means one or more term loan facilities
under the Credit Agreement.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb), as amended, as in effect on the date of this Indenture
(except as provided in Section 9.03) until such time as this Indenture is
qualified under the TIA, and thereafter as in effect on the date on which this
Indenture is qualified under the TIA.
"Trust Officer" means any officer within the corporate trust
department (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his knowledge of and familiarity
with the particular subject.
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"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of this Indenture and thereafter means such successor.
"Unrestricted Securities" means one or more Securities that do
not and are not required to bear the Private Placement Legend in the form set
forth in Exhibit A hereto, including, without limitation, the Exchange
Securities and any Securities registered under the Securities Act pursuant to
and in accordance with the Registration Rights Agreement.
"Unrestricted Subsidiary" of any Person means (i) any
Subsidiary of such Person that at the time of determination shall be or continue
to be designated an Unrestricted Subsidiary by the Board of Directors of such
Person in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" means the Company or any other obligor on the
Securities.
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All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
from time to time, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Initial Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements (including the Guarantee) required by
law, stock exchange rule or usage. The Company and the Trustee shall approve the
form of the Securities and any notation, legend or endorsement (including the
Guarantee) on them. Each Security shall be dated the date of its issuance and
shall show the date of its authentication.
Securities offered and sold in reliance on Rule 144A and
Securities offered and sold in reliance on Regulation S shall be issued
initially in the form of one or more Global Securities, substantially in the
form set forth in Exhibit A hereto, deposited with the Trustee, as custodian for
the Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided and shall bear the legend set forth in Exhibit C hereto.
The aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.
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SECTION 2.02. Execution and Authentication.
An Officer who has been duly authorized by all requisite
corporate actions shall sign the Securities for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security or a Guarantee,
as the case may be, was an Officer at the time of such execution but no longer
holds that office at the time the Trustee authenticates the Security or
Guarantee, as the case may be, the Security or Guarantee, as the case may be,
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Securities for
original issue in an aggregate principal amount not to exceed $120,000,000, (ii)
Private Exchange Securities from time to time only in exchange for a like
principal amount of Initial Securities and (iii) Unrestricted Securities from
time to time only in exchange for (A) a like principal amount of Initial
Securities or (B) a like principal amount of Private Exchange Securities, in
each case upon a written order of the Company in the form of an Officers'
Certificate. Each such written order shall specify the amount of Securities to
be authenticated and the date on which the Securities are to be authenticated,
whether the Securities are to be Initial Securities, Private Exchange Securities
or Unrestricted Securities and whether the Securities are to be issued as
Physical Securities or Global Securities and such other information as the
Trustee may reasonably request. The aggregate principal amount of Securities
outstanding at any time may not exceed $120,000,000, except as provided in
Sections 2.07 and 2.08.
Notwithstanding the foregoing, all Securities issued under
this Indenture shall vote and consent together on all matters (as to which any
of such Securities may vote or consent) as one class and no series of Securities
will have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise provided
in the appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent shall
have the same rights as an Agent to deal with the Company and Affiliates of the
Company.
The Securities shall be issuable only in registered form,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency, which may be
in the Borough of Manhattan, The City of New York, where (a) Securities may be
presented or surrendered for registration of transfer and exchange (the
"Registrar"), (b) Securities may be presented or surrendered for payment (the
"Paying Agent") and (c) notices and demands in respect of the Securities and
this Indenture may be served. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company, upon written notice
to the Trustee, may appoint one or more co-Registrars and one or more additional
Paying Agents. The term "Paying Agent" includes any additional Paying Agent.
Except as provided herein, the Company may act as Paying Agent, Registrar or
co-Registrar.
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The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall incorporate the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee in
writing of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the
Trustee shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has been
appointed. The Securities may be presented for registration of transfer and
exchange at the offices of the Registrar, which initially will be the Corporate
Trust Operations Office of the Trustee. The Company will pay principal (and
premium, if any) on the Securities at the Corporate Trust Operations Office of
the Trustee. The Company will maintain an office in New York, New York and will
also pay principal (and premium, if any) on the Securities at the Company's
offices in New York, New York.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Securities, and shall notify the
Trustee of any Default by the Company in making any such payment. The Company at
any time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent (if other than the Company), the Paying Agent shall have no further
liability for such assets. If the Company or any of its Affiliates acts as
Paying Agent, it shall, on or before each due date of the principal of or
interest on the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee in writing of its
action or failure so to act.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee before each Interest Record Date and at such other times
as the Trustee may request in writing a list as of such date and in such form as
the Trustee may reasonably require of the names and addresses of Holders, which
list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when
Securities are presented to the Registrar or a co-Registrar with a request to
register the transfer of such Securities or to exchange such Securities for an
equal principal amount of Securities of other authorized denominations of the
same series, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney-in-fact duly authorized in
writing. To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Securities at
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the Registrar's or co-Registrar's written request. No service charge shall be
made for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
other governmental charge payable upon exchanges or transfers pursuant to
Section 2.02, 2.10, 3.06, or 9.05). The Registrar or co-Registrar shall not be
required to register the transfer or exchange of any Security (i) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities and ending at the close of business on the
day of such mailing and (ii) selected for redemption in whole or in part
pursuant to Article Three hereof, except the unredeemed portion of any Security
being redeemed in part.
Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee and any Agent of the Company shall
treat the person in whose name the Security is registered as the owner thereof
for all purposes whether or not the Security shall be overdue, and none of the
Company, the Trustee nor any such Agent shall be affected by notice to the
contrary. Any consent, waiver or actions of a Holder shall be binding upon any
subsequent Holders of such Security or a Security received upon transfer. Any
Holder of a beneficial interest in a Global Security shall, by acceptance of
such beneficial interest in a Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only through a
book-entry system maintained by the Depository (or its agent), and that
ownership of a beneficial interest in a Global Security shall be required to be
reflected in a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements for replacement of Securities
are met. If required by the Company or the Trustee, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of the Company and
the Trustee, to protect the Company, the Trustee and any Agent from any loss
which any of them may suffer if a Security is replaced. The Company may charge
such Holder for their reasonable out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel.
Every replacement Security is an obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee except those canceled by it, those
delivered to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any Affiliates of the Company holds the
Security.
If a Security is replaced pursuant to Section 2.07 (other than
a mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or the Final Maturity Date the Paying
Agent holds money sufficient to pay all of the principal and interest due on the
Securities payable on that date, and is not prohibited from paying such money to
the Holders pursuant to the terms of this Indenture, then on and after that date
such Securities cease to be outstanding and interest on them ceases to accrue.
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SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, the Guarantors or any of their respective
Affiliates shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that a Trust Officer of the Trustee actually knows
are so owned shall be disregarded.
The Company shall notify the Trustee, in writing, when the
Company or any of its Affiliates, including any of the Guarantors, repurchases
or otherwise acquires Securities, of the aggregate principal amount of such
Securities so repurchased or otherwise acquired.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities upon
receipt of a written order of the Company in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of temporary
Securities to be authenticated and the date on which the temporary Securities
are to be authenticated.
Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Company pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel, and at the written direction of the
Company, dispose of and deliver evidence of such disposal of all Securities
surrendered for transfer, exchange, payment or cancellation. Subject to Section
2.07, the Company may not issue new Securities to replace Securities that they
have paid or delivered to the Trustee for cancellation. If the Company shall
acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company shall pay interest on overdue principal from time
to time on demand at the rate of interest then borne by the Securities. The
Company shall, to the extent lawful, pay interest on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the rate of interest then borne by the Securities.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest, plus (to the extent lawful) any
interest payable on the defaulted interest to the Persons who are Holders on a
subsequent special record date, which date shall be the fifteenth day preceding
the date fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a
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copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid
prior to the expiration of the 30-day period set forth in Section 6.01(a) shall
be paid to Holders as of the Interest Record Date for the Interest Payment Date
for which interest has not been paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP"
number and the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities, and that reliance
may be placed only on the other identification numbers printed on the
Securities. The Company shall promptly notify the Trustee in writing of any
changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
On the Business Day immediately preceding each Interest
Payment Date, Redemption Date, and the Final Maturity Date, the Company shall
deposit with the Paying Agent in immediately available funds money sufficient to
make cash payments, if any, due on such Interest Payment Date, Redemption Date
or Final Maturity Date, as the case may be, in a timely manner which permits the
Paying Agent to remit payment to the Holders on such Interest Payment Date,
Redemption Date or Final Maturity Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in
the name of the Depository or the nominee of such Depository, (ii) be delivered
to the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit C.
Members of, or participants in, the Depository
("Participants") shall have no rights under this Indenture with respect to any
Global Security held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and Participants, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Securities may
be transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16; provided,
however, that Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
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(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(c) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Securities.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar (so long as the Trustee is the
Registrar, such presentment to be made at the Corporate Trust Operations Office
of the Trustee) or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal
principal amount of Physical Securities of other authorized
denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for registration of transfer or exchange:
(A) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his
attorney-in-fact duly authorized in writing; and
(B) in the case of Physical Securities the offer and sale of
which have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the Company,
by the following additional information and documents, as applicable:
(I) if such Physical Security is being delivered to the
Registrar or co-Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (substantially in the form of Exhibit D
hereto); or
(II) if such Physical Security is being transferred to a
QIB in accordance with Rule 144A, a certification to
that effect (substantially in the form of Exhibit D
hereto); or
(III) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a transferee letter of
representation (substantially in the form of Exhibit
E hereto) and, at the option of the Company, an
Opinion of Counsel reasonably satisfactory to
<PAGE>
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the Company to the effect that such transfer is in
compliance with the Securities Act; or
(IV) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of the Company, an Opinion of Counsel
reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the
Securities Act; or
(V) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of Exhibit
D hereto) and a transferor certificate for Regulation
S transfers (substantially in the form of Exhibit F
hereto) and, at the option of the Company, an Opinion
of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with
the Securities Act; or
(VI) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of the Company, an
Opinion of Counsel reasonably acceptable to the
Company to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Physical Security for a
Beneficial Interest in a Global Security. A Physical Security the offer and sale
of which has not been registered under the Securities Act may not be exchanged
for a beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(i) certification, substantially in the form of Exhibit D
hereto, that such Physical Security is being transferred (A) to a QIB,
(B) to an Institutional Accredited Investor or (C) in an offshore
transaction in reliance on Regulation S and, with respect to (B) or
(C), at the option of the Company, an Opinion of Counsel reasonably
acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act; and
(ii) written instructions directing the Registrar or
co-Registrar to make, or to direct the Depository to make, an
endorsement on the applicable Global Security to reflect an increase in
the aggregate amount of the Securities represented by the Global
Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no 144A Global Security, IAI
Global Security or Regulation S Global Security, as the case may be, is then
outstanding, the Company shall, unless either of the events in the proviso to
Section 2.15(b) have occurred and are continuing, issue and the Trustee shall,
upon written instructions from the Company in accordance with Section 2.02,
authenticate such a Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt
<PAGE>
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by the Registrar or Co-Registrar of written instructions, or such other
instruction as is customary for the Depository, from the Depository or its
nominee, requesting the registration of transfer of an interest in a 144A Global
Security, an IAI Global Security or a Regulation S Global Security, as the case
may be, to another type of Global Security, together with the applicable Global
Securities (or, if the applicable type of Global Security required to represent
the interest as requested to be obtained is not then outstanding, only the
Global Security representing the interest being transferred), the Registrar or
Co-Registrar shall reflect on its books and records (and the applicable Global
Security) the applicable increase and decrease of the principal amount of
Securities represented by such types of Global Securities, giving effect to such
transfer. If the applicable type of Global Security required to represent the
interest as requested to be obtained is not outstanding at the time of such
request, the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.02, authenticate a
new Global Security of such type in principal amount equal to the principal
amount of the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for
a Physical Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Physical Security; provided, however, that prior to the Registration, a
transferee that is a QIB or Institutional Accredited Investor may not
exchange a beneficial interest in Global Security for a Physical
Security. Upon receipt by the Registrar or co-Registrar of written
instructions, or such other form of instructions as is customary for
the Depository, from the Depository or its nominee on behalf of any
Person having a beneficial interest in a Global Security and upon
receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest
containing registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in Securities the offer
and sale of which have not been registered under the Securities Act,
the following additional information and documents:
(A) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of the Company, an Opinion of Counsel
reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the
Securities Act; or
(B) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of the Company, an
Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository
and the Registrar or co-Registrar, the aggregate principal amount of
the applicable Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate in
accordance with Section 2.02, the Trustee will authenticate and deliver
to the transferee a Physical Security in the appropriate principal
amount.
(ii) Securities issued in exchange for a beneficial interest
in a Global Security pursuant to this Section 2.16(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the
<PAGE>
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Registrar or co-Registrar in writing. The Registrar or co-Registrar
shall deliver such Physical Securities to the Persons in whose names
such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act; (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act (including pursuant to a Registration); or (iii) the
date of such transfer, exchange or replacement is two years after the later of
(x) the Issue Date and (y) the last date that the Company or any affiliate (as
defined in Rule 144 under the Securities Act) of the Company was the owner of
such Securities (or any predecessor thereto).
(g) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Participants
or beneficial owners of interest in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
<PAGE>
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to
paragraph 5 of the Securities at the applicable redemption price set forth
thereon, it shall notify the Trustee in writing of the Redemption Date and the
principal amount of Securities to be redeemed. The Company shall give such
notice to the Trustee at least 45 days before the Redemption Date (unless a
shorter notice shall be agreed to by the Trustee in writing), together with an
Officers' Certificate stating that such redemption will comply with the
conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant
to paragraph 5 of the Securities, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the national securities
exchange, if any, on which the Securities are listed or, in the absence of such
requirements or if the Securities are not then listed on a national securities
exchange, on a pro rata basis, by lot or in such other manner as may be required
pursuant to this Indenture or otherwise as the Trustee shall deem fair and
appropriate. Selection of the Securities to be redeemed pursuant to paragraph
5(b) of the Securities shall be made by the Trustee only on a pro rata basis or
on as nearly a pro rata basis as is practicable (subject to the procedures of
the Depository) based on the aggregate principal amount of Securities held by
each Holder. The Trustee shall make the selection from the Securities then
outstanding, subject to redemption and not previously called for redemption.
The Trustee may select for redemption pursuant to paragraph 5
of the Securities portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail a notice of redemption by first-class mail to each
Holder whose Securities are to be redeemed at such Holder's registered address;
provided, however, that notice of a redemption pursuant to paragraph 5(b) of the
Securities shall be mailed to each Holder whose Securities are to be redeemed no
later than 90 days after the date of the closing of the relevant Equity Offering
of the Company.
Each notice of redemption shall identify the Securities to be
redeemed (including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
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(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, as long as the Company has deposited with the Paying Agent
funds in satisfaction of the applicable redemption price pursuant to this
Indenture, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the Paying
Agent;
(6) in the case of any redemption pursuant to paragraph 5 of the
Securities, if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued;
(7) the subparagraph of the Securities pursuant to which such
redemption is being made; and
(8) that no representation is made as to the accuracy of the CUSIP
number listed in such notice or printed on such Security.
At the Company's written request, the Trustee shall give the
notice of redemption on behalf of the Company, in the Company's name and at the
Company's expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon, if any, to the Redemption Date.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the Redemption Date, the
Company shall deposit with the Paying Agent (or if the Company is its own Paying
Agent, it shall, on or before the Redemption Date, segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest, if any, on
all Securities to be redeemed on that date other than Securities or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation.
If any Security surrendered for redemption in the manner
provided in the Securities shall not be so paid on the Redemption Date due to
the failure of the Company to deposit with the Paying Agent money sufficient to
pay the redemption price thereof, the principal and accrued and unpaid interest,
if any, thereon shall, until paid or duly provided for, bear interest as
provided in Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Trustee shall authenticate for the Holder a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the
Securities in the manner provided in this Indenture, the Securities and the
Registration Rights Agreement. An installment of principal or interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than the
Company or any Affiliates of the Company) holds on that date money designated
for and sufficient to pay the installment in full and is not prohibited from
paying such money to the Holders of the Securities pursuant to the terms of this
Indenture.
The Company shall pay cash interest on overdue principal at
the same rate per annum borne by the Securities. The Company shall pay cash
interest on overdue installments of interest at the same rate per annum borne by
the Securities, to the extent lawful, as provided in Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of any office or agency required
by Section 2.03. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Article 11. The Company hereby
initially designates the Trustee at its address set forth in Section 11.02 as
its office for such purposes.
SECTION 4.03. Limitation on Incurrence of Additional Indebtedness and Issuance
of Disqualified Capital Stock.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (other than
Permitted Indebtedness) and the Company shall not issue any Disqualified Capital
Stock and shall not permit its Restricted Subsidiaries to issue any Preferred
Stock except Preferred Stock of a Restricted Subsidiary issued to (and as long
as it is held by) the Company or a Wholly Owned Restricted Subsidiary of the
Company; provided, however, that if no Default or Event of Default shall have
occurred and be continuing at the time of or as a consequence of the incurrence
of any such Indebtedness, the Company and the Guarantors may incur Indebtedness
(including, without limitation, Acquired Indebtedness) and the Company may issue
Disqualified Capital Stock of the Company, if, in either case, at the time of
and immediately after giving pro forma effect to such incurrence of such
Indebtedness or the issuance of such Disqualified Capital Stock, as the case may
be, and the use of proceeds therefrom, the Company's Consolidated Fixed Charge
Coverage Ratio is greater than 2.0 to 1.0.
The Company shall not, and shall not cause or permit any
Guarantor to, directly or indirectly, incur any Indebtedness that purports to be
by its terms (or by the terms of any agreement governing such Indebtedness)
subordinated to any other Indebtedness of the Company or of such Guarantor, as
the case may be, unless such Indebtedness is also by its terms (or by the terms
of any agreement governing such Indebtedness) made expressly subordinated to the
Securities or the Guarantee of such Guarantor, as the case may be, to the same
extent and in the same manner as such Indebtedness is subordinated to such other
Indebtedness.
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For purposes of determining compliance with this Section 4.03,
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described in the various clauses of the definition of
Permitted Indebtedness, the Company, in its sole discretion, shall classify such
item of Indebtedness and shall only be required to include the amount and type
of such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock, (b) redeem any Capital Stock of the Company or Holdings
or any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock, or (c) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b), and
(c) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default
shall have occurred and be continuing or (ii) the Company is not able to incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.03 or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum (the
"Basket"), without duplication, of: (v) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Company earned subsequent to the Issue Date and on or prior to
the date the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (w) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Restricted
Subsidiary of the Company) from the issuance and sale subsequent to the Issue
Date and on or prior to the Reference Date of Qualified Capital Stock of the
Company (other than Qualified Capital Stock, the proceeds of which are to be
used to redeem Securities pursuant to the provisions described in paragraph 5(b)
of the Securities); plus (x) 100% of the net cash proceeds received by the
Company from any Person (other than a Restricted Subsidiary of the Company) from
the issuance subsequent to the Issue Date of Indebtedness convertible or
exchangeable into Qualified Capital Stock of the Company that has actually been
so converted or exchanged, together with the aggregate net cash proceeds
received by the Company (other than from a Restricted Subsidiary of the Company)
at the time of such conversion or exchange; plus (y) without duplication of any
amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock; plus (z) the amount equal to the net reduction in
Investments (other than Permitted Investments) made by the Company or any of its
Restricted Subsidiaries in any Person resulting from, and without duplication,
(i) repurchases or redemptions of such Investments by such Person, proceeds
realized upon the sale of such Investment to an unaffiliated purchaser and
repayments of loans or advances or other transfers of assets by such Person to
the Company or any Restricted Subsidiary of the Company or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in
each case as provided in the definition of "Investment") not to exceed, in the
case of any Restricted Subsidiary, the amount of Investments previously made by
the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which
amount was included in the calculation of Restricted Payments; provided,
however, that no amount shall be included under this clause (z) to the extent it
is already included in Consolidated Net Income.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) if no Default shall
have occurred and be continuing, (i) the acquisition of any shares of Capital
Stock of the Company or Holdings solely in exchange for shares of Qualified
Capital Stock of the Company or Holdings, respectively, or (ii) the making of
any
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Restricted Payment from the net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified Capital
Stock of the Company; (3) so long as no Default shall have occurred and be
continuing, repurchases by the Company of Common Stock of Holdings from
employees of the Company or any of its Subsidiaries or their authorized
representatives (other than Permitted Holders) upon the death, disability or
termination of employment of such employees, in an aggregate amount not to
exceed 5% of the cumulative Consolidated Net Income of the Company earned
subsequent to the Issue Date and on or prior to the date such repurchase occurs;
(4) any repurchase of equity interests deemed to occur upon the exercise of
stock options if such equity interest represents a portion of the exercise price
of such option; (5) payments or other distributions to Holdings solely to enable
Holdings to pay audit, accounting, legal, Commission filing fees and similar
expenses actually incurred, to pay franchise or other similar taxes when due and
to pay other corporate overhead expenses of Holdings actually incurred, provided
that such expenses and taxes arise as a result of Holdings' Investment in the
Company, and provided further that the aggregate amount of such payments does
not exceed $1.0 million in any fiscal year; (6) payments to Holdings to fund
taxes due from Holdings for any given taxable year in an amount equal to the
Company's "separate return liability," as if the Company were the parent of a
consolidated group (for purposes of this clause (6), "separate return liability"
for a given taxable year shall mean the hypothetical United States tax liability
of the Company determined as if the Company had filed its own United States
federal tax return for such taxable year); (7) the payment to Holdings of (i)
any dividend or other distribution in an aggregate amount not to exceed $600,000
in any fiscal year to permit Holdings to pay management fees to P&E Properties,
Inc. or any of its Affiliates and (ii) any dividend or other distribution to
reimburse P&E Properties, Inc. or any of its Affiliates for reasonable services
and out-of-pocket and other costs and expenses actually incurred in connection
with such services; and (8) if no Default shall have occurred and be continuing,
the payment to Holdings of any dividend or other distribution to permit Holdings
to pay cash interest when due on the Holdings Notes on and after the fifth
anniversary of the Issue Date. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant to clauses (1),
(2)(ii), (3), (4), (7)(i) and (8) shall be included in such calculation and
amounts expended pursuant to clause (2)(i), (5), (6) and (7)(ii) shall not be
included in such calculation.
The amount of any non-cash Restricted Payment shall be the
fair market value, on the date such Restricted Payment is made, of the assets or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors of the Company whose resolution with respect thereto
shall be delivered to the Trustee, such determination to be based upon an
opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing if such fair market value exceeds $1.5 million. Not
later than 60 days after the end of any fiscal quarter (100 days in the case of
the last fiscal quarter of the fiscal year) during which any Restricted Payment
is made, the Company shall deliver to the Trustee an Officers' Certificate
stating that all Restricted Payments made during such fiscal quarter were
permitted and setting forth the basis upon which the calculations required by
this Section 4.04 were computed, together with a copy of any opinion or
appraisal required by this Indenture.
SECTION 4.05. Limitation on Asset Sales.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
the applicable Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), (ii) at least 80% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of (x) cash or Cash Equivalents, (y) Replacement
Assets or (z) any combination of the foregoing and
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is received at the time of such disposition; and (iii) upon the consummation of
an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale within 270 days of
receipt thereof either (A) to prepay any Indebtedness incurred pursuant to
clause (ii) or clause (xii) of the definition of "Permitted Indebtedness" (other
than subordinated Indebtedness) and effect a permanent reduction thereunder, (B)
to make an investment in Replacement Assets or (C) a combination of prepayment
and investment permitted by the foregoing clauses (iii)(A) and (iii)(B). On the
271st day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines, as the
case may be, not to apply the Net Cash Proceeds relating to such Asset Sale as
set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding
sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of
Net Cash Proceeds which have not been applied on or before such Net Proceeds
Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of
the next preceding sentence (each a "Net Proceeds Offer Amount") shall be
applied by the Company or such Restricted Subsidiary to make an offer to
purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment
Date") not less than 30 nor more than 45 days following the applicable Net
Proceeds Offer Trigger Date, from all holders of Securities and Pari Passu
Indebtedness (to the extent required by the terms of such Indebtedness) on a pro
rata basis based on the aggregate amount outstanding of Securities and Pari
Passu Indebtedness requiring such an offer to be made, that amount of Securities
and Pari Passu Indebtedness in the aggregate equal to the Net Proceeds Offer
Amount at a price equal to, with respect to the Securities, 100% of the
principal amount of the Securities to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase, and with respect to any Pari
Passu Indebtedness, an amount not greater than 100% of the principal amount, or
accreted value, of such Pari Passu Indebtedness; provided, however, that if at
any time any non-cash consideration received by the Company or any Restricted
Subsidiary, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash (other than interest received
with respect to any such non-cash consideration), then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant. The
Company may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $5,000,000 resulting from one
or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $5,000,000, shall be applied as
required pursuant to this paragraph). Pending the final application of such Net
Cash Proceeds, the Company may temporarily cause the Guarantors to reduce
Indebtedness under the Revolving Credit Facility or invest such Net Cash
Proceeds in Cash Equivalents.
For purposes of clause (ii)(x) of the immediately preceding
paragraph, the term "cash" shall include the amount of any Indebtedness for
borrowed money or any Capitalized Lease Obligations (A) that is assumed by the
transferee of any assets or property which constitutes the Asset Sale or (B)
with respect to the sale or disposition of all of the Capital Stock of a
Restricted Subsidiary, that remains the liability of such Restricted Subsidiary
subsequent to such sale or other disposition, in each case provided that there
is no further recourse to the Company or any of its Restricted Subsidiaries with
respect to such Indebtedness.
In the event of the transfer of substantially all (but not
all) of the property and assets of the Company and its Restricted Subsidiaries
as an entirety to a Person in a transaction permitted under Article Five, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this covenant, and shall comply with the provisions of this covenant with
respect to such deemed sale as if it were an Asset Sale. In addition, the fair
market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.05.
Each Net Proceeds Offer shall be mailed to the record Holders
as shown on the register of Holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the Trustee, and shall
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comply with the procedures set forth in this Indenture. Upon receiving notice of
the Net Proceeds Offer, Holders may elect to tender their Securities in whole or
in part in integral multiples of $1,000 in exchange for cash. To the extent
Holders properly tender Securities in an amount exceeding the Net Proceeds Offer
Amount, Securities of tendering Holders will be purchased on a pro rata basis
(based on amounts tendered). A Net Proceeds Offer shall remain open for a period
of 20 business days or such longer period as may be required by applicable law.
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Net Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.05, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached or violated any of its
obligations under this Section 4.05, by virtue thereof.
SECTION 4.06. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not cause or permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or permit to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary; or (c) transfer any of its property or assets to the
Company or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of: (1) applicable law; (2) the
Indentures; (3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (5) agreements
existing on the Issue Date, including the Credit Agreement, to the extent and in
the manner such agreements are in effect on the Issue Date; (6) an agreement
governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (2), (4) or (5) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable, taken as a
whole, to the Company in any material respect as determined by the Board of
Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (4) or (5); or (7) restrictions imposed by any
agreement to sell, or otherwise dispose of, assets pending the closing of such
sale.
SECTION 4.07. Limitation on Liens.
The Company shall not, and shall not cause or permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Securities, the Securities are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens and (ii) in all other cases, the Securities are equally
and ratably secured, except for (1) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date; (2)
Indebtedness incurred pursuant to clause (ii) of the definition of "Permitted
Indebtedness"; (3) Liens securing the Securities and the Guarantees; (4) Liens
of the Company or a Wholly Owned Restricted Subsidiary on assets of any
Restricted Subsidiary; (5) Liens securing Refinancing Indebtedness which is
incurred to
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Refinance any Indebtedness which has been secured by a Lien permitted under this
Indenture and which has been incurred in accordance with the provisions of this
Indenture; provided, however, that such Liens (x) are no less favorable, taken
as a whole, to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (y) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (6) Permitted Liens.
SECTION 4.08. Limitations on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms that
are no less favorable, taken as a whole, than those that might reasonably have
been obtained in a comparable transaction at such time on an arm's-length basis
from a Person that is not an Affiliate of the Company or such Restricted
Subsidiary. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $500,000 shall
be approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate fair market value of more than $1,500,000, the Company or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to
(i) reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company or any
Restricted Subsidiary in the ordinary course as determined in good faith by the
Company's Board of Directors; (ii) transactions exclusively between or among the
Company and any of its Wholly Owned Restricted Subsidiaries or exclusively
between or among such Wholly Owned Restricted Subsidiaries, provided such
transactions are not otherwise prohibited by this Indenture; (iii) any written
agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto so
long as any such amendment is not more disadvantageous to the Holders in any
material respect than the agreement as in effect on the Issue Date); (iv) loans
or advances to employees of the Company or any Restricted Subsidiary (other than
Permitted Holders) in the ordinary course and in an aggregate amount not to
exceed $250,000 at any one time outstanding; (v) payments (A) to P&E Properties,
Inc. or any of its Affiliates in an aggregate amount not to exceed $600,000 in
any fiscal year to pay management fees and (B) to reimburse P&E Properties, Inc.
or any of its Affiliates for reasonable services and out-of-pocket costs and
other expenses actually incurred in connection with such services; and (vi)
payments permitted by Section 4.04.
SECTION 4.09. Additional Guarantees.
If the Company or any of its Restricted Subsidiaries transfers
or causes to be transferred, in one transaction or a series of related
transactions, any property to any Restricted Subsidiary that is not a Guarantor,
or if the Company or any of its Restricted Subsidiaries shall organize, acquire
or otherwise invest in another Restricted Subsidiary, then such transferee or
acquired or other Restricted Subsidiary shall (i) execute and
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deliver to the Trustee a supplemental indenture in form reasonably satisfactory
to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Securities
and this Indenture on the terms set forth in this Indenture and (ii) deliver to
the Trustee an Opinion of Counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and constitutes
a legal, valid, binding and enforceable obligation of such Restricted
Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all
purposes of this Indenture.
SECTION 4.10. Subsidiaries.
The Company shall not have any Subsidiaries except Wholly
Owned Restricted Subsidiaries and Unrestricted Subsidiaries.
SECTION 4.11. Designation of Unrestricted Subsidiaries.
The Company may designate after the Issue Date any Subsidiary
of the Company as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
and
(ii) the Company would be permitted to make an Investment
(other than a Permitted Investment) at the time of such Designation
(assuming the effectiveness of such Designation) pursuant to Section
4.04 in an amount (the "Designation Amount") equal to the fair market
value of the Company's proportionate interest in the net worth of such
Subsidiary on such date calculated in accordance with GAAP.
Neither the Company nor any Restricted Subsidiary shall at any
time (x) provide credit support for or guarantee any Indebtedness of any
Unrestricted Subsidiary (including any undertaking, agreement or instrument
evidencing such Indebtedness); provided, that the Company may pledge equity
interests or Indebtedness of any Unrestricted Subsidiary on a nonrecourse basis
such that the pledgee has no claim whatsoever against the Company other than to
obtain such pledged property, (y) be directly or indirectly liable for any
Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly
liable for any Indebtedness of an Unrestricted Subsidiary which provides that
the holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary, except for any nonrecourse
guarantee given solely to support the pledge by the Company of the Capital Stock
of any Unrestricted Subsidiary. For purposes of the foregoing, the Designation
of a Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to
include the Designation of all of the Subsidiaries of such Subsidiary.
Any such Designation by the Company shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such Designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
SECTION 4.12. Conduct of Business.
The Company and its Restricted Subsidiaries shall not engage
in any businesses other than Permitted Businesses.
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SECTION 4.13. Reports to Holders.
The Company shall deliver to the Trustee within 15 days after
the filing of the same with the Commission, copies of the quarterly and annual
reports and of the information, documents and other reports, if any, which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. For so long as
any Securities remain outstanding, the Company shall furnish to the Holders and
to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, and, to any beneficial holder of Securities, if not obtainable
from the SEC, information of the type that would be filed with the SEC pursuant
to the foregoing provisions, upon the request of any such holder. The first such
report that the Company shall be required to deliver shall be for the period
ending June 30, 1998.
SECTION 4.14. Payments for Consents.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Securities for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Securities unless such consideration is offered to be
paid or is paid to all Holders of the Securities that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
SECTION 4.15. Limitation on Investment Company Status.
The Company and its Subsidiaries shall not take any action, or
otherwise permit to exist any circumstance, that would require the Company to
register as an "investment company" under the Investment Company Act of 1940, as
amended.
SECTION 4.16. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any of
its Subsidiaries is declared due and payable before its maturity because of the
occurrence of any Default (or any event which, with notice or lapse of time, or
both, would constitute such a Default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such Default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of the occurrence and continuation of
any Default or Event of Default, the Company shall promptly deliver an Officers'
Certificate to the Trustee specifying the Default or Event of Default.
SECTION 4.17. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder
shall have the right to require that the Company purchase all or a portion of
such Holder's Securities pursuant to the offer described below (the "Change of
Control Offer"), at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest to the date of purchase.
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(b) Prior to the mailing of the notice referred to below, but
in any event within 30 days following the date on which the Company becomes
aware that a Change of Control has occurred (the "Change of Control Date"), the
Company covenants that if the purchase of the Securities would violate or
constitute a default under any other Indebtedness of the Company, then the
Company shall, to the extent needed to permit such purchase of Securities,
either (i) repay all such Indebtedness and terminate all commitments outstanding
thereunder or (ii) obtain the requisite consents, if any, under any such
Indebtedness to permit the purchase of the Securities as provided below. The
Company shall first comply with the covenant in the preceding sentence before it
will be required to make the Change of Control Offer or purchase the Securities
pursuant to the provisions described below.
(c) Within 30 days following the date on which a Change of
Control has occurred, the Company shall send, by first class mail, a notice to
each Holder with a copy to the Trustee, which notice shall govern the terms of
the Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender Securities
pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.17 and that all Securities validly tendered and not
withdrawn will be accepted for payment;
(2) the purchase price (including the amount of accrued
interest, if any), and the purchase date (which shall be a Business Day
no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law) (the "Change of
Control Payment Date");
(3) that any Security not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment
therefor, any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying Agent for the
Securities at the address specified in the notice prior to the close of
business on the third Business Day prior to the Change of Control
Payment Date;
(6) that Holders shall be entitled to withdraw their election
if the Paying Agent receives, not later than three Business Days prior
to the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Securities the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have
such Security purchased;
(7) that Holders whose Securities are purchased only in part
shall be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; provided, however,
that each Security purchased and each new Security issued shall be in a
principal amount of $1,000 or integral multiples thereof; and
(8) the circumstances and relevant facts regarding such Change
of Control.
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(d) On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Securities or portions thereof (in integral
multiples of $1,000) validly tendered pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent in accordance with Section 2.14 cash in U.S.
dollars or United States Government Obligations sufficient to pay the purchase
price plus accrued and unpaid interest, if any, of all Securities so tendered
and (iii) deliver to the Trustee Securities so accepted together with an
Officers' Certificate stating the Securities or portions thereof being purchased
by the Company. Upon receipt by the Paying Agent of the monies specified in
clause (ii) above and a copy of the Officers' Certificate specified in clause
(iii) above, the Paying Agent shall promptly mail to the Holders of Securities
so accepted payment in an amount equal to the purchase price plus accrued and
unpaid interest, if any, out of the funds deposited with the Paying Agent in
accordance with the immediately preceding sentence. The Trustee shall promptly
authenticate and mail to such Holders new Securities equal in principal amount
to any unpurchased portion of the Securities surrendered. Upon the payment of
the purchase price for the Securities accepted for purchase, the Trustee shall
return the Securities purchased to the Company for cancellation. Any monies
remaining after the purchase of Securities pursuant to a Change of Control Offer
shall be returned within three Business Days by the Trustee to the Company
except with respect to monies owed as obligations to the Trustee pursuant to
Article Eight. For purposes of this Section 4.17, the Trustee shall, except with
respect to monies owed as obligations to the Trustee pursuant to Article Seven,
act as the Paying Agent.
(e) The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of the Securities pursuant to a Change of Control Offer. To
the extent that the provisions of any securities laws or regulations conflict
with the provisions of this Indenture relating to a Change of Control Offer, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations relating to such Change of
Control provisions by virtue thereof.
SECTION 4.18. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after
the close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Company has been made under the
supervision of the signing officer with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers know of any
Default or Event of Default by the Company that occurred during such fiscal
year. If they do know of such a Default or Event of Default, their status and
the action the Company is taking or proposes to take with respect thereto. The
first certificate to be delivered by the Company pursuant to this Section 4.18
shall be for the fiscal year ending March 31, 1999.
SECTION 4.19. Existence.
Subject to Article Five, the Company shall do or shall cause
to be done all things necessary to preserve and keep in full force and effect
its existence and the corporate, partnership or other existence of each
Subsidiary in accordance with the respective organizational documents of each
such Subsidiary and the rights (charter and statutory) and material franchises
of the Company and the Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right or franchise, or the corporate or
other existence of any Subsidiary, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and the Subsidiaries, taken as a whole;
provided, further, however, that a determination of the Board of Directors of
the Company shall not be required in the event of a merger of one or more
Restricted Subsidiaries of the Company with or into another Restricted
Subsidiary of the Company or another Person, if the surviving Person is a
Restricted Subsidiary of the Company organized
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under the laws of the United States or a State thereof or of the District of
Columbia. This Section 4.19 shall not prohibit the Company from taking any other
action otherwise permitted by, and made in accordance with, the provisions of
this Indenture.
SECTION 4.20. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its material properties in normal condition (subject
to ordinary wear and tear) and make all reasonably necessary repairs, renewals
or replacements thereto as in the judgment of the Company may be reasonably
necessary to the conduct of the business of the Company and its Restricted
Subsidiaries; provided, however, that nothing in this Section 4.20 shall prevent
the Company or any of its Restricted Subsidiaries from discontinuing the
operation and maintenance of any of its properties, if such properties are, in
the reasonable and good faith judgment of the Board of Directors of the Company
or the Restricted Subsidiary, as the case may be, no longer reasonably necessary
in the conduct of their respective businesses.
(b) The Company shall provide or cause to be provided, for
itself and each of its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Company, are reasonably adequate and appropriate for
the conduct of the business of the Company and such Restricted Subsidiaries.
SECTION 4.21. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any of
its Restricted Subsidiaries or properties of it or any of its Restricted
Subsidiaries and (ii) all material lawful claims for labor, materials, supplies
and services that, if unpaid, might by law become a Lien upon the property of it
or any of its Restricted Subsidiaries; provided, however, that there shall not
be required to be paid or discharged any such tax, assessment, charge or claim,
the amount, applicability or validity of which is being contested in good faith
by appropriate proceedings and for which adequate provision has been made or
where the failure to effect such payment or discharge is not adverse in any
material respect to the financial condition of the Company and its Restricted
Subsidiaries, taken as a whole.
SECTION 4.22. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of, premium or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the obligations or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
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ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and the Company's Restricted Subsidiaries)
whether as an entirety or substantially as an entirety to any Person unless: (i)
either (1) the Company shall be the surviving or continuing corporation or (2)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and assets of
the Company and of the Company's Restricted Subsidiaries substantially as an
entirety (the "Surviving Entity") (x) shall be a corporation organized and
validly existing under the laws of the United States or any state thereof or the
District of Columbia and (y) shall expressly assume, by supplemental indenture
(in form and substance reasonably satisfactory to the Trustee), executed and
delivered to the Trustee, the due and punctual payment of the principal of, and
premium, if any, and interest on all of the Securities and the performance of
every covenant of the Securities and this Indenture on the part of the Company
to be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, shall be
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.03; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
and any Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing; and (iv) the
Company or the Surviving Entity shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
(b) Each Guarantor (other than any Guarantor whose Guarantee is
to be released in accordance with the terms of such Guarantee and this Indenture
in connection with any transaction complying with the provisions of Section
4.05) shall not, and the Company shall not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) or to which such sale,
lease, conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any state thereof
or the District of Columbia; (ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor on such Guarantee; (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (iv) immediately after giving effect to
such transaction and the use of any net proceeds therefrom on a pro forma basis,
the Company could satisfy the provisions of clause (ii) of Section 5.01(a). Any
merger or consolidation of a Guarantor with and into the Company (with the
Company being the surviving entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary need only comply with clause (iv) of Section 5.01(a) and
clause (iii) of this Section 5.01(b).
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(c) For purposes of the foregoing subsection (a), the transfer
(by lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 5.02. Successor Corporation Substituted.
In the event of any transaction (other than a lease) described
in and complying with the conditions listed in Section 5.01 in which the Company
is not the surviving person and the surviving person is to assume all the
Obligations of the Company under the Securities, this Indenture and the
Registration Rights Agreement pursuant to a supplemental indenture, such
surviving person shall succeed to, and be substituted for, and may exercise
every right and power of the Company, and the Company shall be discharged from
its Obligations under this Indenture, the Securities and the Registration Rights
Agreement.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for
purposes of this Indenture:
(a) the failure to pay interest on any Securities when the
same becomes due and payable and the default continues for a period of
30 days;
(b) the failure to pay the principal on any Securities, when
such principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase
Securities tendered pursuant to Section 4.05 or 4.17);
(c) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default
continues for a period of 30 days after the Company receives written
notice specifying the default (and demanding that such default be
remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Securities (except in the case of a
default with respect to Article Five, which will constitute an Event of
Default with such notice requirement but without such passage of time
requirement);
(d) a default or defaults under the terms of one or more
instruments evidencing or securing Indebtedness of the Company or any
Significant Subsidiaries having an outstanding principal amount of
$2,000,000 or more individually or in the aggregate that has resulted
in the acceleration of the payment of such Indebtedness or failure by
the Company or any Significant Subsidiary to pay principal when due at
the stated maturity of any such Indebtedness and such default or
defaults shall have continued after any applicable grace period and
shall not have been cured or waived;
(e) one or more judgments in an aggregate amount in excess of
$2,000,000 shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undis-
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charged, unpaid or unstayed for a period of 60 days after such judgment
or judgments become final and non-appealable;
(f) the Company or any of its Significant Subsidiaries (or one
or more Restricted Subsidiaries that, taken together would constitute a
Significant Subsidiary) pursuant to or within the meaning of any
Bankruptcy Law: (i) admits in writing its inability to pay its debts
generally as they become due; (ii) commences a voluntary case or
proceeding; (iii) consents to the entry of an order for relief against
it in an involuntary case or proceeding; (iv) consents or acquiesces in
the institution of a bankruptcy or insolvency proceeding against it;
(v) consents to the appointment of a Custodian of it or for all or
substantially all of its property; or (vi) makes a general assignment
for the benefit of its creditors, or any of them takes any action to
authorize or effect any of the foregoing;
(g) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief against the
Company or any Significant Subsidiary (or one or more Restricted
Subsidiaries that, taken together would constitute a Significant
Subsidiary) of the Company in an involuntary case or proceeding; (ii)
appoints a Custodian of the Company or any Significant Subsidiary (or
one or more Restricted Subsidiaries that, taken together would
constitute a Significant Subsidiary) of the Company for all or
substantially all of its property; or (iii) orders the liquidation of
the Company or any Significant Subsidiary (or one or more Restricted
Subsidiaries that, taken together would constitute a Significant
Subsidiary) of the Company; and in each case the order or decree
remains unstayed and in effect for 60 days; provided, however, that if
the entry of such order or decree is appealed and dismissed on appeal,
then the Event of Default hereunder by reason of the entry of such
order or decree shall be deemed to have been cured; or
(h) any of the Guarantees ceases to be in full force and
effect or any of the Guarantees is declared to be null and void and
unenforceable or any of the Guarantees is found to be invalid or any of
the Guarantors denies its liability under its Guarantee (other than by
reason of release of a Guarantor in accordance with the terms of this
Indenture).
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other
than an Event of Default specified in clause (f) or (g) of Section 6.01 with
respect to the Company or any of its Significant Subsidiaries) shall occur and
be continuing, the Trustee may, or the Trustee upon the request of Holders of at
least 25% in principal amount of the outstanding Securities shall, or the
Holders of at least 25% in aggregate principal amount of the outstanding
Securities may declare the principal of all the Securities, together with all
accrued and unpaid interest and premium, if any, to be due and payable by notice
in writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice"),
and the same shall become immediately due and payable (unless all Events of
Default specified in such Acceleration Notice have been cured or waived).
If an Event of Default specified in clause (f) or (g) of
Section 6.01 with respect to the Company or any of its Significant Subsidiaries
occurs and is continuing, then all unpaid principal of, and premium, if any, and
accrued and unpaid interest on all of the outstanding Securities shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration with respect
to the Securities as described in this Section 6.02, the Holders of a majority
in principal amount of the Securities may rescind and cancel such decla-
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ration and its consequences (i) if the rescission would not conflict with any
outstanding judgment or judicial decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (f) or (g) of Section 6.01, the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto. The
Holders of a majority in principal amount of the Securities may waive any
existing Default or Event of Default under this Indenture, and its consequences,
except a Default in the payment of the principal of or interest on any
Securities.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder in exercising any right or
remedy maturing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 9.02, prior to the
declaration of acceleration of the Securities, the Holders of not less than a
majority in aggregate principal amount of the outstanding Securities by written
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (a) and (b) of Section 6.01 or a Default in
respect of any term or provision of this Indenture that may not be amended or
modified without the consent of each Holder affected as provided in Section
9.02. The Company shall deliver to the Trustee an Officers' Certificate stating
that the requisite percentage of Holders have consented to such waiver and
attaching copies of such consents. In case of any such waiver, the Company, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder and under the Securities, respectively. This paragraph of this Section
6.04 shall be in lieu of ss. 316(a)(1)(B) of the TIA and such ss. 316(a)(1)(B)
of the TIA is hereby expressly excluded from this Indenture and the Securities,
as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Securities, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direc-
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tion that conflicts with law or this Indenture that the Trustee determines may
be unduly prejudicial to the rights of another Holder, it being understood that
the Trustee shall have no duty (subject to Section 7.01) to ascertain whether or
not such actions or forebearances are unduly prejudicial to such Holders, or
that may involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. In the event the Trustee takes any action or
follows any direction pursuant to this Indenture, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction. This Section
6.05 shall be in lieu of ss. 316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A)
of the TIA is hereby expressly excluded from this Indenture and the Securities,
as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of the outstanding Securities make a written request to the Trustee to
pursue a remedy;
(iii) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(v) during such 60-day period the Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee
a direction which, in the opinion of the Trustee, is inconsistent with
the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of or interest on a
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest
specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of principal
and accrued interest remaining unpaid, together with interest overdue on
principal and to the extent that payment of such interest is lawful, interest on
overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the
reasonable costs and expenses of collection which would be out-of-pocket,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and legal counsel.
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SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and legal counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of the Holders,
vote for the election of a trustee in bankruptcy or similar official and may be
a member of the creditors' committee.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably,
without preference or priority of any kind,
according to the amounts due and payable on the
Securities for principal and interest, respectively;
and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to the Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit other than the Trustee of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of a Default:
(i) The Trustee agrees and undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions conforming to the requirements of this Indenture; provided,
however, that in the case of any such certificates or opinions which
by any provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall examine such certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee shall not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01;
(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(iii) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 6.02, 6.04 and 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely, and shall be protected in acting or
refraining from acting, on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of Counsel, which
shall conform to the provisions of Section 11.05. The Trustee shall not
be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
(c) The Trustee may act through attorneys and agents of its
selection and shall not be responsible for the misconduct or negligence
of any agent or attorney (other than an agent who is an employee of the
Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) Before the Trustee acts or refrains from acting, it may
consult with legal counsel and the advice or opinion of such legal
counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted
or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such legal counsel.
(f) Any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution.
(g) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(h) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney.
(i) The Trustee shall not be deemed to have notice of any
Event of Default unless a Trust Officer of the Trustee has actual
knowledge thereof or unless the Trustee shall have received written
notice thereof at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture.
(j) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties
hereunder.
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(k) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty and the
Trustee shall not be answerable for other than its gross negligence or
willful misconduct.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company or
its Affiliates with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
This Indenture and the provisions of the TIA contain certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payments of claims in certain cases or to realize on certain
property received in respect of any such claim as security or otherwise. Subject
to the TIA, the Trustee will be permitted to engage in other transactions;
provided that if the Trustee acquires any conflicting interest as described in
the TIA, it must eliminate such conflict within 30 days, obtain permission
within 30 days from the Commission to continue as Trustee or resign.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company or any Guarantor in this Indenture or any document issued in connection
with the sale of Securities or any statement in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and the Trustee has actual knowledge of such Defaults or Events of Default, the
Trustee shall mail to each Holder notice of the Default or Event of Default
within 30 days after obtaining such knowledge. Except in the case of a Default
or an Event of Default in payment of principal of or interest on any Security or
a Default or Event of Default in complying with Section 5.01, the Trustee may
withhold the notice if and so long as a Trust Officer in good faith determines
that withholding the notice is in the interest of the Holders. This Section 7.05
shall be in lieu of the proviso to ss. 315(b) of the TIA and such proviso to ss.
315(b) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA ss. 313(a), within 60 days after each
November 1 beginning with November 1, 1998, the Trustee shall mail to each
Holder a report dated as of such November 1 that complies with TIA ss. 313(a).
If required by law, the Trustee also shall comply with TIA ss. 313(b), (c) and
(d).
A copy of each such report at the time of its mailing to
Holders shall be filed with the Commission and each stock exchange, if any, on
which the Securities are listed.
The Company shall promptly notify the Trustee in writing if
the Securities become listed on any stock exchange or of any delisting thereof.
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SECTION 7.07. Compensation and Indemnity.
The Company and the Guarantors shall pay to the Trustee and
the Agents from time to time, and the Trustee and the Agents shall be entitled
to, such compensation as the Company and the Trustee and the Agents shall from
time to time agree in writing for their respective services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company and the Guarantors shall reimburse the Trustee and
the Agents upon request for all reasonable disbursements, expenses and advances,
including all reasonable costs and expenses of collection which would be
out-of-pocket and reasonable fees, disbursements and expenses of its agents and
outside legal counsel incurred or made by any of them in addition to the
compensation for their respective services except any such disbursements,
expenses and advances as may be attributable to negligence or willful misconduct
of the party to be reimbursed. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and outside legal counsel and any taxes or other expenses incurred by a
trust created pursuant to Section 8.01 hereof.
The Company and the Guarantors jointly and severally shall
indemnify the Trustee and the Agents and each of its directors, officers,
attorneys, and agents for, and hold them harmless against any and all loss,
damage, claims, liability or expense, including taxes (other than franchise
taxes imposed on the indemnified party and taxes based upon, measured by or
determined by the income of the indemnified party) and reasonable compensation,
disbursements, and expenses of the Trustee's agents and counsel, arising out of
or in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending themselves against or
investigating any claim or liability in connection with the exercise or
performance of any of their powers or duties hereunder, except to the extent
that such loss, damage, claim, liability or expense is due to negligence or
willful misconduct of the indemnified party. The indemnified party shall notify
the Company promptly of any claim asserted against the indemnified party for
which it may seek indemnity. However, the failure by the indemnified party to so
notify the Company shall not relieve the Company and the Guarantors of their
obligations hereunder unless the Company and the Guarantors have been materially
prejudiced thereby. The Company and the Guarantors shall defend the claim and
the indemnified party shall cooperate in the defense at the expense of the
Company and the Guarantors; provided, that the Trustee may, if it so elects,
have separate legal counsel of its own choosing and the Company and the
Guarantors shall pay the reasonable fees and expenses of such legal counsel;
provided that the Company and the Guarantors will not be required to pay such
fees and expenses if they assume the Trustee's defense and there is no conflict
of interest between the Company and Guarantors (on the one hand) and the Trustee
(on the other hand) in connection with such defense; provided, further, however,
that in any such event the reimbursement obligation of the Company and the
Guarantors with respect to separate counsel of the indemnified party will be
limited to the reasonable fees and expenses of such legal counsel.
The Company and the Guarantors need not pay for any settlement
made without their written consent, which consent shall not be unreasonably
withheld. The Company and the Guarantors need not reimburse any expense or
indemnify against any loss or liability incurred by the Trustee or an Agent as a
result of its own negligence or willful misconduct.
To secure the payment obligations of the Company and the
Guarantors in this Section 7.07, the Trustee shall have a Lien prior to the
Securities against all money or property held or collected by the Trustee, in
its capacity as Trustee, except money or property held in trust to pay principal
of or interest on particular Securities.
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When the Trustee incurs expenses or renders services after an
Event of Default specified in clause (f) or (g) of Section 6.01 occurs, the
expenses (including the reasonable fees and expenses of its agents and legal
counsel) and the compensation for the services shall be preferred over the
status of the Holders in a proceeding under any Bankruptcy Law and are intended
to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company
in writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 25% in principal amount of the outstanding
Securities may petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee; provided, however, that such corporation shall be otherwise
qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be
eligible to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(2). The Trustee
shall have a combined capital and surplus of at least U.S.$50,000,000 as set
forth in its most recent published annual report of condition. If the Trustee
has or shall acquire any "conflicting interest" within the meaning of TIA ss.
310(b), the Trustee and the Company shall comply with the provisions of TIA ss.
310(b); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10, the Trustee shall resign
immediately in the manner and with the effect hereinbefore specified in this
Article Seven. The provisions of TIA ss. 310 shall apply to the Company and any
other obligor of the Securities.
SECTION 7.11. Preferential Collection of Claims Against the Company.
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations.
The Company may, at its option and at any time, terminate its
obligations under the Securities and this Indenture as well as the obligations
of the Guarantors under their respective Guarantees, except those obligations
referred to in the penultimate paragraph of this Section 8.01, if :
(i) either (a) all the Securities theretofore authenticated
and delivered (except lost, stolen or destroyed Securities which have
been replaced or paid and Securities for whose payment money has
theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from
such trust) have been delivered to the Trustee for cancellation or (b)
all Securities not theretofore delivered to the Trustee for
cancellation have become due and payable or have been called for
redemption and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Securities not theretofore
delivered to the Trustee for cancellation, for principal of, premium,
if any, and interest on the Securities to the date of deposit together
with irrevocable instructions from the
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Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be;
(ii) the Company has paid all other sums payable under this
Indenture by the Company; and
(iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions
precedent under this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the first paragraph of this Section 8.01, the
Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05
and 8.06 shall survive until the Securities are no longer outstanding pursuant
to Section 2.08. After the Securities are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's and
Guarantors' obligations under the Securities, the Guarantees and this Indenture,
as the case may be, except for those surviving obligations specified above.
SECTION 8.02. Legal Defeasance and Covenant Defeasance
(a) The Company may, at its option and at any time, terminate
its obligations in respect of the Securities by delivering all outstanding
Securities to the Trustee for cancellation and paying all sums payable by it on
account of principal of and interest on all Securities or otherwise. In addition
to the foregoing, the Company may, at its option and at any time, elect to have
either paragraph (b) or (c) below be applied to all outstanding Securities,
subject in either case to compliance with the conditions set forth in Section
8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be deemed to have paid
and discharged the entire indebtedness represented by the outstanding
Securities, except for (i) the rights of Holders to receive payments in respect
of the principal of, premium, if any, and interest on the Securities when such
payments are due, (ii) the Company's obligations with respect to the Securities
under Sections 2.03 through 2.07, inclusive, and 4.02, (iii) the rights, powers,
trust, duties and immunities of the Trustee under this Indenture and the
Company's obligations in connection therewith and (iv) this Article Eight of
this Indenture (hereinafter, "Legal Defeasance"). Subject to compliance with
this Article Eight, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be released from its
obligations under Sections 4.03 through 4.17, inclusive, 4.20, 4.21 and Article
Five with respect to the outstanding Securities (hereinafter, "Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or an Event of Default with respect to the Securities.
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.
In order to exercise either Legal Defeasance pursuant to
Section 8.02(b) or Covenant Defeasance pursuant to Section 8.02(c):
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(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars or United
States Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on the Securities on the stated date
for payment thereof or on the applicable redemption date, as the case
may be;
(b) in the case of an election under Section 8.02(b), the
Company shall have delivered to the Trustee an Opinion of Counsel
reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c), the
Company shall have delivered to the Trustee an Opinion of Counsel
reasonably acceptable to the Trustee confirming that the Holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as clauses (f) and (g) of Section 6.01 are
concerned, at any time in the period ending on the 91st day after the
date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance, as the case
may be, shall not result in a breach or violation of or constitute a
Default under this Indenture or any other material agreement or
instrument to which the Company or any of its Significant Subsidiaries
is a party or by which the Company or any of its Significant
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance, as the case may be, have been complied
with; and
(h) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that assuming no intervening bankruptcy or
insolvency of the Company between the date of deposit and the 91st day
following the deposit and that no Holder is an insider of the Company,
after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar law affecting creditors' rights generally.
Notwithstanding the foregoing, the Opinion of Counsel required
by clause (b) above need not be delivered if all Securities not theretofore
delivered to the Trustee for cancellation (x) have become due and
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payable, (y) will become due and payable on the Final Maturity Date within one
year or (z) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
SECTION 8.04. Application of Trust Money; Trustee Acknowledgment and Indemnity.
The Trustee shall hold in trust money or United States
Government Obligations deposited with it pursuant to Section 8.03, and shall
apply the deposited money and the money from United States Government
Obligations in accordance with this Indenture solely to the payment of principal
of, premium, if any, and interest on the Securities.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the United States
Government Obligations deposited pursuant to Section 8.03 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Securities.
SECTION 8.05. Repayment to the Company.
Subject to Sections 7.07 and 8.04, the Trustee shall promptly
pay to the Company upon written request any excess money held by it at any time.
The Trustee shall pay to the Company upon written request any money held by it
for the payment of principal or interest that remains unclaimed for two years;
provided, however, that the Trustee before being required to make any payment
may at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that, after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, Holders entitled to
money must look solely to the Company for payment as general creditors unless an
applicable abandoned property law designates another person and all liability of
the Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 8.06. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 8.02 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.02 until
such time as the Trustee is permitted to apply all such money or United States
Government Obligations in accordance with Section 8.02; provided, however, that
if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or United States Government Obligations held by the
Trustee.
<PAGE>
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, the Guarantors and the Trustee may amend this
Indenture or the Securities without the consent of the Holders:
(a) to cure any ambiguity, defect or inconsistency; provided,
however, that such amendment or supplement does not, in the opinion of
the Trustee, adversely affect the rights of any Holder in any material
respect;
(b) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this Indenture in
connection with any transaction complying with Article Five of this
Indenture;
(c) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(d) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional
benefit or rights to the Holders;
(f) to make any other change that does not adversely affect
the rights of any Holder under this Indenture;
(g) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company;
(h) to reflect the release of a Guarantor from its obligations
with respect to its Guarantee in accordance with the provisions of
Section 10.03 and to add a Guarantor pursuant to the requirements of
Section 4.09; or
(i) to secure the Securities pursuant to the requirements of
Section 4.07 or otherwise;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, the Guarantors and the
Trustee may modify, amend or supplement, or waive compliance by the Company with
any provision of, this Indenture or the Securities with the written consent of
the Holders of at least a majority in principal amount of the outstanding
Securities. However, without the consent of each Holder affected, no such
modification, amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may:
<PAGE>
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(a) reduce the principal amount of or change the Stated
Maturity of any Security or alter the provisions with respect to the
repurchase or redemption of the Securities (other than provisions
relating to Section 4.05 or 4.17);
(b) reduce the rate of or change the time for payment of
interest on any Security;
(c) make any Security payable in money other than that stated
in the Securities;
(d) make any change in the provisions of this Indenture
relating to the rights of Holders of Securities to receive payments of
principal of or premium, if any, or interest on the Securities;
(e) modify any provisions of Section 6.04 (other than to add
sections of this Indenture or the Securities subject thereto) or 6.07
or this Section 9.02 (other than to add sections of this Indenture or
the Securities which may not be modified, amended, supplemented or
waived without the consent of each Holder affected);
(f) reduce the percentage of the principal amount of
outstanding Securities necessary for amendment to or waiver of
compliance with any provision of this Indenture or the Securities or
for waiver of any Default in respect thereof;
(g) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Securities (except
a rescission of acceleration of the Securities by the Holders thereof
as provided in Section 6.02 and a waiver of the payment default that
resulted from such acceleration);
(h) waive a mandatory repurchase or redemption payment with
respect to any Security required by Section 4.05 or 4.17;
(i) modify the ranking or priority of any Security or the
Guarantee in respect thereof of the Company or any Guarantor, as the
case may be, in any manner adverse to the Holders of the Securities; or
(j) release any Guarantor from any of its obligations under
its Guarantee or this Indenture, other than in accordance with this
Indenture.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
<PAGE>
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SECTION 9.04. Record Date for Consents and Effect of Consents.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders of Securities entitled to
consent to any amendment, supplement or waiver. If a record date is fixed, then
those persons who were Holders of Securities at such record date (or their duly
designated proxies), and only those persons, shall be entitled to consent to
such amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date. The Trustee is entitled to rely upon any electronic
instruction from beneficial owners to the Holders of any Global Security.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes a change described in any of clauses
(a) through (j) of Section 9.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determine, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject to customary exceptions). The
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
ARTICLE TEN
GUARANTEES
SECTION 10.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (each, a "Guarantee") to each Holder of a Security authenticated by
the Trustee and to the Trustee and its successors and assigns that: the
principal of and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise, and interest on any overdue principal and interest on
the Securities and all other obligations of the Company to the Holders or the
Trustee hereunder or
<PAGE>
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under the Securities will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; subject, however, to the
limitations set forth in Section 10.04. Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture, the absence of
any action to enforce the same, any waiver or consent by any Holder of the
Securities with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a Guarantor. Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that its
Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture and this Guarantee. If
any Holder or the Trustee is required by any court or otherwise to return to the
Company, any Guarantor, or any Custodian, trustee, liquidator or other similar
official acting in relation to the Company or any Guarantor, any amount paid by
the Company or any Guarantor to the Trustee or such Holder, this Guarantee, to
the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purpose of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall forth become due and payable by each Guarantor for the purpose of this
Guarantee.
SECTION 10.02. Severability.
In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.03. Release of a Guarantor.
(a) If the Securities are defeased in accordance with the
terms of this Indenture, or if Section 5.01(c) is complied with, or if, subject
to the requirements of Section 5.01(a) or 5.01(b), all or substantially all of
the assets of any Guarantor or all of the equity interests of any Guarantor are
sold (including by issuance or otherwise) by the Company in a transaction
constituting an Asset Sale and (x) the Net Cash Proceeds from such Asset Sale
are used in accordance with Section 4.05 or (y) the Company delivers to the
Trustee an Officers' Certificate to the effect that the Net Cash Proceeds from
such Asset Sale shall be used in accordance with Section 4.05 and within the
time limits specified by Section 4.05, then each Guarantor (in the case of
defeasance) or such Guarantor (in the case of compliance with Section 5.01(c) or
in the event of a sale or other disposition of all of the equity interests of
such Guarantor) or the Person acquiring such assets (in the event of a sale or
other disposition of all or substantially all of the assets of such Guarantor)
shall be released and discharged from all obligations under this Article Ten
without any further action required on the part of the Trustee or any Holder.
The Trustee shall, at the sole cost and expense of the Company and upon receipt
at the reasonable request of the Trustee of an Opinion of Counsel that the
provisions of this Section 10.03 have been complied with, deliver an appropriate
instrument evidencing such release upon receipt of a request by the Company
accompanied by an Officers' Certificate certifying as to the compliance with
this Section 10.03. Any Guarantor not so released shall remain liable for the
full amount of principal of and interest on the Securities and the other
obligations of the Company hereunder as provided in this Article Ten.
<PAGE>
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(b) Any Guarantor that is designated an Unrestricted Subsidiary
shall upon such designation be released and discharged of all obligations under
this Article Ten without any further action required on the part of the Trustee
or any Holder.
SECTION 10.04. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and
the Trustee, hereby confirms that it is the intention of all such parties that
the Guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. Federal or state or other applicable law. To
effectuate the foregoing intention, the Holders, the Trustee and each Guarantor
hereby irrevocably agree that the obligations of each Guarantor under its
Guarantee shall be limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities of such Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its
Guarantee or pursuant to Section 10.05, result in the obligations of such
Guarantor under its Guarantee not constituting such a fraudulent transfer or
conveyance.
SECTION 10.05. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee, such Funding Guarantor shall be entitled to a contribution from each
other Guarantor in a pro rata amount, based on the net assets of each Guarantor
(including the Funding Guarantor), determined in accordance with GAAP, subject
to Section 10.04, for all payments, damages and expenses incurred by such
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligations with respect to such Guarantee.
SECTION 10.06. Execution of Guarantee.
To further evidence their Guarantee to the Holders, each of
the Guarantors hereby agrees to execute a Guarantee to be endorsed on each
Security ordered to be authenticated and delivered by the Trustee. Each
Guarantor hereby agrees that its Guarantee set forth in Section 10.01 shall
remain in full force and effect notwithstanding any failure to endorse on each
Security a Guarantee. Each such Guarantee shall be signed on behalf of each
Guarantor by its Chairman of the Board, its President or one of its Vice
Presidents prior to the authentication of the Security on which it is endorsed,
and the delivery of such Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of such Guarantee on behalf of
such Guarantor. Such signature upon the Guarantee may be manual or facsimile
signature of such officer and may be imprinted or otherwise reproduced on the
Guarantee, and in case such officer who shall have signed the Guarantee shall
cease to be such officer before the Security on which such Guarantee is endorsed
shall have been authenticated and delivered by the Trustee or disposed of by the
Company, such Security nevertheless may be authenticated and delivered or
disposed of as though the Person who signed the Guarantee had not ceased to be
such officer of such Guarantor.
SECTION 10.07. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against the
Company that arises from the payment, performance or enforcement of such
Guarantor's obligations under its Guarantee or this Indenture, including,
without limitation, any right of subrogation, shall be subject and subordinate
to, and no payment with
<PAGE>
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respect to any such claim of such Guarantor shall be made before, the payment in
full in cash of all outstanding Securities in accordance with the provisions
provided therefor in this Indenture.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that
are required to be a part of this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA provision
shall be excluded from this Indenture.
The provisions of TIA ss.ss. 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 11.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile and confirmed by overnight
courier, or mailed by first-class mail addressed as follows:
if to the Company:
R.A.B. Enterprises, Inc.
444 Madison Avenue, Suite 601
New York, New York 10022
Attn: Richard A. Bernstein
James A. Cohen, Esq.
Facsimile: (212) 888-5025
Telephone: (212) 688-4500
if to the Trustee:
PNC Bank, National Association
Two Tower Center Blvd.
20th Floor, Corporate Trust Department
East Brunswick, NJ 08816
Facsimile: (732) 220-3745
Telephone: (732) 220-3733
<PAGE>
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The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed, first-class, postage
prepaid, to a Holder including any notice delivered in connection with TIA ss.
310(b), TIA ss. 313(c), TIA ss. 314(a) and TIA ss. 315(b), shall be mailed to
him at his address as set forth on the Security register and shall be
sufficiently given to him if so mailed within the time prescribed. To the extent
required by the TIA, any notice or communication shall also be mailed to any
Person described in TIA ss. 313(c).
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received, if
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA ss. 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take or refrain from taking any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 11.05. Statements Required in Certificate.
Each certificate with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate has read such
covenant or condition;
(2) a statement that, in the opinion of such person, such person has
made such examination or investigation as is necessary to enable such
person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(3) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
<PAGE>
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SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 11.07. Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE,
THE SECURITIES AND THE GUARANTEES WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD
BE REQUIRED THEREBY.
SECTION 11.08. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee or stockholder, as such, of the
Company, the Guarantors or any of their respective Affiliates, or any of their
respective heirs, estates or personal representatives, shall have any liability
for any obligations of the Company under the Securities or the Guarantees, as
the case may be, or this Indenture or for any claim based on, or in respect of,
or by reason of, such obligations or their creation. Each holder of Securities
by accepting a Security unconditionally and irrevocably waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Securities and the Guarantees, as the case may be.
SECTION 11.09. Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of each Guarantor in this
Indenture shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 11.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 11.11. Severability.
In case any provision in this Indenture, in the Securities or
in the Guarantees shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
SECTION 11.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or a Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
<PAGE>
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SECTION 11.13. Legal Holidays.
If a payment date is not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day.
[Remainder of page intentionally left blank]
<PAGE>
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
R.A.B. ENTERPRISES, INC.
By: _________________________________
Name:
Title:
MILLBROOK DISTRIBUTION SERVICES INC.,
as Guarantor
By: _________________________________
Name:
Title:
THE B. MANISCHEWITZ COMPANY, LLC,
as Guarantor
By: _________________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION,
as Trustee
By: _________________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT
OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-1
<PAGE>
R.A.B. ENTERPRISES, INC.
10 1/2% Senior Note due 2005
CUSIP No.:[ ]
No. [ ] $[ ]
R.A.B. ENTERPRISES, INC., a Delaware corporation (the
"Company," which term includes any successor corporation), for value received,
promises to pay to [ ] or registered assigns the principal sum of [ ] Dollars,
on May 1, 2005.
Interest Payment Dates: May 1 and November 1, commencing on
November 1, 1998.
Interest Record Dates: April 15 and October 15.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
R.A.B. ENTERPRISES, INC.
By: _______________________________
Name:
Title:
Dated: May 1, 1998
A-2
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 1/2% Senior Notes due 2005, described in
the within-mentioned Indenture.
Dated: May 1, 1998
PNC BANK, NATIONAL ASSOCIATION, as Trustee
By: ______________________________________
Authorized Signatory
A-3
<PAGE>
(REVERSE OF SECURITY)
R.A.B. ENTERPRISES, INC.
10 1/2% Senior Note due 2005
1. Interest.
R.A.B. ENTERPRISES, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. Cash interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 1998. The Company will pay interest semi-annually in arrears
on each Interest Payment Date, commencing on November 1, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time
to time on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered holders at the close
of business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are canceled on registration of transfer or
registration of exchange after such Interest Record Date. Holders must surrender
the Securities to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by wire transfer
of Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
Initially, PNC Bank, National Association (the "Trustee") will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company may, subject to certain
exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as
of May 1, 1998 (the "Indenture"), by and among the Company, the Guarantors named
therein and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Security is one of a duly
authorized issue of Securities of the Company designated as its 10 1/2% Senior
Notes due 2005, Series A (the "Initial Securities"), limited in aggregate
principal amount to $120,000,000, which may be issued under the Indenture. The
Securities include the Initial Securities, the Private Exchange Securities (as
defined in the Indenture) and the Unre-
A-4
<PAGE>
stricted Securities (as defined in the Indenture). All Securities issued under
the Indenture are treated as a single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture
(except as otherwise indicated in the Indenture) until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and Holders are
referred to the Indenture and the TIA for a statement of them. The Securities
are general unsecured obligations of the Company.
5. Optional Redemption.
(a) The Securities will be redeemable, at the Company's option,
in whole or in part at any time, on and after May 1, 2002, upon not less than 30
nor more than 60 days notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on May 1 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2002 105.250%
2003 102.625%
2004 and thereafter 100.000%
(b) At any time, or from time to time, on or prior to May 1,
2001, the Company may, at its option, use the net cash proceeds of one or more
Public Equity Offerings of the Company or Holdings to redeem up to 35% of the
originally issued aggregate principal amount of the Securities at a price equal
to 110.500% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that at least 65% of the
principal amount of Securities originally issued remains outstanding immediately
after any such redemption. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, (i) the Company shall make such
redemption not more than 120 days after the closing of any such Public Equity
Offering and (ii) in the case of a Public Equity Offering by Holdings, the
Company is a wholly owned subsidiary of Holdings and the proceeds thereof in an
amount sufficient to effect such redemption shall be contributed to the Company
as common equity capital.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address. The Trustee may
select for redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
A-5
<PAGE>
7. Change of Control Offer.
Following the occurrence of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Company shall, within
30 days after the Change of Control Date, be required to offer to purchase all
Securities then outstanding at a purchase price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon to the date
of such purchase.
8. Limitation on Disposition of Assets.
The Company is, subject to certain conditions and certain
exceptions, obligated to offer to purchase the Securities at a purchase price
equal to 100% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of such purchase (subject to the right of Holders
of record on the relevant Interest Record Date to receive interest due on the
relevant Interest Record Date) with the proceeds of certain asset dispositions.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Company at their written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees, except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the
Securities (including the Guarantees) may be amended or supplemented with the
written consent of the Holders of at least a majority in principal amount of the
Securities then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Securities then outstanding.
Without notice to or consent of the Holders, the parties thereto may amend or
supplement the In-
A-6
<PAGE>
denture, the Securities and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to sell assets, to permit
restrictions on dividends and other payments by Subsidiaries to the Company, to
consolidate, merge or sell all or substantially all of its assets and to engage
in transactions with affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must report annually to the
Trustee on compliance with such limitations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
16. Trustee Dealings with the Company and the Guarantors.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, the Guarantors, their respective Subsidiaries or their
respective Affiliates as if it were not the Trustee.
17. No Personal Liability of Directors, Officers, Employees and Stockholders.
No director, officer, employee or stockholder, as such, of the
Company, the Guarantors or any of their respective Affiliates, or any of their
respective heirs, estates or personal representatives, shall have any liability
for any obligations of the Company under the Securities or the Guarantees, as
the case may be, or the Indenture or for any claim based on, or in respect of,
or by reason of, such obligations or their creation. Each holder of Securities
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities and the
Guarantees, as the case may be.
18. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
A-7
<PAGE>
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
21. Registration Rights.
Pursuant to the Registration Rights Agreement, the Company and
the Guarantors will be obligated to consummate an exchange offer pursuant to
which the Holder of this Security shall have the right to exchange this Security
for a 10 1/2% Senior Note due 2005 of the Company which has been registered
under the Securities Act, in like principal amount and having terms identical in
all material respects to the Initial Securities. The Holders shall be entitled
to receive certain liquidated damages payments in the event such exchange offer
is not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
22. Governing Law.
The laws of the State of New York shall govern the Indenture,
this Security and any Guarantee hereof without regard to principles of conflicts
of laws to the extent that the application of the laws of another jurisdiction
would be required thereby.
A-8
<PAGE>
[FORM OF GUARANTEE]
SENIOR GUARANTEE
Each undersigned Guarantor (as defined in the Indenture
referred to in the Security upon which this notation is endorsed) hereby
unconditionally guarantees on a senior basis (such guaranty by such Guarantor
being referred to herein as the "Guarantee"), jointly and severally, the due and
punctual payment of the principal of, premium, if any, and interest on the
Security, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal, premium and interest on
the Security and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee, all in accordance with the terms set
forth in Article Ten of the Indenture.
This Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Security upon which this
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
This Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
MILLBROOK DISTRIBUTION SERVICES INC.
By: ___________________________________
Name:
Title:
THE B. MANISCHEWITZ COMPANY, LLC
By: ___________________________________
Name:
Title:
A-9
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _______________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.05 or Section 4.17 of the Indenture, check the
appropriate box:
Section 4.05 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.05 or Section 4.17 of the
Indenture, state the amount: $_____________
Dated:___________________ Your Signature: __________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _______________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT B
---------
[FORM OF SERIES B SECURITY]
R.A.B. ENTERPRISES, INC.
10 1/2% Senior Note due 2005, Series B
CUSIP No.:[ ]
No. [ ] $[ ]
R.A.B. ENTERPRISES, INC., a Delaware corporation (the
"Company," which term includes any successor corporation), for value received,
promises to pay to [ ] or registered assigns the principal sum of [ ] Dollars,
on May 1, 2005.
Interest Payment Dates: May 1 and November 1, commencing on
November 1, 1998.
Interest Record Dates: April 15 and October 15.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
R.A.B. ENTERPRISES, INC.
By: _______________________________
Name:
Title:
Dated:
B-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 1/2% Senior Notes due 2005, Series B,
described in the within-mentioned Indenture.
Dated:
PNC BANK, NATIONAL ASSOCIATION,
as Trustee
By: __________________________________
Authorized Signatory
B-2
<PAGE>
(REVERSE OF SECURITY)
R.A.B. ENTERPRISES, INC.
10 1/2% Senior Note due 2005, Series B
1. Interest.
R.A.B. ENTERPRISES, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. Cash interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 1998. The Company will pay interest semi-annually in arrears
on each Interest Payment Date, commencing on November 1, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time
to time on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are canceled on registration of transfer or
registration of exchange after such Interest Record Date. Holders must surrender
the Securities to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by wire transfer
of Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar.
Initially, the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to the Holders. The Company may, subject to certain exceptions, act as
Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as
of May 1, 1998 (the "Indenture"), by and among the Company, the Guarantors named
therein and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Security is one of a duly
authorized issue of Securities of the Company designated as its 10 1/2% Senior
Notes due 2005, Series B limited in aggregate principal amount to $120,000,000,
which may be issued under the Indenture. The Securities include the Initial
Securities (as defined in the Indenture), the Private Exchange Securities (as
defined in the Indenture) and the Unrestricted Securities (as defined in the
Indenture). All Securities issued under the Indenture are treated as a single
B-3
<PAGE>
class of securities under the Indenture. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture (except as otherwise indicated in the
Indenture) until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of them. The Securities are general unsecured obligations of the
Company.
5. Optional Redemption.
(a) The Securities will be redeemable, at the Company's
option, in whole or in part at any time, on and after May 1, 2002, upon not less
than 30 nor more than 60 days notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on May 1 of the year set forth below, plus,
in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
Year Percentage
--- ----------
2002 105.250%
2003 102.625%
2004 and thereafter 100.000%
(b) At any time, or from time to time, on or prior to May 1,
2001, the Company may, at its option, use the net cash proceeds of one or more
Public Equity Offerings of the Company or Holdings to redeem up to 35% of the
originally issued aggregate principal amount of the Securities at a price equal
to 110.500% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; provided that at least 65% of the
principal amount of Securities originally issued remains outstanding immediately
after any such redemption. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, (i) the Company shall make such
redemption not more than 120 days after the closing of any such Public Equity
Offering and (ii) in the case of a Public Equity Offering by Holdings, the
Company is a wholly owned subsidiary of Holdings and the proceeds thereof in an
amount sufficient to effect such redemption shall be contributed to the Company
as common equity capital.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address. The Trustee may
select for redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
B-4
<PAGE>
7. Change of Control Offer.
Following the occurrence of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Company shall, within
30 days after the Change of Control Date, offer to purchase all Securities then
outstanding at a purchase price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon to the date of such purchase.
8. Limitation on Disposition of Assets.
The Company is, subject to certain conditions and certain
exceptions, obligated to offer to purchase the Securities at a purchase price
equal to 100% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of such purchase (subject to the right of Holders
of record on the relevant Interest Record Date to receive interest due on the
relevant Interest Payment Date) with the proceeds of certain asset dispositions.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Company at their written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees, except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the
Securities (including the Guarantees) may be amended or supplemented with the
written consent of the Holders of at least a majority in principal amount of the
Securities then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount of the Securities then outstanding.
Without notice to or consent of the Holders, the parties thereto may amend or
supplement the In-
B-5
<PAGE>
denture, the Securities and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to sell assets, to permit
restrictions on dividends and other payments by Subsidiaries to the Company, to
consolidate, merge or sell all or substantially all of its assets and to engage
in transactions with affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must report annually to the
Trustee on compliance with such limitations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
16. Trustee Dealings with the Company and the Guarantors.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, the Guarantors, their respective Subsidiaries or their
respective Affiliates as if it were not the Trustee.
17. No Personal Liability of Directors, Officers, Employees and Stockholders.
No director, officer, employee or stockholder, as such, of the
Company, the Guarantors or any of their respective Affiliates, or any of their
respective heirs, estates or personal representatives, shall have any liability
for any obligations of the Company under the Securities or the Guarantees, as
the case may be, or the Indenture or for any claim based on, or in respect of,
or by reason of, such obligations or their creation. Each holder of Securities
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities and the
Guarantees, as the case may be.
18. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
B-6
<PAGE>
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
21. Governing Law.
The laws of the State of New York shall govern the Indenture,
this Security and any Guarantee hereof without regard to principles of conflicts
of laws to the extent that the application of the laws of another jurisdiction
would be required thereby.
B-7
<PAGE>
[FORM OF GUARANTEE]
SENIOR GUARANTEE
Each undersigned Guarantor (as defined in the Indenture
referred to in the Security upon which this notation is endorsed) hereby
unconditionally guarantees on a senior basis (such guaranty by such Guarantor
being referred to herein as the "Guarantee"), jointly and severally, the due and
punctual payment of the principal of, premium, if any, and interest on the
Securities, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal, premium and interest on
the Securities, and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee, all in accordance with the terms set
forth in Article Ten of the Indenture.
This Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
this Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
This Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
MILLBROOK DISTRIBUTION SERVICES INC.
By: _______________________________
Name:
Title:
THE B. MANISCHEWITZ COMPANY, LLC
By: _______________________________
Name:
Title:
B-8
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed: ____________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _______________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.05 or Section 4.17 of the Indenture, check the
appropriate box:
Section 4.05 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.05 or Section 4.17 of the
Indenture, state the amount: $_____________
Dated:___________________ Your Signature: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _______________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT C
---------
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required in
the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
---------
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10 1/2% Senior Notes due 2005
(the "Securities") of R.A.B. Enterprises, Inc.
----------------------------------------------
This Certificate relates to $_______ principal amount of
Securities held in the form of* ___ a beneficial interest in a Global Security
or* _______ Physical Securities by ______ (the "Transferor").
The Transferor:*
has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
has requested that the Registrar by written order exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of the Securities does not require registration under the
Securities Act of 1933, as amended (the "Act"), because*:
Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.16 of the Indenture).
Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Act), in reliance on
Rule 144A.
Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Act) which delivers a certificate to the Trustee in
the form of Exhibit E to the Indenture.
Such Security is being transferred in reliance on Rule 144
under the Act.
Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act other
than Rule 144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." [An Opinion of Counsel to the effect that such transfer
does not require registration under the Securities Act accompanies this
certification.]
____________________________________
[INSERT NAME OF TRANSFEROR]
By: _______________________________
[Authorized Signatory]
Date: ______________________
*Check applicable box.
D-1
<PAGE>
EXHIBIT E
---------
Form of Transferee Letter of Representation
--------------------------------------------
R.A.B. ENTERPRISES, INC.
444 Madison Avenue, Suite 601
New York, New York 10022
Ladies and Gentlemen:
This certificate is delivered to request a transfer of
$________ aggregate principal amount of the 10 1/2% Senior Notes due 2005 (the
"Notes") of R.A.B. ENTERPRISES, INC., a Delaware corporation (the "Company").
Upon transfer, the Notes would be registered in the name of the new beneficial
owner as follows:
Name: ________________________________
Address: ______________________________
Taxpayer ID Number: ___________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risk of our investment in the Notes and we invest
in or purchase securities similar to the Notes in the normal course of our
business. We and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to the date which is two years after the
later of the date of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
or for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in a minimum principal
amount of Notes of $250,000, (e) pursuant to offers and sales that occur outside
the United States within the meaning of Regulation S under the Securities Act or
(f) pursuant to any other available exemption from the registration requirements
of the Securities Act, subject in each of the foregoing cases to any requirement
of law that the disposition of our property or the property of such investor
account or accounts be at all times within our or their control
E-1
<PAGE>
and in compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Notes is proposed to be
made pursuant to clause (d) above prior to the Resale Restriction Termination
Date, the transferor shall deliver a letter from the transferee substantially in
the form of this letter to the Company and the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act and that it is acquiring such Notes for investment purposes and
not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the Notes pursuant to clause (d), (e) or (f) above to require the delivery of
an opinion of counsel, certificates and/or other information satisfactory to the
Company and the Trustee.
Dated: ______________________ TRANSFEREE: ________________________
By: ________________________________
E-2
<PAGE>
EXHIBIT F
---------
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
---------------, ----
PNC Bank, National Association
Two Tower Center Blvd.
20th Floor
East Brunswick, NJ 08816
Attention: Corporate Trust Department
Re: R.A.B. ENTERPRISES, INC. (the "Company")
10 1/2% Senior Notes due 2005, Series A and
10 1/2% Senior Notes due 2005, Series B (collectively, the "Securities")
------------------------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $____________
aggregate principal amount of the Securities, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent
that:
(1) the offer of the Securities was not made to a person in
the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
F-1
<PAGE>
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By: _______________________________
[Authorized Signatory]
F-2
<PAGE>
R.A.B. HOLDINGS, INC.
$48,000,000
13% Senior Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
May 1, 1998
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
R.A.B. Holdings, Inc., a Delaware corporation ("Holdings" or the "Issuer"),
proposes to issue and sell to Chase Securities Inc. ("CSI" or the "Initial
Purchaser"), upon the terms and subject to the conditions set forth in a
purchase agreement dated April 28, 1998 (the "Purchase Agreement"), $48,000,000
aggregate principal amount of its 13% Senior Notes due 2008 (the "Notes"). The
Notes will be issued pursuant to an Indenture to be dated as of May 1, 1998 (the
"Indenture") between Holdings and PNC Bank, National Association, as trustee
(the "Trustee"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchaser to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchaser thereunder, the Issuer agrees with the Initial Purchaser, for the
benefit of the holders (including the Initial Purchaser) of the Notes, the
Exchange Notes (as defined herein) and the Private Exchange Notes (as defined
herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Issuer shall (i) prepare and, not later
than 180 days following the date of original issuance of the Notes (the "Issue
Date"), file with the Commission a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act with
respect to a proposed offer to the Holders of the Notes (the "Registered
Exchange Offer") to issue and deliver to such Holders, in exchange for the
Notes, a like aggregate principal amount of debt securities of Holdings (the
"Exchange Notes") that are identical in all material respects to the Notes
(except that the Exchange Notes will not contain terms with respect to transfer
restrictions), (ii) use its best efforts to cause the Exchange Offer
Registration Statement to become effective under the Securities Act no later
than 240 days after the Issue Date and the Registered Exchange Offer to be
consummated no later than 270 days after the Issue Date and (iii) keep the
Exchange Offer Registration Statement effective for not less than 30 days (or
longer, if required by applicable law) after the date
<PAGE>
on which notice of the Registered Exchange Offer is mailed to the Holders (such
period being called the "Exchange Offer Registration Period"). The Exchange
Notes will be issued under the Indenture or an indenture (the "Exchange Notes
Indenture") between the Issuer and the Trustee or such other bank or trust
company that is reasonably satisfactory to the Initial Purchaser, as trustee
(the "Exchange Notes Trustee"), such indenture to be identical in all material
respects to the Indenture (except that the Exchange Notes Indenture will not
contain terms with respect to transfer restrictions) (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement, the
Issuer shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Notes for Exchange Notes (assuming that such Holder (a) is not an
affiliate of the Issuer or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) is not the Initial
Purchaser holding Notes that have, or that are reasonably likely to have, the
status of an unsold allotment in an initial distribution, (c) acquires the
Exchange Notes in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Notes) and to trade such Exchange Notes from and
after their receipt without any limitations or restrictions under the Securities
Act and without material restrictions under the securities laws of the several
states of the United States. The Issuer, the Initial Purchaser and each
Exchanging Dealer acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, (i) each Holder that is a
broker-dealer electing to exchange Notes acquired for its own account as a
result of market-making activities or other trading activities for Exchange
Notes (an "Exchanging Dealer") is required to deliver a prospectus containing
substantially the information set forth in Annex A hereto on the cover of such
prospectus, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Notes received by such Exchanging Dealer pursuant to the Registered
Exchange Offer and (ii) if the Initial Purchaser elects to sell Private Exchange
Notes (as defined) acquired in exchange for Notes constituting any portion of an
unsold allotment, it is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act and the Exchange Act ("Regulation S-K"), as applicable, in connection with
such a sale.
Upon consummation of the Registered Exchange Offer in accordance with this
Section 1, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Transfer Restricted Notes that are Private
Exchange Notes, Exchange Notes as to which clause (v) of the first paragraph of
Section 2 hereof is applicable and Exchange Notes held by Participating
Broker-Dealers (as defined), and Holdings shall have no further obligations to
register Transfer Restricted Notes (as defined) (other than Private Exchange
-2-
<PAGE>
Notes and other than in respect of Exchange Notes as to which clause (v) of the
first paragraph of Section 2 hereof applies) pursuant to Section 2 hereof.
If, prior to the consummation of the Registered Exchange Offer, any Holder
holds any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Issuer shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Notes in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the Notes
held by such Holder (the "Private Exchange"), a like aggregate principal amount
of debt securities of the Issuer (the "Private Exchange Notes") that are
identical in all material respects to the Exchange Notes (except that the
Exchange Notes will contain terms with respect to transfer restrictions). The
Private Exchange Notes will be issued under the same indenture as the Exchange
Notes, and the Issuer shall use its reasonable best efforts to cause the Private
Exchange Notes to bear the same CUSIP number as the Exchange Notes.
In connection with the Registered Exchange Offer, the Issuer shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days (or
longer, if required by applicable law) after the date on which notice of the
Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York City time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable to
the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer and
any Private Exchange, as the case may be, the Issuer shall:
(f) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Registered Exchange Offer and the Private Exchange;
-3-
<PAGE>
(g) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(h) cause the Trustee or the Exchange Notes Trustee, as the case may be,
promptly to authenticate and deliver to each Holder, Exchange Notes or Private
Exchange Notes, as the case may be, equal in principal amount to the Notes of
such Holder so accepted for exchange.
The Issuer shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein in order to permit such prospectus to be used by all persons
subject to the prospectus delivery requirements of the Securities Act for such
period of time as such persons must comply with such requirements in order to
resell the Exchange Notes; provided that (i) in the case where such prospectus
and any amendment or supplement thereto must be delivered by an Exchanging
Dealer, such period shall be the lesser of 180 days and the date on which all
Exchanging Dealers have sold all Exchange Notes held by them and (ii) the Issuer
shall make such prospectus and any amendment or supplement thereto available to
any broker-dealer for use in connection with any resale of any Exchange Notes
for a period of 180 days after the consummation of the Registered Exchange
Offer.
The Indenture or the Exchange Notes Indenture, as the case may be, shall
provide that the Notes, the Exchange Notes and the Private Exchange Notes shall
vote and consent together on all matters as one class and that none of the
Notes, the Exchange Notes or the Private Exchange Notes will have the right to
vote or consent as a separate class on any matter.
Interest on each Exchange Note and Private Exchange Note issued pursuant to
the Registered Exchange Offer and in the Private Exchange will accrue from the
last interest payment date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from the
Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Issuer that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes within the meaning of the Securities Act,
(iii) such Holder is not an affiliate of the Issuer or, if it is such an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable and (iv) if such
Holder is an Exchanging Dealer, such Holder shall comply with the prospectus
delivery requirements of the Securities Act.
-4-
<PAGE>
Notwithstanding any other provisions hereof, the Issuer will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or applicable
interpretations thereof by the Commission's staff the Issuer is not permitted to
effect the Registered Exchange Offer as contemplated by Section 1 hereof, or
(ii) any Notes validly tendered pursuant to the Registered Exchange Offer are
not exchanged for Exchange Notes within 270 days after the Issue Date, or (iii)
the Initial Purchaser so requests with respect to Notes or Private Exchange
Notes not eligible to be exchanged for Exchange Notes in the Registered Exchange
Offer and held by it following the consummation of the Registered Exchange
Offer, or (iv) any applicable law or interpretations do not permit any Holder to
participate in the Registered Exchange Offer, or (v) any Holder that
participates in the Registered Exchange Offer does not receive freely
transferable Exchange Notes in exchange for tendered Notes, or (vi) the Issuer
so elects, then the following provisions shall apply:
(a) The Issuer shall use its best efforts to file as promptly as
practicable (but in no event more than 30 days after so required or requested
pursuant to this Section 2) with the Commission, and thereafter shall use its
best efforts to cause to be declared effective, a shelf registration statement
on an appropriate form under the Securities Act relating to the offer and sale
of the Transfer Restricted Notes (as defined below) by the Holders thereof
from time to time in accordance with the methods of distribution set forth in
such registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement").
(b) The Issuer shall use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the prospectus forming
part thereof to be used by Holders of Transfer Restricted Notes for a period
ending on the earlier of (i) two years from the Issue Date or such shorter
period that will terminate when all the Transfer Restricted Notes covered by
the Shelf Registration Statement have been
-5-
<PAGE>
sold pursuant thereto and (ii) the date on which the Notes become eligible for
resale without volume restrictions pursuant to Rule 144 under the Securities
Act (in any such case, such period being called the "Shelf Registration
Period"). The Issuer shall be deemed not to have used its best efforts to keep
the Shelf Registration Statement effective during the requisite period if the
Issuer voluntarily takes any action that would result in Holders of Transfer
Restricted Notes covered thereby not being able to offer and sell such
Transfer Restricted Notes during that period, unless such action is required
by applicable law. Any such period during which the Issuer fails to keep the
registration statement effective and usable for offers and sales of Notes and
Exchange Notes is referred to as a "Suspension Period." A Suspension Period
shall commence on and include the date that the Issuer gives notice that the
Shelf Registration Statement is no longer effective or the prospectus included
therein is no longer usable for offers and sales of Notes and Exchange Notes
and shall end on the date when each Holder of Notes and Exchange Notes covered
by such registration statement either receives the copies of the supplemented
or amended prospectus contemplated by Section 4(j) hereof or is advised in
writing by the Issuer that use of the prospectus may be resumed. If one or
more Suspension Periods occur, the two-year period referenced above shall be
extended by the aggregate of the number of days included in each such
Suspension Period.
(c) Notwithstanding any other provisions hereof, the Issuer will ensure
that (i) any Shelf Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included
therein in reliance upon or in conformity with written information furnished
to the Issuer by or on behalf of any Holder specifically for use therein (the
"Holders' Information")) does not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect to
Holders' Information), does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders of
Transfer Restricted Notes will suffer damages if the Issuer fails to fulfill its
obligations under Section 1 or Section 2, as applicable, and that it would not
be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable Registration Statement is not filed with
-6-
<PAGE>
the Commission on or prior to 180 days after the Issue Date, (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective within 240 days after the Issue Date, (iii)
the Registered Exchange Offer is not consummated on or prior to 270 days after
the Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 270 days after the Issue Date but shall thereafter cease to be
effective (at any time that the Issuer is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Issuer will be
obligated to pay liquidated damages to each Holder of Transfer Restricted Notes,
during the period of one or more such Registration Defaults, in an amount equal
to $ 0.192 per week per $1,000 principal amount of Transfer Restricted Notes
held by such Holder until (i) the applicable Registration Statement is filed,
(ii) the Exchange Offer Registration Statement is declared effective and the
Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement
is declared effective or (iv) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration Defaults,
the accrual of liquidated damages will cease. As used herein, the term "Transfer
Restricted Notes" means (i) each Note until the date on which such Note has been
exchanged for a freely transferable Exchange Note in the Registered Exchange
Offer, (ii) each Note or Private Exchange Note until the date on which it has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) each Note or Private
Exchange Note until the date on which it is distributed to the public pursuant
to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k)
under the Securities Act. Notwithstanding anything to the contrary in this
Section 3(a), the Issuer shall not be required to pay liquidated damages to a
Holder of Transfer Restricted Notes if such Holder failed to comply with its
obligations to make the representations set forth in the second to last
paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
(b) The Issuer shall notify the Trustee and the Paying Agent under the
Indenture immediately upon the happening of each and every Registration Default.
The Issuer shall pay the liquidated damages due on the Transfer Restricted Notes
by depositing with the Paying Agent (which may not be the Issuer for these
purposes), in trust, for the benefit of the Holders thereof, prior to 10:00
a.m., New York City time, on the next interest payment date specified by the
Indenture and the Notes, sums sufficient to pay the liquidated damages then due.
The liquidated damages due shall be payable on each interest payment date
specified by the Indenture and the Notes to the record holder entitled to
receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
-7-
<PAGE>
(c) The parties hereto agree that the liquidated damages provided for in
this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Notes by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration Statement,
the following provisions shall apply:
(a) The Issuer shall (i) furnish to the Initial Purchaser, prior to the
filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use its best efforts to reflect in each such document, when
so filed with the Commission, such comments as the Initial Purchaser may
reasonably propose; (ii) include the information set forth in Annex A hereto
on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and
the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan
of Distribution" section of the prospectus forming a part of the Exchange
Offer Registration Statement, and include the information set forth in Annex D
hereto in the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; and (iii) if requested by the Initial Purchaser, include the
information required by Items 507 or 508 of Regulation S-K, as applicable, in
the prospectus forming a part of the Exchange Offer Registration Statement.
(b) The Issuer shall advise the Initial Purchaser, each Exchanging Dealer
and the Holders (if applicable) and, if requested by any such person, confirm
such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall
be accompanied by an instruction to suspend the use of the prospectus until
the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has been
filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
any Registration Statement or the prospectus included therein or for
additional information;
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(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of any Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Issuer of any notification with respect to
the suspension of the qualification of the Notes, the Exchange Notes or the
Private Exchange Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included therein in
order that the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(c) The Issuer will make every reasonable effort to obtain the withdrawal
at the earliest possible time of any order suspending the effectiveness of any
Registration Statement.
(d) The Issuer will furnish to each Holder of Transfer Restricted Notes
included within the coverage of any Shelf Registration Statement, without
charge, at least one conformed copy of such Shelf Registration Statement and
any post-effective amendment thereto, including financial statements and
schedules and, if any such Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(e) The Issuer will, during the Shelf Registration Period, promptly deliver
to each Holder of Transfer Restricted Notes included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Issuer consents to the use of such prospectus
or any amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Notes in connection with the offer and sale of the
Transfer Restricted Notes covered by such prospectus or any amendment or
supplement thereto.
(f) The Issuer will furnish to the Initial Purchaser and each Exchanging
Dealer, and to any other Holder who so requests, without charge, at least one
conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if the Initial
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Purchaser or Exchanging Dealer or any such Holder so requests in writing, all
exhibits thereto (including those, if any, incorporated by reference).
(g) The Issuer will, during the Exchange Offer Registration Period or the
Shelf Registration Period, as applicable, promptly deliver to the Initial
Purchaser, each Exchanging Dealer and such other persons that are required to
deliver a prospectus following the Registered Exchange Offer, without charge,
as many copies of the final prospectus included in the Exchange Offer
Registration Statement or the Shelf Registration Statement and any amendment
or supplement thereto as the Initial Purchaser, Exchanging Dealer or other
persons may reasonably request; and the Issuer consents to the use of such
prospectus or any amendment or supplement thereto by the Initial Purchaser,
Exchanging Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the Issuer
will use its best efforts to register or qualify, or cooperate with the
Holders of Notes, Exchange Notes or Private Exchange Notes included therein
and their respective counsel in connection with the registration or
qualification of such Notes, Exchange Notes or Private Exchange Notes for
offer and sale under the securities or blue sky laws of such jurisdictions as
any such Holder reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Notes, Exchange Notes or Private Exchange Notes covered
by such Registration Statement; provided that the Issuer will not be required
to qualify generally to do business in any jurisdiction where it is not then
so qualified or to take any action which would subject it to general service
of process or to taxation in any such jurisdiction where it is not then so
subject.
(i) The Issuer will cooperate with the Holders of Notes, Exchange Notes or
Private Exchange Notes to facilitate the timely preparation and delivery of
certificates representing Notes, Exchange Notes or Private Exchange Notes to
be sold pursuant to any Registration Statement free of any restrictive legends
and in such denominations and registered in such names as the Holders thereof
may request in writing prior to sales of Notes, Exchange Notes or Private
Exchange Notes pursuant to such Registration Statement.
(j) If (i) any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Issuer is required to maintain an effective
Registration Statement or (ii) any Suspension Period remains in effect more
than 240 days after the occurrence thereof, the Issuer will promptly prepare
and file with the Commission a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other required
document so that, as thereafter delivered to pur-
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chasers of the Notes, Exchange Notes or Private Exchange Notes from a Holder,
the prospectus will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Issuer will provide a CUSIP number for the Notes, the Exchange
Notes and the Private Exchange Notes, as the case may be, and provide the
applicable trustee with printed certificates for the Notes, the Exchange Notes
or the Private Exchange Notes, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Issuer will comply with all applicable rules and regulations of the
Commission and will make generally available to its security holders as soon
as practicable after the effective date of the applicable Registration
Statement an earning statement satisfying the provisions of Section 11(a) of
the Securities Act; provided that in no event shall such earning statement be
delivered later than 45 days after the end of a 12-month period (or 90 days,
if such period is a fiscal year) beginning with the first month of the
Issuer's first fiscal quarter commencing after the effective date of the
applicable Registration Statement, which statement shall cover such 12-month
period.
(m) The Issuer will cause the Indenture or the Exchange Notes Indenture, as
the case may be, to be qualified under the Trust Indenture Act, if and as
required by applicable law, in a timely manner.
(n) The Issuer may require each Holder of Transfer Restricted Notes to be
registered pursuant to any Shelf Registration Statement to furnish to the
Issuer such information concerning the Holder and the distribution of such
Transfer Restricted Notes as the Issuer may from time to time reasonably
require for inclusion in such Shelf Registration Statement, and the Issuer may
exclude from such registration the Transfer Restricted Notes of any Holder
that fails to furnish such information within a reasonable time after
receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of Transfer
Restricted Notes to be registered pursuant thereto agrees by acquisition of
such Transfer Restricted Notes that, upon receipt of any notice from the
Issuer (i) of a Suspension Period under Section 2(b) hereof or (ii) pursuant
to Section 4(b)(ii) through (v) hereof, such Holder will discontinue
disposition of such Transfer Restricted Notes until such Holder's receipt of
(x) notice that the Suspension Period has ended or (y) copies of the
supplemental or amended prospectus contemplated by Section 4(j) hereof, as the
case
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may be, or until advised in writing (the "Advice") by the Issuer that the use
of the applicable prospectus may be resumed. If the Issuer shall give any
notice under Section 4(b)(ii) through (v) during the period that the Issuer is
required to maintain an effective Registration Statement (the "Effectiveness
Period"), such Effectiveness Period shall be extended by the number of days
during such period from and including the date of the giving of such notice to
and including the date when each seller of Transfer Restricted Notes covered
by such Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an amended
or supplemental prospectus is required) or (y) the Advice (if no amended or
supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Issuer shall enter
into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as
Holders of a majority in aggregate principal amount of the Notes, Exchange
Notes and Private Exchange Notes being sold or the managing underwriters (if
any) shall reasonably request in order to facilitate any disposition of Notes,
Exchange Notes or Private Exchange Notes pursuant to such Shelf Registration
Statement.
(q) In the case of a Shelf Registration Statement, the Issuer shall (i)
make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Notes, Exchange Notes and Private Exchange Notes being
sold and any underwriter participating in any disposition of Notes, Exchange
Notes or Private Exchange Notes pursuant to such Shelf Registration Statement,
all relevant financial and other records, pertinent corporate documents and
properties of the Issuer and its subsidiaries and (ii) use its best efforts to
have its officers, directors, employees, accountants and counsel supply all
relevant information reasonably requested by such representative, Special
Counsel or any such underwriter (an "Inspector") in connection with such Shelf
Registration Statement.
(r) In the case of a Shelf Registration Statement, the Issuer shall, if
requested by Holders of a majority in aggregate principal amount of the Notes,
Exchange Notes and Private Exchange Notes being sold, their Special Counsel or
the managing underwriters (if any) in connection with such Shelf Registration
Statement, use its best efforts to cause (i) its counsel to deliver an opinion
relating to the Shelf Registration Statement and the Notes, Exchange Notes or
Private Exchange Notes, as applicable, in customary form, (ii) its officers to
execute and deliver all customary documents and certificates requested by
Holders of a majority in aggregate principal amount of the Notes, Exchange
Notes and Private Exchange Notes being sold, their
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Special Counsel or the managing underwriters (if any) and (iii) its
independent public accountants to provide a comfort letter or letters in
customary form, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards
No. 72.
5. Registration Expenses. The Issuer will bear all expenses incurred in
connection with the performance of its obligations under Sections 1, 2, 3 and 4
and the Issuer will reimburse the Initial Purchaser and the Holders for the
reasonable fees and disbursements of one firm of attorneys (in addition to any
local counsel) chosen by the Holders of a majority in aggregate principal amount
of the Notes, the Exchange Notes and the Private Exchange Notes to be sold
pursuant to each Registration Statement (the "Special Counsel") acting for the
Initial Purchaser or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration Statement or
in connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Issuer shall indemnify and hold harmless each Holder (including,
without limitation, any such Initial Purchaser or Exchanging Dealer), its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls such Holder within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6 and Section 7 as a "Holder") from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, without limitation, any loss, claim, damage, liability or action
relating to purchases and sales of Notes, Exchange Notes or Private Exchange
Notes), to which that Holder may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any such Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Holder promptly
upon demand for any legal or other expenses reasonably incurred by that Holder
in connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Issuer shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with any Holders'
Information; and provided, further, that with respect to any such untrue
statement in or omission from any related preliminary prospectus, the indemnity
agreement
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contained in this Section 6(a) shall not inure to the benefit of any Holder from
whom the person asserting any such loss, claim, damage, liability or action
received Notes, Exchange Notes or Private Exchange Notes to the extent that such
loss, claim, damage, liability or action of or with respect to such Holder
results from the fact that both (A) a copy of the final prospectus was not sent
or given to such person at or prior to the written confirmation of the sale of
such Notes, Exchange Notes or Private Exchange Notes to such person and (B) the
untrue statement in or omission from the related preliminary prospectus was
corrected in the final prospectus unless, in either case, such failure to
deliver the final prospectus was a result of non-compliance by the Issuer with
Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder, severally
and not jointly, shall indemnify and hold harmless the Issuer, its affiliates,
their respective officers, directors, employees, representatives and agents, and
each person, if any, who controls the Issuer within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the "Issuer"), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Issuer may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Issuer by such Holder, and shall reimburse each Issuer for any legal or
other expenses reasonably incurred by such Issuer in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Notes, Exchange Notes or
Private Exchange Notes pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing
of the claim or the commencement of that action; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this Section 6 except to the extent that it has been
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materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 6. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and
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indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Issuer from the offering and sale of the Notes, on the
one hand, and a Holder with respect to the sale by such Holder of Notes,
Exchange Notes or Private Exchange Notes, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuer on the
one hand and such Holder on the other with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Issuer on the one hand and a Holder on the
other with respect to such offering and such sale shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Notes (before
deducting expenses) received by or on behalf of the Issuer as set forth in the
table on the cover of the Offering Memorandum, on the one hand, bear to the
total proceeds received by such Holder with respect to its sale of Notes,
Exchange Notes or Private Exchange Notes, on the other. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to the Issuer or information supplied by the Issuer on
the one hand or to any Holders' Information supplied by such Holder on the
other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 7 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 7 shall be deemed
to include, for purposes of this Section 7, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 7, an indemnifying party that is a Holder of
Notes, Exchange Notes or Private Exchange Notes shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Notes, Exchange Notes or Private Exchange Notes sold by such indemnifying
party to any purchaser exceeds the amount of any damages which such indemnifying
party has oth-
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erwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Rules 144 and 144A. The Issuer shall use its best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange Act
in a timely manner and, if at any time the Issuer is not required to file such
reports, it will, upon the written request of any Holder of Transfer Restricted
Notes, make publicly available other information so long as necessary to permit
sales of such Holder's securities pursuant to Rules 144 and 144A. The Issuer
covenants that it will take such further action as any Holder of Transfer
Restricted Notes may reasonably request, all to the extent required from time to
time to enable such Holder to sell Transfer Restricted Notes without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including, without limitation, the requirements
of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer
Restricted Notes, the Issuer shall deliver to such Holder a written statement as
to whether it has complied with such requirements. Notwithstanding the
foregoing, nothing in this Section 8 shall be deemed to require the Issuer to
register any of its securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted Notes
covered by any Shelf Registration Statement are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of such Transfer Restricted Notes included in such
offering, subject to the consent of the Issuer (which shall not be unreasonably
withheld or delayed), and such Holders shall be responsible for all underwriting
commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Notes on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
10. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Issuer has obtained the
written consent of Holders of
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a majority in aggregate principal amount of the Notes, the Exchange Notes and
the Private Exchange Notes, taken as a single class. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders whose Notes,
Exchange Notes or Private Exchange Notes are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Notes, the Exchange Notes and the Private Exchange Notes
being sold by such Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(i) if to a Holder, at the most current address given by such Holder to the
Issuer in accordance with the provisions of this Section 10(b), which address
initially is, with respect to each Holder, the address of such Holder
maintained by the registrar under the Indenture, with a copy in like manner to
Chase Securities Inc.;
(ii) if to the Initial Purchaser, initially at its address set forth in the
Purchase Agreement; and
(iii) if to the Issuer, initially at the address of Holdings set forth in
the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors and Assigns. This Agreement shall be binding upon the Issuer
and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act
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and (c) except where otherwise expressly provided, the term "affiliate" has the
meaning set forth in Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Issuer or by any Holder of
any of its obligations under this Agreement, each Holder or the Issuer, as the
case may be, in addition to being entitled to exercise all rights granted by
law, including recovery of damages (other than the recovery of damages for a
breach by the Issuer of its obligations under Sections 1 or 2 hereof for which
liquidated damages have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. The Issuer
and each Holder agree that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(i) No Inconsistent Agreements. The Issuer represents, warrants and agrees
that (i) it has not entered into and shall not, on or after the date of this
Agreement, enter into any agreement that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the provisions
hereof, (ii) it has not previously entered into any agreement which remains in
effect granting any registration rights with respect to any of its debt
securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Notes, it shall not
grant to any person the right to request the Issuer to register any debt
securities of the Issuer under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of this Agreement.
(j) No Piggyback on Registrations. Neither the Issuer nor any of its
security holders (other than the Holders of Transfer Restricted Notes in such
capacity) shall have the right to include any securities of the Issuer in any
Shelf Registration or Registered Exchange Offer other than Transfer Restricted
Notes.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein
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shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable best efforts
to find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
[Remainder of page intentionally left blank]
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer and the Initial Purchaser.
Very truly yours,
R.A.B. HOLDINGS, INC.
By: ___________________________________
Name:
Title:
S-1
<PAGE>
Accepted by:
CHASE SECURITIES INC.
By: ______________________________
Name:
Title:
S-2
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuer has agreed that, for a period of 180 days
after the Expiration Date (as defined herein), it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Issuer has agreed that, for a period
of 180 days after the Expiration Date, it will make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until _______________, 199_, all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Issuer will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Registered Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Registered Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuer will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Issuer has agreed to pay all expenses incident to the
Registered Exchange Offer (including the expenses of one counsel for the Holders
of the Notes) other than commissions or concessions of any broker-dealers and
will indemnify the Holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
<PAGE>
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE>
R.A.B. ENTERPRISES, INC.
$120,000,000
10 1/2% Senior Notes due 2005
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
May 1, 1998
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
R.A.B. Enterprises, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to Chase Securities Inc. ("CSI" or the "Initial Purchaser"),
upon the terms and subject to the conditions set forth in a purchase agreement
dated April 28, 1998 (the "Purchase Agreement"), $120,000,000 aggregate
principal amount of its 10 1/2% Senior Notes due 2005 (the "Notes"). The Notes
will be unconditionally guaranteed (collectively, the "Guarantees") on a senior
basis by certain of the Company's existing and future subsidiaries
(collectively, the "Guarantors" and, together with the Company, the "Issuers").
The Notes will be issued pursuant to an Indenture to be dated as of May 1, 1998
(the "Indenture") between the Company, the Guarantors and PNC Bank, National
Association, as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchaser to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchaser thereunder, the Issuers agree with the Initial Purchaser, for the
benefit of the holders (including the Initial Purchaser) of the Notes, the
Exchange Notes (as defined herein) and the Private Exchange Notes (as defined
herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Issuers shall (i) prepare and, not later
than 180 days following the date of original issuance of the Notes (the "Issue
Date"), file with the Commission a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act with
respect to a proposed offer to the Holders of the Notes (the "Registered
Exchange Offer") to issue and deliver to such Holders, in exchange
<PAGE>
for the Notes, a like aggregate principal amount of debt securities of the
Company (the "Exchange Notes") that are identical in all material respects to
the Notes (except that the Exchange Notes will not contain terms with respect to
transfer restrictions), (ii) use their respective best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act no later than 240 days after the Issue Date and the Registered Exchange
Offer to be consummated no later than 270 days after the Issue Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 30
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "Exchange Offer Registration Period"). The Exchange Notes will be
issued under the Indenture or an indenture (the "Exchange Notes Indenture")
between the Issuers and the Trustee or such other bank or trust company that is
reasonably satisfactory to the Initial Purchaser, as trustee (the "Exchange
Notes Trustee"), such indenture to be identical in all material respects to the
Indenture (except that the Exchange Notes Indenture will not contain terms with
respect to transfer restrictions) (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement, the
Issuers shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Notes for Exchange Notes (assuming that such Holder (a) is not an
affiliate of any of the Issuers or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) is not the Initial
Purchaser holding Notes that have, or that are reasonably likely to have, the
status of an unsold allotment in an initial distribution, (c) acquires the
Exchange Notes in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Notes) and to trade such Exchange Notes from and
after their receipt without any limitations or restrictions under the Securities
Act and without material restrictions under the securities laws of the several
states of the United States. The Issuers, the Initial Purchaser and each
Exchanging Dealer acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, (i) each Holder that is a
broker-dealer electing to exchange Notes acquired for its own account as a
result of market-making activities or other trading activities for Exchange
Notes (an "Exchanging Dealer") is required to deliver a prospectus containing
substantially the information set forth in Annex A hereto on the cover of such
prospectus, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Notes received by such Exchanging Dealer pursuant to the Registered
Exchange Offer and (ii) if the Initial Purchaser elects to sell Private Exchange
Notes (as defined) acquired in exchange for Notes constituting any portion of an
unsold allotment, it is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act and the Exchange Act ("Regulation S-K"), as applicable, in connection with
such a sale.
Upon consummation of the Registered Exchange Offer in accordance with this
Section 1, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Transfer Restricted Notes (as defined) that are
Private Ex-
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<PAGE>
change Notes, Exchange Notes as to which clause (v) of the first
paragraph of Section 2 hereof is applicable and Exchange Notes held by
Participating Broker-Dealers (as defined), and the Company shall have no
further obligations to register Transfer Restricted Notes (other than Private
Exchange Notes and other than in respect of Exchange Notes as to
which clause (v) of the first paragraph of Section 2 hereof applies)
pursuant to Section 2 hereof.
If, prior to the consummation of the Registered Exchange Offer, any Holder
holds any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Issuers shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Notes in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the Notes
held by such Holder (the "Private Exchange"), a like aggregate principal amount
of debt securities of the Issuers (the "Private Exchange Notes") that are
identical in all material respects to the Exchange Notes (except that the
Private Exchange Notes will contain terms with respect to transfer
restrictions). The Private Exchange Notes will be issued under the same
indenture as the Exchange Notes, and the Issuers shall use their reasonable best
efforts to cause the Private Exchange Notes to bear the same CUSIP number as the
Exchange Notes.
In connection with the Registered Exchange Offer, the Issuers shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York City time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable
to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer and
any Private Exchange, as the case may be, the Issuers shall:
(a) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Registered Exchange Offer and the Private Exchange;
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<PAGE>
(b) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(c) cause the Trustee or the Exchange Notes Trustee, as the case may
be, promptly to authenticate and deliver to each Holder, Exchange Notes or
Private Exchange Notes, as the case may be, equal in principal amount to
the Notes of such Holder so accepted for exchange.
The Issuers shall use their respective best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; provided that (i) in the case where such
prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Notes held by them and (ii)
the Issuers shall make such prospectus and any amendment or supplement thereto
available to any broker-dealer for use in connection with any resale of any
Exchange Notes for a period of 180 days after the consummation of the Registered
Exchange Offer.
The Indenture or the Exchange Notes Indenture, as the case may be, shall
provide that the Notes, the Exchange Notes and the Private Exchange Notes shall
vote and consent together on all matters as one class and that none of the
Notes, the Exchange Notes or the Private Exchange Notes will have the right to
vote or consent as a separate class on any matter.
Interest on each Exchange Note and Private Exchange Note issued pursuant to
the Registered Exchange Offer and in the Private Exchange will accrue from the
last interest payment date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from the
Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Issuers that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes within the meaning of the Securities Act,
(iii) such Holder is not an affiliate of any of the Issuers or, if it is such an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable and (iv) if such
Holder is an Exchanging Dealer, such Holder shall comply with the prospectus
delivery requirements of the Securities Act.
Notwithstanding any other provisions hereof, the Issuers will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange
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<PAGE>
Offer Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not,
as of the consummation of the Registered Exchange Offer, include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or applicable
interpretations thereof by the Commission's staff the Issuers are not permitted
to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or
(ii) any Notes validly tendered pursuant to the Registered Exchange Offer are
not exchanged for Exchange Notes within 270 days after the Issue Date, or (iii)
the Initial Purchaser so requests with respect to Notes or Private Exchange
Notes not eligible to be exchanged for Exchange Notes in the Registered Exchange
Offer and held by it following the consummation of the Registered Exchange
Offer, or (iv) any applicable law or interpretations do not permit any Holder to
participate in the Registered Exchange Offer, or (v) any Holder that
participates in the Registered Exchange Offer does not receive freely
transferable Exchange Notes in exchange for tendered Notes, or (vi) either of
the Issuers so elect, then the following provisions shall apply:
(a) The Issuers shall use their respective best efforts to file as
promptly as practicable (but in no event more than 30 days after so
required or requested pursuant to this Section 2) with the Commission, and
thereafter shall use their respective best efforts to cause to be declared
effective, a shelf registration statement on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Notes (as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with
any Exchange Offer Registration Statement, a "Registration Statement").
(b) The Issuers shall use their respective best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer
Restricted Notes for a period ending on the earlier of (i) two years from
the Issue Date or such shorter period that will terminate when all the
Transfer Restricted Notes covered by the Shelf Registration Statement have
been sold pursuant thereto and (ii) the date on which the Notes become
eligible for resale without volume restrictions pursuant to Rule 144 under
the Securities Act (in any such case, such period being called the "Shelf
Registration Period"). The Issuers shall be deemed not to have used their
respective best efforts to keep the Shelf Registration Statement effective
during the requisite period if any Issuer voluntarily takes any action that
would result in Holders of Transfer Restricted Notes covered thereby not
being able to offer and sell such Transfer Restricted Notes during that
period, unless such action is required by
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<PAGE>
applicable law. Any such period during which the Issuers fail to keep the
registration statement effective and usable for offers and sales of Notes
and Exchange Notes is referred to as a "Suspension Period." A Suspension
Period shall commence on and include the date that the Issuers give notice
that the Shelf Registration Statement is no longer effective or the
prospectus included therein is no longer usable for offers and sales of
Notes and Exchange Notes and shall end on the date when each Holder of
Notes and Exchange Notes covered by such registration statement either
receives the copies of the supplemented or amended prospectus contemplated
by Section 4(j) hereof or is advised in writing by the Issuers that use of
the prospectus may be resumed. If one or more Suspension Periods occur, the
two-year period referenced above shall be extended by the aggregate of the
number of days included in each such Suspension Period.
(c) Notwithstanding any other provisions hereof, the Issuers will
ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with
respect to information included therein in reliance upon or in conformity
with written information furnished to the Issuers by or on behalf of any
Holder specifically for use therein (the "Holders' Information")) does not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Shelf
Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders of
Transfer Restricted Notes will suffer damages if the Issuers fail to fulfill
their obligations under Section 1 or Section 2, as applicable, and that it would
not be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable Registration Statement is not filed with the Commission on or prior
to 180 days after the Issue Date, (ii) the Exchange Offer Registration Statement
or the Shelf Registration Statement, as the case may be, is not declared
effective within 240 days after the Issue Date, (iii) the Registered Exchange
Offer is not consummated on or prior to 270 days after the Issue Date, or (iv)
the Shelf Registration Statement is filed and declared effective within 270 days
after the Issue Date but shall thereafter cease to be effective (at any time
that the Issuers are obligated to maintain the effectiveness thereof) without
being succeeded within 30 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Issuers will be obligated, jointly and severally,
to pay liquidated damages to each Holder of Transfer Restricted Notes, during
the period of one or more such Registration Defaults, in an amount equal to
$0.192 per week per $1,000 principal amount of Transfer Re-
-6-
<PAGE>
stricted Notes held by such Holder until (i) the applicable Registration
Statement is filed, (ii) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease. As used
herein, the term "Transfer Restricted Notes" means (i) each Note until the date
on which such Note has been exchanged for a freely transferable Exchange Note in
the Registered Exchange Offer, (ii) each Note or Private Exchange Note until the
date on which it has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) each
Note or Private Exchange Note until the date on which it is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable pursuant to
Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary
in this Section 3(a), the Company shall not be required to pay liquidated
damages to a Holder of Transfer Restricted Notes if such Holder failed to comply
with its obligations to make the representations set forth in the second to last
paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
(b) The Issuers shall notify the Trustee and the Paying Agent under the
Indenture immediately upon the happening of each and every Registration Default.
The Issuers shall pay the liquidated damages due on the Transfer Restricted
Notes by depositing with the Paying Agent (which may not be any of the Issuers
for these purposes), in trust, for the benefit of the Holders thereof, prior to
10:00 a.m., New York City time, on the next interest payment date specified by
the Indenture and the Notes, sums sufficient to pay the liquidated damages then
due. The liquidated damages due shall be payable on each interest payment date
specified by the Indenture and the Notes to the record holder entitled to
receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided for in
this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Notes by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration Statement,
the following provisions shall apply:
(a) The Issuers shall (i) furnish to the Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and shall use their respective best efforts to
reflect in each such document, when so filed with the Commission, such
comments as the Initial Purchaser may reasonably
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<PAGE>
propose; (ii) include the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan
of Distribution" section of the prospectus forming a part of the Exchange
Offer Registration Statement, and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and (iii) if requested by the Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K, as
applicable, in the prospectus forming a part of the Exchange Offer
Registration Statement.
(b) The Issuers shall advise the Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use
of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has
been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Issuers of any notification with
respect to the suspension of the qualification of the Notes, the
Exchange Notes or the Private Exchange Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Issuers will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Issuers will furnish to each Holder of Transfer Restricted
Notes included within the coverage of any Shelf Registration Statement,
without charge, at
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<PAGE>
least one conformed copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules and, if any such Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
(e) The Issuers will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Notes included within the
coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Issuers consent to
the use of such prospectus or any amendment or supplement thereto by each
of the selling Holders of Transfer Restricted Notes in connection with the
offer and sale of the Transfer Restricted Notes covered by such prospectus
or any amendment or supplement thereto.
(f) The Issuers will furnish to the Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge,
at least one conformed copy of the Exchange Offer Registration Statement
and any post-effective amendment thereto, including financial statements
and schedules and, if the Initial Purchaser or Exchanging Dealer or any
such Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(g) The Issuers will, during the Exchange Offer Registration Period or
the Shelf Registration Period, as applicable, promptly deliver to the
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the Shelf Registration Statement
and any amendment or supplement thereto as the Initial Purchaser,
Exchanging Dealer or other persons may reasonably request; and the Issuers
consent to the use of such prospectus or any amendment or supplement
thereto by the Initial Purchaser, Exchanging Dealer or other persons, as
applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Issuers will use their respective best efforts to register or qualify, or
cooperate with the Holders of Notes, Exchange Notes or Private Exchange
Notes included therein and their respective counsel in connection with the
registration or qualification of such Notes, Exchange Notes or Private
Exchange Notes for offer and sale under the securities or blue sky laws of
such jurisdictions as any such Holder reasonably requests in writing and do
any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Notes, Exchange Notes or Private
Exchange Notes covered by such Registration Statement; provided that the
Issuers will not be required to qualify generally to do business in any
jurisdiction where each is not then so qualified or to take any action
which would subject such Issuers to general
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<PAGE>
service of process or to taxation in any such jurisdiction where such
Issuers are not then so subject.
(i) The Issuers will cooperate with the Holders of Notes, Exchange
Notes or Private Exchange Notes to facilitate the timely preparation and
delivery of certificates representing Notes, Exchange Notes or Private
Exchange Notes to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such
names as the Holders thereof may request in writing prior to sales of
Notes, Exchange Notes or Private Exchange Notes pursuant to such
Registration Statement.
(j) If (i) any event contemplated by Section 4(b)(ii) through (v)
occurs during the period for which the Issuers are required to maintain an
effective Registration Statement or (ii) any Suspension Period remains in
effect more than 240 days after the occurrence thereof, the Issuers will
promptly prepare and file with the Commission a post-effective amendment to
the Registration Statement or a supplement to the related prospectus or
file any other required document so that, as thereafter delivered to
purchasers of the Notes, Exchange Notes or Private Exchange Notes from a
Holder, the prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Issuers will provide a CUSIP number for the Notes, the
Exchange Notes and the Private Exchange Notes, as the case may be, and
provide the applicable trustee with printed certificates for the Notes, the
Exchange Notes or the Private Exchange Notes, as the case may be, in a form
eligible for deposit with The Depository Trust Company.
(l) The Issuers will comply with all applicable rules and regulations
of the Commission and will make generally available to its securityholders
as soon as practicable after the effective date of the applicable
Registration Statement an earning statement satisfying the provisions of
Section 11(a) of the Securities Act; provided that in no event shall such
earning statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning
with the first month of the Company's first fiscal quarter commencing after
the effective date of the applicable Registration Statement, which
statement shall cover such 12-month period.
(m) The Issuers will cause the Indenture or the Exchange Notes
Indenture, as the case may be, to be qualified under the Trust Indenture
Act, if and as required by applicable law, in a timely manner.
(n) The Issuers may require each Holder of Transfer Restricted Notes
to be registered pursuant to any Shelf Registration Statement to furnish to
the Issuers such information concerning the Holder and the distribution of
such Transfer Restricted
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<PAGE>
Notes as the Issuers may from time to time reasonably require for inclusion
in such Shelf Registration Statement, and the Issuers may exclude from such
registration the Transfer Restricted Notes of any Holder that fails to
furnish such information within a reasonable time after receiving such
request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Notes to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Notes that, upon receipt of any
notice from the Issuers (i) of a Suspension Period under Section 2(b)
hereof or (ii) pursuant to Section 4(b)(ii) through (v) hereof, such Holder
will discontinue disposition of such Transfer Restricted Notes until such
Holder's receipt of (x) notice that the Suspension Period has ended or (y)
copies of the supplemental or amended prospectus contemplated by Section
4(j) hereof, as the case may be, or until advised in writing (the "Advice")
by the Issuers that the use of the applicable prospectus may be resumed. If
the Issuers shall give any notice under Section 4(b)(ii) through (v) during
the period that the Issuers are required to maintain an effective
Registration Statement (the "Effectiveness Period"), such Effectiveness
Period shall be extended by the number of days during such period from and
including the date of the giving of such notice to and including the date
when each seller of Transfer Restricted Notes covered by such Registration
Statement shall have received (x) the copies of the supplemental or amended
prospectus contemplated by Section 4(j) (if an amended or supplemental
prospectus is required) or (y) the Advice (if no amended or supplemental
prospectus is required).
(p) In the case of a Shelf Registration Statement, the Issuers shall
enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action,
if any, as Holders of a majority in aggregate principal amount of the
Notes, Exchange Notes and Private Exchange Notes being sold or the managing
underwriters (if any) shall reasonably request in order to facilitate any
disposition of Notes, Exchange Notes or Private Exchange Notes pursuant to
such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Issuers shall
(i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Notes, Exchange Notes and Private
Exchange Notes being sold and any underwriter participating in any
disposition of Notes, Exchange Notes or Private Exchange Notes pursuant to
such Shelf Registration Statement, all relevant financial and other
records, pertinent corporate documents and properties of the Issuers and
their respective subsidiaries and (ii) use their respective best efforts to
have their respective officers, directors, employees, accountants and
counsel supply all relevant information reasonably requested by such
representative, Special Counsel or any such underwriter (an "Inspector") in
connection with such Shelf Registration Statement.
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<PAGE>
(r) In the case of a Shelf Registration Statement, the Issuers shall,
if requested by Holders of a majority in aggregate principal amount of the
Notes, Exchange Notes and Private Exchange Notes being sold, their Special
Counsel or the managing underwriters (if any) in connection with such Shelf
Registration Statement, use their respective best efforts to cause (i)
their counsel to deliver an opinion relating to the Shelf Registration
Statement and the Notes, Exchange Notes or Private Exchange Notes, as
applicable, in customary form, (ii) their officers to execute and deliver
all customary documents and certificates requested by Holders of a majority
in aggregate principal amount of the Notes, Exchange Notes and Private
Exchange Notes being sold, their Special Counsel or the managing
underwriters (if any) and (iii) their independent public accountants to
provide a comfort letter or letters in customary form, subject to receipt
of appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
5. Registration Expenses. The Issuers will, jointly and severally, bear all
expenses incurred in connection with the performance of their obligations under
Sections 1, 2, 3 and 4 and the Issuers will, jointly and severally, reimburse
the Initial Purchaser and the Holders for the reasonable fees and disbursements
of one firm of attorneys (in addition to any local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Notes, the Exchange
Notes and the Private Exchange Notes to be sold pursuant to each Registration
Statement (the "Special Counsel") acting for the Initial Purchaser or Holders in
connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration Statement or
in connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, each of the Issuers, jointly and severally, shall indemnify and hold
harmless each Holder (including, without limitation, any such Initial Purchaser
or Exchanging Dealer), its affiliates, their respective officers, directors,
employees, representatives and agents, and each person, if any, who controls
such Holder within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 6 and Section 7 as a
"Holder") from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, without limitation, any
loss, claim, damage, liability or action relating to purchases and sales of
Notes, Exchange Notes or Private Exchange Notes), to which that Holder may
become subject, whether commenced or threatened, under the Securities Act, the
Exchange Act or any other federal or state statutory law or regulation, at
common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness
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<PAGE>
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Issuers shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Holders' Information; and provided,
further, that with respect to any such untrue statement in or omission from any
related preliminary prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of any Holder from whom the person
asserting any such loss, claim, damage, liability or action received Notes,
Exchange Notes or Private Exchange Notes to the extent that such loss, claim,
damage, liability or action of or with respect to such Holder results from the
fact that both (A) a copy of the final prospectus was not sent or given to such
person at or prior to the written confirmation of the sale of such Notes,
Exchange Notes or Private Exchange Notes to such person and (B) the untrue
statement in or omission from the related preliminary prospectus was corrected
in the final prospectus unless, in either case, such failure to deliver the
final prospectus was a result of non-compliance by the Issuers with Section
4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder, severally
and not jointly, shall indemnify and hold harmless each of the Issuers, their
respective affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls any Issuer
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6(b) and Section 7 as the "Issuers"),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Issuers may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any such Registration Statement or any prospectus forming part
thereof or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any
Holders' Information furnished to the Issuers by such Holder, and shall
reimburse each Issuer for any legal or other expenses reasonably incurred by
such Issuer in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that no such Holder shall be liable for any indemnity claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Notes, Exchange Notes or Private Exchange Notes pursuant to such Shelf
Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 6(a) or
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<PAGE>
6(b), notify the indemnifying party in writing of the claim or the commencement
of that action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 6 except to the extent that it has been materially prejudiced (through
the forfeiture of substantive rights or defenses) by such failure; and provided,
further, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have to an indemnified party otherwise than
under this Section 6. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than the
reasonable costs of investigation; provided, however, that an indemnified party
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based upon advice of counsel
to the indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based upon advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settle-
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<PAGE>
ment includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Issuers from the offering and sale of the Notes, on the
one hand, and a Holder with respect to the sale by such Holder of Notes,
Exchange Notes or Private Exchange Notes, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers on
the one hand and such Holder on the other with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Issuers on the one hand and a Holder on the
other with respect to such offering and such sale shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Notes (before
deducting expenses) received by or on behalf of the Issuers as set forth in the
table on the cover of the Offering Memorandum, on the one hand, bear to the
total proceeds received by such Holder with respect to its sale of Notes,
Exchange Notes or Private Exchange Notes, on the other. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to the Issuers or information supplied by the Issuers on
the one hand or to any Holders' Information supplied by such Holder on the
other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 7 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 7 shall be deemed
to include, for purposes of this Section 7, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 7, an indemnifying party that is a Holder of
Notes, Exchange Notes or Private Exchange Notes shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Notes, Exchange Notes or Private Exchange Notes sold by such indemnifying
party to any purchaser exceeds the amount of any damages which such indemnifying
party has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
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<PAGE>
8. Rules 144 and 144A. The Issuers shall use their respective best efforts
to file the reports required to be filed by them under the Securities Act and
the Exchange Act in a timely manner and, if at any time the Issuers are not
required to file such reports, they will, upon the written request of any Holder
of Transfer Restricted Notes, make publicly available other information so long
as necessary to permit sales of such Holder's securities pursuant to Rules 144
and 144A. The Issuers covenant that they will take such further action as any
Holder of Transfer Restricted Notes may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Notes without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including, without limitation, the
requirements of Rule 144A(d)(4)). Upon the written request of any Holder of
Transfer Restricted Notes, the Issuers shall deliver to such Holder a written
statement as to whether they have complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Issuers to register any of their respective securities pursuant to
the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted Notes
covered by any Shelf Registration Statement are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of such Transfer Restricted Notes included in such
offering, subject to the consent of the Issuers (which shall not be unreasonably
withheld or delayed), and such Holders shall be responsible for all underwriting
commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Notes on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
10. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the Issuers have
obtained the written consent of Holders of a majority in aggregate
principal amount of the Notes, the Exchange Notes and the Private Exchange
Notes, taken as a single class. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Notes, Exchange Notes or
Private Exchange Notes are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other Holders
may be given by Holders of a majority in aggregate principal amount of the
Notes, the Exchange Notes and the Private Exchange Notes being sold by such
Holders pursuant to such Registration Statement.
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<PAGE>
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or air courier guaranteeing next-day delivery:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this
Section 10(b), which address initially is, with respect to each
Holder, the address of such Holder maintained by the registrar under
the Indenture, with a copy in like manner to Chase Securities Inc.;
(ii) if to the Initial Purchaser, initially at its address set
forth in the Purchase Agreement; and
(iii) if to the Issuers, initially at the address of the Company
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon each
of the Issuer and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and
by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act and (c) except where otherwise expressly
provided, the term "affiliate" has the meaning set forth in Rule 405 under
the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by any Issuer or by any Holder
of any of its obligations under this Agreement, each Holder or each Issuer,
as the case may be, in addition to being entitled to exercise all rights
granted by law, including
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recovery of damages (other than the recovery of damages for a breach by the
Issuers of their obligations under Sections 1 or 2 hereof for which
liquidated damages have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. Each
Issuer and each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of
the provisions of this Agreement and hereby further agree that, in the
event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. Each Issuer represents, warrants and
agrees that (i) it has not entered into and shall not, on or after the date
of this Agreement, enter into any agreement that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof, (ii) it has not previously entered into any
agreement which remains in effect granting any registration rights with
respect to any of its debt securities to any person and (iii) without
limiting the generality of the foregoing, without the written consent of
the Holders of a majority in aggregate principal amount of the then
outstanding Transfer Restricted Notes, it shall not grant to any person the
right to request the Issuers to register any debt securitiesof the Issuers
under the Securities Act unless the rights so granted are not in conflict
or inconsistent with the provisions of this Agreement.
(j) No Piggyback on Registrations. Neither the Issuers nor any of
their security holders (other than the Holders of Transfer Restricted Notes
in such capacity) shall have the right to include any securities of the
Issuers in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Notes.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable best
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
[Remainder of page intentionally left blank]
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser.
Very truly yours,
R.A.B. ENTERPRISES, INC.
By:
-------------------------------------
Name:
Title:
MILLBROOK DISTRIBUTION SERVICES INC.
By:
-------------------------------------
Name:
Title:
THE B. MANISCHEWITZ COMPANY, LLC
By:
-------------------------------------
Name:
Title:
S-1
<PAGE>
Accepted by:
CHASE SECURITIES INC.
By:
-------------------------------------
Name:
Title:
S-2
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuers have agreed that, for a period of 180 days
after the Expiration Date (as defined herein), they will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Issuers have agreed that, for a
period of 180 days after the Expiration Date, they will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until _______________, 199_, all dealers
effecting transactions in the Exchange Notes may be required to deliver a
prospectus.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Registered Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Registered Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commission or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuers have agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Notes) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE>
EXECUTION COPY
R.A.B. ENTERPRISES, INC.
$120,000,000
10.5 % Senior Notes due 2005
and
R.A.B. HOLDINGS, INC.
$48,000,000
13% Senior Notes due 2008
PURCHASE AGREEMENT
April 28, 1998
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
R.A.B. Holdings, Inc., a Delaware corporation ("Holdings"),
proposes to issue and sell $48,000,000 aggregate principal amount of its 13%
Senior Notes due 2008 (the "Holdings Notes") and R.A.B. Enterprises, Inc., a
Delaware corporation and a wholly-owned subsidiary of Holdings (the "Company",
and, together with Holdings, the "Issuers"), proposes to issue and sell
$120,000,000 aggregate principal amount of its 10.5% Senior Notes due 2005 (the
"Company Notes"). The Company Notes will be fully and unconditionally guaranteed
(collectively, the "Guarantees") on a senior unsecured basis by certain of the
Company's direct and indirect, existing subsidiaries (collectively, the
"Guarantors"). The Holdings Notes and the Company Notes are collectively
referred to as the "Securities". The Holdings Notes will be issued pursuant to
an indenture to be dated as of May 1, 1998 (the "Holdings Indenture"), between
Holdings and PNC Bank, National Association, as trustee, and the Company Notes
and the Guarantees will be issued pursuant to an Indenture to be dated as of May
1, 1998 (the "Company Indenture", and together with the Holdings Notes
Indenture, the "Indentures"), among the Company, the Guarantors and PNC Bank,
National Association, as trustee. The Issuers hereby confirm their agreement
with Chase Securities Inc. (the "Initial Purchaser") concerning the purchase of
the Securities from Holdings, the Company and the Guarantors by the Initial
Purchaser.
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On the Closing Date (as defined), approximately $17,000,000 of
the net proceeds from the sale of the Holdings Notes (the "Initial Escrow
Amount"), representing funds that will be sufficient to pay interest on the
Holdings Notes for the first six interest payment dates, will be placed into an
escrow account and pledged to the escrow agent named therein for the benefit of
the holders of the Holdings Notes and the trustee under the Holdings Indenture,
pursuant to an escrow agreement (the "Holdings Escrow Agreement") to be dated as
of May 1, 1998 among Holdings, the trustee under the Holdings Indenture and the
escrow agent named therein, as escrow agent and collateral agent.
The Securities will be offered and sold to the Initial
Purchaser without being registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon an exemption therefrom. The Issuers
have prepared a preliminary offering memorandum dated April 15, 1998 (the
"Preliminary Offering Memorandum") and will prepare an offering memorandum dated
the date hereof (the "Offering Memorandum") setting forth information concerning
the Issuers and the Securities. Copies of the Preliminary Offering Memorandum
have been, and copies of the Offering Memorandum will be, delivered by the
Issuers to the Initial Purchaser pursuant to the terms of this Agreement. Any
references herein to the Preliminary Offering Memorandum and the Offering
Memorandum shall be deemed to include all amendments and supplements thereto,
unless otherwise noted. The Issuers hereby confirm that they have authorized the
use of the Preliminary Offering Memorandum and the Offering Memorandum in
connection with the offering and resale of the Securities by the Initial
Purchaser in accordance with Section 2 hereof.
Holders of the Holdings Notes (including the Initial Purchaser
and its direct and indirect transferees) will be entitled to the benefits of an
Exchange and Registration Rights Agreement, substantially in the form attached
hereto as Annex A-1 (the "Holdings Registration Rights Agreement"), pursuant to
which Holdings will agree to file with the Securities and Exchange Commission
(the "Commission") (i) a registration statement under the Securities Act (the
"Holdings Exchange Offer Registration Statement") registering an issue of
Holdings Notes (the "Holdings Exchange Securities") which are identical in all
material respects to the Holdings Notes (except that the Holdings Exchange
Securities will not contain terms with respect to transfer restrictions) and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Holdings Shelf Registration Statement").
Holders of the Company Notes (including the Initial Purchaser
and its direct and indirect transferees) will be entitled to the benefits of an
Exchange and Registration Rights Agreement, substantially in the form attached
hereto as Annex A-2 (the "Company Registration Rights Agreement"), pursuant to
which the Company and the Guarantors will agree to file with the Commission (i)
a registration statement under the Securities Act (the "Company Exchange Offer
Registration Statement") registering an issue of Company Notes (the "Company
Exchange Securities") which are identical in all material respects to the
Company Notes (except that the Company Exchange Securities will not contain
terms with respect
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to transfer restrictions) and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the
"Company Shelf Registration Statement").
On March 3, 1998, the Company entered into a Purchase
Agreement, which has been amended by a First Amendment dated as of April 8, 1998
(the "Manischewitz Purchase Agreement") to acquire (the "Acquisition") all of
the outstanding equity interests of The B. Manischewitz Company, LLC, a Delaware
limited liability company ("Manischewitz"), for approximately $124 million. The
Acquisition will be consummated concurrently with the issuance and sale of the
Securities.
Millbrook Distribution Services Inc., a Delaware corporation
("Millbrook"), and a wholly owned subsidiary of the Company, is party to a
credit agreement dated March 31, 1997 (the "Credit Agreement"). Concurrently
with the closing of the Acquisition, (i) the Credit Agreement will be amended
and restated (the "Amended Credit Agreement") to provide, among other things,
for Millbrook and Manischewitz to be co-borrowers under the Credit Agreement,
(ii) Millbrook will repay approximately $20.4 million of indebtedness under the
revolving credit portion of the Credit Agreement and (iii) Holdings will
contribute to the Company all of the capital stock of Millbrook (the "Stock
Contribution"). The issuance and sale of the Securities and the Guarantees, the
Acquisition, the execution of the Amended Credit Agreement and the Stock
Contribution are collectively referred to as the "Transactions". The issuance
and sale of the Securities and the Guarantees is conditioned upon the concurrent
consummation of the other components of the Transactions.
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Issuers
and Millbrook. Each of the Issuers and Millbrook, jointly and severally,
represents and warrants to, and agrees with, the Initial Purchaser on and as of
the date hereof and the Closing Date (as defined in Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, did not, and on the
Closing Date the Offering Memorandum will not, contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
provided that the Issuers and Millbrook make no representation or
warranty as to information contained in or omitted from the
Preliminary Offering Memorandum or the Offering Memorandum in
reliance upon and in conformity with written information relating
to the Initial Purchaser furnished to the Issuers by or on behalf
of the Initial Purchaser specifically for use therein (the "Initial
Purchaser's Information").
(b) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, contains all of the
information that, if re-
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quested by a prospective purchaser of the Securities, would be
required to be provided to such prospective purchaser pursuant to
Rule 144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and
warranties of the Initial Purchaser contained in Section 2 and its
compliance with the agreements set forth therein, it is not
necessary, in connection with the issuance and sale of the
Securities to the Initial Purchaser and the offer, resale and
delivery of the Securities by the Initial Purchaser in the manner
contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or to qualify the
Indentures under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
(d) Each subsidiary of Holdings is listed on Schedule 1 hereto
and each subsidiary of Manischewitz is listed on Schedule 2 hereto.
Holdings and each of its subsidiaries and Manischewitz and each of
its subsidiaries have been duly incorporated or organized, as the
case may be, and are validly existing as corporations, limited
partnerships or limited liability companies, as the case may be, in
good standing under the laws of their respective jurisdictions of
incorporation or organization, as the case may be, are duly
qualified to do business and are in good standing as foreign
corporations, partnerships or limited liability companies, as the
case may be, in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification, and have all power and
authority necessary to own or hold their respective properties and
to conduct the businesses in which they are engaged, except where
the failure to so qualify or have such power or authority would
not, singularly or in the aggregate, have a material adverse effect
on the condition (financial or otherwise), results of operations or
business, as presently conducted or currently contemplated, of
Holdings and its subsidiaries taken as a whole after giving effect
to the Acquisition (a "Material Adverse Effect").
(e) Each of Holdings and the Company has the respective
authorized capitalization set forth in the Offering Memorandum
under the heading "Capitalization" on a pro forma basis after
giving effect to the Transactions; all of the outstanding shares of
capital stock of Holdings have been duly and validly authorized and
issued and are fully paid and non-assessable. Except as described
in the Offering Memorandum, (i) all of the outstanding shares of
capital stock or membership interests of each subsidiary of
Holdings and, to the knowledge of the Issuers and Millbrook, of
Manischewitz and each of its subsidiaries have been duly and
validly authorized and issued, and, in the case of such shares of
capital stock, are fully paid and non-assessable and are, or, after
giving effect to the Acquisition, will be, owned directly or
indirectly by Holdings, free and clear of any lien, charge,
encumbrance, security interest, restriction upon voting or transfer
or any other claim of any third party (except that the capital
stock of Millbrook is
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pledged pursuant to the Credit Agreement and will be pledged
pursuant to the Amended Credit Agreement).
(f) Each of the Issuers and Millbrook has, and Manischewitz
will have on or prior to the Closing Date, full right, power and
authority to execute and deliver this Agreement, the Indentures,
the Registration Rights Agreements, the Securities, the
Manischewitz Purchase Agreement and the Amended Credit Agreement
(collectively, the "Transaction Documents"), in each case, to the
extent, and only to the extent, each is a party thereto, and to
perform its respective obligations hereunder and thereunder, as
applicable; and all corporate action required to be taken for the
due and proper authorization and consummation of the Stock
Contribution and for the due and proper authorization, execution
and delivery of each of the Transaction Documents, to which it is a
party, and the consummation of the Transactions have been duly and
validly taken.
(g) This Agreement has been duly authorized, executed and
delivered by each of the Issuers and Millbrook and constitutes a
valid and legally binding agreement of each of the Issuers and
Millbrook, enforceable against the Issuers and Millbrook, as
applicable, in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law).
(h) The Holdings Registration Rights Agreement has been duly
authorized by Holdings and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of Holdings
enforceable against Holdings in accordance with its terms, except
to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered
in a proceeding in equity or at law). The Company Registration
Rights Agreement has been duly authorized by the Company and
Millbrook and when authorized by Manischewitz and, when duly
executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and legally binding
agreement of each of the Company, Millbrook and Manischewitz
enforceable against the Company, Millbrook and Manischewitz, as
applicable, in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law).
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(i) The Holdings Indenture has been duly authorized by
Holdings and, when duly executed and delivered in accordance with
its terms by each of the parties thereto, will constitute a valid
and legally binding agreement of Holdings enforceable against
Holdings in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law). The Company Indenture has been, or, in the case
of Manischewitz, will have been on or prior to the Closing Date,
duly authorized by the Company, Millbrook and Manischewitz and,
when duly executed and delivered in accordance with its terms by
each of the parties thereto, will constitute a valid and legally
binding agreement of the Company, Millbrook and Manischewitz
enforceable against the Company, Millbrook and Manischewitz, as
applicable, in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law). On the Closing Date, each of the Indentures will
conform in all material respects to the requirements of the Trust
Indenture Act and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(j) The Holdings Notes have been duly authorized by Holdings
and, when duly executed, authenticated, issued and delivered as
provided in the Holdings Indenture and paid for as provided herein,
will be duly and validly issued and outstanding and will constitute
valid and legally binding obligations of Holdings entitled to the
benefits of the Holdings Indenture and enforceable against Holdings
in accordance with their terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at
law). The Company Notes and the Guarantees have been, or, in the
case of Manischewitz, will have been on or prior to the Closing
Date, duly authorized by the Company and Millbrook and
Manischewitz, as the case may be, and, when duly executed,
authenticated, issued and delivered as provided in the Company
Indenture and paid for as provided herein, will be duly and validly
issued and outstanding and will constitute valid and legally
binding obligations of the Company, Millbrook and Manischewitz, as
applicable, entitled to the benefits of the Company Indenture and
enforceable against the Company, Millbrook and Manischewitz, as
applicable, in accordance with their terms, except to the extent
that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law).
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(k) The Holdings Escrow Agreement will have been on or prior
to the Closing Date duly authorized by Holdings and, when duly
executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and legally binding
agreement of Holdings enforceable against Holdings in accordance
with its terms, except to the extent that such enforceability may
be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law.
(l) The Manischewitz Purchase Agreement has been duly
authorized, executed and delivered by the Company and, assuming
that the Manischewitz Purchase Agreement has been duly authorized,
executed and delivered by the other parties thereto, constitutes a
valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, except to the
extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered
in a proceeding in equity or at law).
(m) The Amended Credit Agreement has been duly authorized by
Millbrook and will have been on or prior to the Closing Date duly
authorized by Manischewitz and when duly executed and delivered in
accordance with its terms by each of the parties thereto will
constitute a valid and legally binding agreement of Millbrook and
Manischewitz enforceable against Millbrook and Manischewitz in
accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at
law).
(n) The execution, delivery and performance by each of the
Issuers and Millbrook and Manischewitz, to the extent each is a
party thereto, of the Transaction Documents, the issuance,
authentication, sale and delivery of the Holdings Notes by Holdings
and compliance by Holdings with the terms thereof, the issuance,
sale and delivery of the Company Notes and the Guarantees by the
Company and Millbrook and Manischewitz, respectively, and
compliance by the Company and Millbrook and Manischewitz with the
terms thereof and the consummation of the Transactions will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon
any property or assets of any of the Issuers or Millbrook or
Manischewitz or any of their respective subsidiaries pursuant to,
any material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument to which any of
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the Issuers or Millbrook or Manischewitz or any of their respective
subsidiaries is a party or by which any Issuer or Millbrook or
Manischewitz or any of their respective is bound or to which any of
the material property or material assets of any of the Issuers or
Millbrook or Manischewitz or any of their respective subsidiaries
is subject, nor will such actions result in any violation of the
provisions of the charter or by-laws or other organizational
document of any of the Issuers or Millbrook or Manischewitz or any
of their respective subsidiaries or any statute or any judgment,
order, decree, rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over any of the
Issuers or Millbrook or Manischewitz or any of their respective
subsidiaries or any of their material properties or material
assets; and no consent, approval, authorization or order of, or
filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment,
order, decree, rule or regulation is required for the execution,
delivery and performance by each of the Issuers and Millbrook and
Manischewitz of each of the Transaction Documents, the issuance,
authentication, sale and delivery of the Securities and compliance
by the respective Issuers and Millbrook and Manischewitz with the
terms thereof and the consummation of the Transactions, except for
such consents, approvals, authorizations, filings, registrations or
qualifications (i) which shall have been obtained or made prior to
the Closing Date, (ii) as may be required to be obtained or made
under the Securities Act and applicable state securities laws as
provided in the Registration Rights Agreements, (iii) as may be
required to be obtained or made under applicable state securities
laws in connection with the purchase and resale of the Securities
by the Initial Purchaser and (iv) the liens contemplated by the
Amended Credit Agreement.
(o) Deloitte & Touche LLP are independent certified public
accountants with respect to Holdings, the Company and Millbrook,
within the meaning of Rule 101 of the Code of Professional Conduct
of the American Institute of Certified Public Accountants ("AICPA")
and its interpretations and rulings thereunder. Except as set forth
in the Offering Memorandum, including, without limitation, under
"Risk Factors--Unaudited Historical Financial Data", the historical
financial statements of Holdings (including the related notes
thereto) contained in the Offering Memorandum, comply in all
material respects with the requirements applicable to a
registration statement on Form S-1 under the Securities Act (except
that certain supporting schedules are omitted); such financial
statements have been prepared in conformity with generally accepted
accounting principles consistently applied throughout the periods
covered thereby and when taken as a whole, present fairly, in all
material respects, the financial position of Holdings at the
respective dates indicated and the results of its operations and
its cash flows for the respective periods indicated; the unaudited
financial data of the Predecessor set forth in the Offering
Memorandum are fair presentations of the information they purport
to show; and the historical financial information contained in the
Offering Memorandum under the headings "Summary--Summary Historical
Finan-
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cial Data--R.A.B. Holdings, Inc.", "Selected Historical Financial
Data--R.A.B. Holdings, Inc.", and "Management's Discussion and
Analysis of Results of Operations and Financial Condition--R.A.B.
Holdings, Inc." is fairly and accurately derived, in all material
respects, from the accounting records of Holdings and its
subsidiaries. Except as set forth in the Offering Memorandum,
including, without limitation, under "Risk Factors--Unaudited Pro
Forma Condensed Consolidated Financial Data" and except for the pro
forma adjustments specified therein, the pro forma financial
information contained in the Offering Memorandum has been prepared
on a basis consistent with the historical financial statements of
Holdings contained in the Offering Memorandum, includes all
material adjustments to the historical financial information
required by Rule 11-02 of Regulation S-X under the Securities Act
to reflect the transactions described in the Offering Memorandum
and gives effect to assumptions made on a reasonable basis. The
other historical financial and statistical information included in
the Offering Memorandum are, in all material respects, a reasonable
presentation of the information they purport to show.
(p) Arthur Andersen, LLP are independent certified public
accountants with respect to Manischewitz within the meaning of Rule
101 of the Code of Professional Conduct of the American Institute
of Certified Public Accountants ("AICPA") and its interpretations
and rulings thereunder. The historical combined financial
statements (including the related notes) of MANO Holdings
Corporation, a Delaware corporation ("MANO"), and KBMC Acquisition
Company, L.P., a Delaware limited partnership ("KBMC") contained in
the Offering Memorandum comply in all material respects with the
requirements applicable to a registration statement on Form S-1
under the Securities Act (except that certain supporting schedules
are omitted); such financial statements have been prepared in
conformity with generally accepted accounting principles
consistently applied throughout the periods covered thereby and
when, taken as a whole, present fairly, in all material respects,
the combined financial position of MANO and KBMC at the respective
dates indicated and the combined results of their operations and
their cash flows for the respective periods indicated; and the
historical financial information contained in the Offering
Memorandum under the headings "Summary--Summary Historical Combined
Financial Data--The B. Manischewitz Company, LLC," "Selected
Historical Combined Financial Data--The B. Manischewitz Company,
LLC," and "Management's Discussion and Analysis of Results of
Operations and Financial Condition--The B. Manischewitz Company,
LLC" is fairly and accurately, in all material respects, derived
from the accounting records of Manischewitz (which is the sole
asset of MANO and KBMC).
(q) There are no legal or governmental proceedings pending to
which Holdings or any of its subsidiaries or, to the knowledge of
the Issuers and Millbrook, Manischewitz or any of its subsidiaries
is a party or of which any property or assets of Holdings or any of
its subsidiaries or Manischewitz or any of its sub-
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sidiaries is the subject which, singularly or in the aggregate,
could reasonably be expected to have a Material Adverse Effect; and
to the knowledge of the Issuers and Millbrook, no such proceedings
are threatened or contemplated by governmental authorities or
threatened by others.
(r) To the knowledge of the Issuers and Millbrook, no action
has been taken and no statute, rule, regulation or order has been
enacted, adopted or issued by any governmental agency or body which
prevents the issuance of the Securities or suspends the sale of the
Securities in any jurisdiction; no injunction, restraining order or
order of any nature by any federal or state court of competent
jurisdiction has been issued with respect to any of the Issuers or
Millbrook or Manischewitz or any of their respective subsidiaries
which would prevent or suspend the issuance or sale of the
Securities or the use of the Preliminary Offering Memorandum or the
Offering Memorandum in any jurisdiction; no action, suit or
proceeding is pending against or, to the knowledge of the Issuers
and Millbrook, threatened against or affecting any of the Issuers
or Millbrook, any of their respective subsidiaries or Manischewitz
or any of its subsidiaries before any court or arbitrator or any
governmental agency, body or official, domestic or foreign, which
could reasonably be expected to interfere with or adversely affect
the issuance of the Securities or in any manner draw into question
the validity or enforceability of any of the Transaction Documents
or any action taken or to be taken pursuant thereto; and the
Issuers and Millbrook have and, to the knowledge of the Issuers and
Millbrook, Manischewitz has complied with any and all requests by
any securities authority in any jurisdiction for additional
information to be included in the Preliminary Offering Memorandum
and the Offering Memorandum.
(s) None of Holdings or any of its subsidiaries, and to the
knowledge of the Issuers and Millbrook, none of Manischewitz or any
of its subsidiaries is (i) in violation of its charter or by-laws
or other organizational documents, (ii) in default in any material
respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition
contained in any material indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which it is
a party or by which it is bound or to which any of its property or
assets is subject, (iii) in violation in any material respect of
any law, ordinance, governmental rule, regulation or court decree
to which it or its property or assets may be subject, except, in
the case of clauses (ii) and (iii), for such violations which would
not, singularly or in the aggregate, have a Material Adverse
Effect.
(t) Holdings and each of its subsidiaries and, to the
knowledge of the Issuers and Millbrook, Manischewitz and each of
its subsidiaries possess all material licenses, certificates,
authorizations and permits issued by, and have made all
declarations and filings with, the appropriate federal, state or
foreign regulatory
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agencies or bodies which are necessary or desirable for the
ownership of their respective properties or the conduct of their
respective businesses as described in the Offering Memorandum,
except where the failure to possess or make the same would not,
singularly or in the aggregate, have a Material Adverse Effect, and
neither Holdings nor any of its subsidiaries nor does Holdings or
any of its subsidiaries have knowledge that Manischewitz or any of
its subsidiaries has received notification of any revocation or
modification of any such license, certificate, authorization or
permit or has any reason to believe that any such license,
certificate, authorization or permit will not be renewed in the
ordinary course.
(u) Holdings and each of its subsidiaries and, to the
knowledge of the Issuers and Millbrook, Manischewitz and each of
its subsidiaries have filed all federal, state, local and foreign
income and franchise tax returns required to be filed through the
date hereof and have paid all taxes due thereon, and no tax
deficiency has been determined adversely to Holdings or any of its
subsidiaries or, to the knowledge of the Issuers and Millbrook,
Manischewitz or any of its subsidiaries which has had (nor does
Holdings or any of its subsidiaries have any knowledge of any tax
deficiency which, if determined adversely to Holdings or any of its
subsidiaries or Manischewitz or any of its subsidiaries could
reasonably be expected to have) a Material Adverse Effect.
(v) None of Holdings or any of its subsidiaries is (i) an
"investment company" or a company "controlled by" an investment
company within the meaning of the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and the rules and
regulations of the Commission thereunder or (ii) a "holding
company" or a "subsidiary company" of a holding company or an
"affiliate" thereof within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(w) Holdings and each of its subsidiaries maintain a system of
internal accounting controls intended to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations and (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with United States generally
accepted accounting principles.
(x) Holdings and each of its subsidiaries and, to the
knowledge of the Issuers and Millbrook, Manischewitz and any of its
subsidiaries have insurance covering their respective properties,
operations, personnel and businesses, which insurance is in amounts
and insures against such losses and risks as are customary for
similarly situated businesses. None of Holdings and its
subsidiaries, or to the knowledge of the Issuers and Millbrook,
Manischewitz and its subsidiaries has received notice from any
insurer or agent of such insurer that capital improvements
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or other expenditures are required or necessary to be made in order
to continue such insurance.
(y) Holdings and each of its subsidiaries and, to the
knowledge of the Issuers and Millbrook, Manischewitz and each of
its subsidiaries own or possess adequate rights to use all material
patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations,
copyrights, licenses and know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) necessary for the conduct of
their respective businesses as presently conducted; and the conduct
of their respective businesses as presently conducted do not
conflict in any material respect with, and Holdings and its
subsidiaries have not and, to the knowledge of the Issuers and
Millbrook, Manischewitz and its subsidiaries have not received any
notice of any claim of conflict with, any such rights of others.
(z) Holdings and each of its subsidiaries and, to the
knowledge of the Issuers and Millbrook, Manischewitz and each of
its subsidiaries have good title in fee simple to, or have valid
rights to lease or otherwise use, all items of real and personal
property which are material to the business of Holdings, each of
its subsidiaries and Manischewitz and each of its subsidiaries, as
described in the Offering Memorandum, in each case free and clear
of all liens, encumbrances, claims and defects and imperfections of
title except such as (i) do not materially interfere with the use
made and proposed to be made of such property by Holdings and its
subsidiaries or Manischewitz and its subsidiaries, as applicable,
(ii) could not reasonably be expected to have a Material Adverse
Effect or (iii) as described in the Offering Memorandum.
(aa) No labor disturbance by or dispute with the employees of
Holdings or any of its subsidiaries or, to the knowledge of the
Issuers and Millbrook, Manischewitz or any of its subsidiaries
exists or, to the knowledge of the Issuers and Millbrook, is
contemplated or threatened, except as could not reasonably be
expected to have a Material Adverse Effect.
(bb) No "prohibited transaction" (as defined in Section 406 of
the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code")) or "accumulated funding
deficiency" (as defined in Section 302 of ERISA) or any of the
events set forth in Section 4043(b) of ERISA (other than events
with respect to which the 30-day notice requirement under Section
4043 of ERISA has been waived) has occurred with respect to any
employee benefit plan of Holdings or any of its subsidiaries or, to
the knowledge of the Issuers and Millbrook, Manischewitz or any of
its subsidiaries which could reasonably be expected to
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<PAGE>
have a Material Adverse Effect; each such employee benefit plan of
Holdings and its subsidiaries or, to the knowledge of the Issuers
and Millbrook, Manischewitz and its subsidiaries, is in compliance
in all material respects with applicable law, including ERISA and
the Code; none of Holdings or any of its subsidiaries or, to the
knowledge of the Issuers and Millbrook, Manischewitz or any of its
subsidiaries has incurred liability under Title IV of ERISA with
respect to the termination of, or withdrawal from, any pension plan
for which Holdings or any of its subsidiaries would have any
liability after giving effect to the Acquisition; and each such
pension plan that is intended to be qualified under Section 401(a)
of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which could
reasonably be expected to cause the loss of such qualification.
(cc) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission or other release
of any kind of toxic or other hazardous wastes or other hazardous
substances by, due to or caused by Holdings or any of its
subsidiaries or, to the knowledge of the Issuers and Millbrook,
Manischewitz or any of its subsidiaries (any other entity
(including any predecessor) for whose acts or omissions Holdings or
any of its subsidiaries or, to the knowledge of the Issuers and
Millbrook, Manischewitz or any of its subsidiaries is or could
reasonably be expected to be liable) upon any of the property now
or previously owned or leased by Holdings or any of its
subsidiaries or, to the knowledge of the Issuers and Millbrook,
Manischewitz or any of its subsidiaries, or upon any other
property, in violation of any statute or any ordinance, rule,
regulation, order, judgment, decree or permit or which would, under
any applicable statute or any ordinance, rule, regulation, order,
judgment, decree or permit, give rise to any liability, except for
any violation or liability could not reasonably be expected to
have, singularly or in the aggregate with all such violations and
liabilities, a Material Adverse Effect; and to the knowledge of the
Issuers and Millbrook, there has been no disposal, discharge,
emission or other release of any kind onto such property or into
the environment surrounding such property of any toxic or other
wastes or other hazardous substances with respect to which Holdings
has knowledge, except for any such disposal, discharge, emission or
other release of any kind which could not reasonably be expected to
have, singularly or in the aggregate with all such discharges and
other releases, a Material Adverse Effect.
(dd) Neither Holdings nor, to the knowledge of the Issuers
and Millbrook, any director, officer, agent, employee or other
person associated with or acting on behalf of Holdings or any
subsidiary of Holdings (and having authority to act on behalf of
Holdings or any such subsidiary) has (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any
direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds;
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(iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977; or (iv) made any other unlawful
payment.
(ee) On and immediately after the Closing Date, each of the
Issuers and Millbrook and Manischewitz (after giving effect to the
issuance of the Securities and the Guarantees and to the other
Transactions) will be Solvent. As used in this paragraph, the term
"Solvent" means, with respect to a particular person and date, that
on such date (i) the present fair market value (or present fair
saleable value) of the assets of such person is not less than the
total amount required to pay the probable liabilities of such
person on its total existing debts and liabilities (including
contingent liabilities) as they become absolute and matured in
accordance with their scheduled maturity, (ii) such person is able
to realize upon its assets and pay its debts and other liabilities,
contingent obligations and commitments as they mature and become
due in the normal course of business, (iii) assuming the sale of
the Securities as contemplated by this Agreement and the Offering
Memorandum, such person is not incurring debts or liabilities
beyond its ability to pay as such debts and liabilities mature in
accordance with their scheduled maturity and (iv) such person is
not engaged in any business or transaction, and is not about to
engage in any business or transaction, for which its assets and
property would constitute unreasonably small capital after giving
due consideration to the prevailing practice in the industry in
which such person is engaged. In computing the amount of such
contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in the light of
all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or
matured liability.
(ff) Except for the conversion and other provisions of
Holdings' Series A Preferred Stock, there are no outstanding
subscriptions, rights, warrants, calls or options to acquire, or
instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares
of capital stock of or other equity or other ownership interest in
Holdings or any of its subsidiaries.
(gg) Neither Holdings nor any of its subsidiaries owns any
"margin securities" as that term is defined in Regulations G and U
of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), and none of the proceeds of the sale of
the Securities will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, for the
purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Securities to be
considered a "purpose credit" within the meanings of Regulation G,
T, U or X of the Federal Reserve Board.
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<PAGE>
(hh) None of the Issuers or Millbrook or Manischewitz is a
party to any contract, agreement or understanding with any person
that would give rise to a valid claim against any of the Issuers or
Millbrook or Manischewitz or the Initial Purchaser for a brokerage
commission, finder's fee or like payment in connection with the
offering and sale of the Securities.
(ii) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(jj) None of the Issuers or Millbrook or Manischewitz nor any
of their respective affiliates or any person authorized to act on
its or their behalf has engaged or will engage in any directed
selling efforts (as such term is defined in Regulation S under the
Securities Act ("Regulation S")), and all such persons have
complied and will comply with the offering restrictions requirement
of Regulation S to the extent applicable.
(kk) None of the Issuers or Millbrook or Manischewitz nor any
of their respective affiliates has, directly or through any agent,
sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any security (as such term is defined in
the Securities Act), which is or will be integrated with the sale
of the Securities in a manner that would require registration of
the Securities under the Securities Act.
(ll) None of the Issuers or Millbrook or Manischewitz nor any
of their respective affiliates or any other person authorized to
act on its or their behalf has engaged, in connection with the
offering of the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
Securities Act.
(mm) There are no securities of any of the Issuers or
Millbrook or Manischewitz registered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or listed on a
national securities exchange or quoted in a U.S. automated
inter-dealer quotation system.
(nn) None of the Issuers or Millbrook or Manischewitz has
taken and none will take, directly or indirectly, any action
prohibited by Regulation M under the Exchange Act in connection
with the offering of the Securities.
(oo) No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Preliminary Offering Memorandum or the
Offering Memorandum has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.
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<PAGE>
(pp) None of Holdings or any of its subsidiaries or, to the
knowledge of the Issuers and Millbrook, Manischewitz or any of its
subsidiaries does business with the government of Cuba or with any
person or affiliate located in Cuba within the meaning of Florida
Statutes Section 517.075.
(qq) Since the date as of which information is given in the
Offering Memorandum, except as otherwise stated therein, (i) there
has been no material adverse change in the condition, financial or
otherwise, or in the earnings, management or business, as presently
conducted or currently contemplated, of Holdings and its
subsidiaries or Manischewitz and its subsidiaries, whether or not
arising in the ordinary course of business, (ii) none of Holdings
and its subsidiaries or Manischewitz and its subsidiaries has
incurred any material liability or obligation, direct or
contingent, other than in the ordinary course of business, (iii)
none of Holdings and its subsidiaries or Manischewitz and its
subsidiaries has entered into any material transaction other than
in the ordinary course of business and (iv) there has not been any
change in the capital stock or long-term debt of Holdings, or any
dividend or distribution of any kind declared, paid or made by
Holdings on any class of its capital stock.
2. Purchase and Resale of the Securities. (a) On the basis of
the representations, warranties and agreements contained in this Agreement, and
subject to the terms and conditions set forth in this Agreement, (i) Holdings
agrees to issue and sell to the Initial Purchaser and the Initial Purchaser
agrees to purchase from Holdings $48,000,000 of Holdings Notes at a purchase
price equal to 97% of the principal amount thereof and (ii) the Company agrees
to issue and sell to the Initial Purchaser and the Initial Purchaser agrees to
purchase from the Company $120,000,000 of Company Notes at a purchase price
equal to 97% of the principal amount thereof. The Issuers shall not be obligated
to deliver any of the Securities except upon payment for all of the Securities
to be purchased as provided herein.
(b) The Initial Purchaser has advised the Issuers that it
proposes to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. The Initial
Purchaser represents and warrants to, and agrees with, the Issuers that (i) it
is purchasing the Securities pursuant to a private sale exempt from registration
under the Securities Act, (ii) it has not solicited offers for, or offered or
sold, and will not solicit offers for, or offer or sell, the Securities by means
of any form of general solicitation or general advertising within the meaning of
Rule 502(c) of Regulation D under the Securities Act ("Regulation D") or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act and (iii) it has solicited and will solicit offers for the
Securities only from, and has offered or sold and will offer, sell or deliver
the Securities, as part of its initial offering, only (A) within the United
States to persons whom it reasonably believes to be qualified institutional
buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the
Securities Act, or if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when such
person has represented to it that each such account is a Qualified Institutional
Buyer to whom notice has been given
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<PAGE>
that such sale or delivery is being made in reliance on Rule 144A and in each
case, in transactions in accordance with Rule 144A and (B) outside the United
States to persons other than U.S. persons in compliance with and in reliance on
Regulation S under the Securities Act ("Regulation S").
(c) In connection with the offer and sale of the Securities in
reliance on Regulation S, the Initial Purchaser represents, warrants and agrees
that:
(i) The Securities have not been registered under the
Securities Act and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except
pursuant to an exemption from, or in transactions not subject to,
the registration requirements of the Securities Act.
(ii) The Initial Purchaser has offered and sold the
Securities, and will offer and sell the Securities, (A) as part of
its distribution at any time and (B) otherwise until 40 days after
the later of the commencement of the offering of the Securities and
the Closing Date, only in accordance with Regulation S or Rule 144A
or any other available exemption from registration under the
Securities Act.
(iii) None of the Initial Purchaser or any of its affiliates
or any other person acting on its or their behalf has engaged or
will engage in any directed selling efforts with respect to the
Securities, and all such persons have complied and will comply with
the offering restrictions requirement of Regulation S.
(iv) The Initial Purchaser (A) has not offered or sold and
prior to the date six months after the Closing Date will not offer
or sell any Securities to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (B) has complied and
will comply with all applicable provisions of the Financial
Services Act 1986 and the Public Offers of Securities Regulations
1995 with respect to anything done by it in relation to the
Securities in, from or otherwise involving the United Kingdom and
(C) has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with
the issue of Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.
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<PAGE>
(v) At or prior to the confirmation of sale of any Securities
sold in reliance on Regulation S, it will have sent to each
distributor, dealer or other person receiving a selling concession,
fee or other remuneration that purchase Securities from it during
the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons (i) as
part of their distribution at any time or (ii) otherwise until
40 days after the later of the commencement of the offering of
the Securities and the date of original issuance of the
Securities, except in accordance with Regulation S or Rule
144A or any other available exemption from registration under
the Securities Act. Terms used above have the meanings given
to them by Regulation S."
(vi) It has not and will not enter into any contractual
arrangement with any distributor with respect to the distribution
of the Securities, except with its affiliates or with the prior
written consent of the Issuers.
Terms used in this Section 2(c) have the meanings given to them by Regulation S.
(d) The Initial Purchaser agrees that, prior to or
simultaneously with the confirmation of sale by the Initial Purchaser to any
purchaser of any of the Securities purchased by the Initial Purchaser from the
Issuers pursuant hereto, the Initial Purchaser shall furnish to that purchaser a
copy of the Offering Memorandum (and any amendment or supplement thereto that
the Company shall have furnished to the Initial Purchaser prior to the date of
such confirmation of sale). In addition to the foregoing, the Initial Purchaser
acknowledges and agrees that the Issuers and, for purposes of the opinions to be
delivered to the Initial Purchaser pursuant to Sections 5(d) and (e), counsel
for the Issuers and for the Initial Purchaser, respectively, may rely upon the
accuracy of the representations and warranties of the Initial Purchaser and its
compliance with the agreements contained in this Section 2, and the Initial
Purchaser hereby consents to such reliance.
(e) The Issuers acknowledge and agree that the Initial
Purchaser may sell Securities to any affiliate of an Initial Purchaser and that
any such affiliate may sell Securities purchased by it to an Initial Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of
and payment for the Securities shall be made at the offices of Parker Chapin
Flattau & Klimpl, LLP, New York, New York, or at such other place as shall be
agreed upon by the Initial Purchaser and the Issuers, at 10:00 A.M., New York
City time, on May 1, 1998, or at such other time or date, not later than seven
full business days thereafter, as shall be agreed upon by the Initial Purchaser
and the Issuers (such date and time of payment and delivery being referred to
herein as the "Closing Date").
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<PAGE>
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to Holdings and the Company, as applicable, by wire or
book-entry transfer of same-day funds to such account or accounts as Holdings
and the Company shall specify prior to the Closing Date or by such other means
as the parties hereto shall agree prior to the Closing Date against delivery to
the Initial Purchaser of the certificates evidencing the Securities. Time shall
be of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligations of the Initial Purchaser
hereunder. Upon delivery, the Securities shall be in global form, registered in
such names and in such denominations as the Initial Purchaser shall have
requested in writing not less than two full business days prior to the Closing
Date. The Issuers agree to make one or more global certificates evidencing the
Securities available for inspection by the Initial Purchaser in New York, New
York at least 24 hours prior to the Closing Date.
4. Further Agreements of the Issuers and Millbrook. Each of
the Issuers and Millbrook agrees with the Initial Purchaser:
(a) to advise the Initial Purchaser promptly and, if requested
in writing, confirm such advice in writing, of the happening of any
event which makes any statement of a material fact made in the
Offering Memorandum untrue or which requires the making of any
additions to or changes in the Offering Memorandum (as amended or
supplemented from time to time) in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; to advise the Initial Purchaser promptly of
any order preventing or suspending the use of the Preliminary
Offering Memorandum or the Offering Memorandum, of any suspension
of the qualification of the Securities for offering or sale in any
jurisdiction and of the initiation or threatening (of which the
Issuers and Millbrook have knowledge) of any proceeding for any
such purpose; and to use its best efforts to prevent the issuance
of any such order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum or
suspending any such qualification and, if any such suspension is
issued, to obtain the lifting thereof at the earliest possible
time;
(b) to furnish promptly to the Initial Purchaser and counsel
for the Initial Purchaser, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and
any amendments or supplements thereto) as may be reasonably
requested;
(c) prior to making any amendment or supplement to the
Offering Memorandum, to furnish a copy thereof to the Initial
Purchaser and counsel for the Initial Purchaser and not to effect
any such amendment or supplement to which the Initial Purchaser
shall reasonably object in writing by notice to the Company after a
reasonable period to review, but in no event five (5) business days
after being furnished with a copy of the proposed amendment on
supplement;
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<PAGE>
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchaser, any event shall occur or
condition exist as a result of which it is necessary, in the
opinion of counsel for the Initial Purchaser or counsel for the
Issuers, to amend or supplement the Offering Memorandum in order
that the Offering Memorandum will not include an untrue statement
of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser,
not misleading, or if it is necessary to amend or supplement the
Offering Memorandum to comply with applicable law, to promptly
prepare such amendment or supplement as may be necessary to correct
such untrue statement or omission or so that the Offering
Memorandum, as so amended or supplemented, will comply with
applicable law;
(e) for so long as any of the Securities are outstanding and
are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, to furnish to holders of the Securities
and prospective purchasers of the Securities designated by such
holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act, unless the Issuers are
then subject to and in compliance with Section 13 or 15(d) of the
Exchange Act (the foregoing agreement being for the benefit of the
holders from time to time of the Securities and prospective
purchasers of the Securities designated by such holders);
(f) for so long as any of the Holdings Notes or the Company
Notes are outstanding, to furnish to the Initial Purchaser copies
of any annual reports, quarterly reports and current reports filed
by the respective Issuer with the Commission on Forms 10-K, 10-Q
and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports and information as
shall be furnished by the respective Issuer to the trustee under
the applicable Indenture or to the holders of the Securities
pursuant to the applicable Indenture or the Exchange Act or any
rule or regulation of the Commission thereunder;
(g) to promptly take from time to time such actions as the
Initial Purchaser may reasonably request to qualify the Securities
for offering and sale under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may designate and to
continue such qualifications in effect for so long as required for
the resale of the Securities; and to arrange for the determination
of the eligibility for investment of the Securities under the laws
of such jurisdictions as the Initial Purchaser may reasonably
request; provided that Holdings and its subsidiaries shall not be
obligated to qualify as foreign corporations in any jurisdiction in
which they are not so qualified or to file a general consent to
service of process in any jurisdiction;
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<PAGE>
(h) to assist the Initial Purchaser in arranging for the
Securities to be designated for trading in The Portal Market in
accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. ("NASD") relating to
trading in The Portal Market and for the Securities to be eligible
for clearance and settlement through The Depository Trust Company
("DTC");
(i) not to, and to cause its affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as such term is defined in the Securities Act)
which could be integrated with the sale of the Securities in a
manner which would require registration of the Securities under the
Securities Act;
(j) except following the effectiveness of the Holdings
Exchange Offer Registration Statement, the Holdings Shelf
Registration Statement, the Company Exchange Offer Registration
Statement or the Company Shelf Registration Statement, as the case
may be, not to, and to cause its affiliates not to, and not to
authorize or knowingly permit any person authorized to act on their
behalf to, solicit any offer to buy or offer to sell the Securities
by means of any form of general solicitation or general advertising
within the meaning of Regulation D or in any manner involving a
public offering within the meaning of Section 4(2) of the
Securities Act; and not to offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, contract or disposition would
cause the exemption afforded by Section 4(2) of the Securities Act
to cease to be applicable to the offering and sale of the
Securities as contemplated by this Agreement and the Offering
Memorandum;
(k) for a period of 180 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or
otherwise dispose of, directly or indirectly, or file a
registration statement for, or announce any offer, sale, contract
for sale of or other disposition of any debt securities issued or
guaranteed by any of the Issuers or any of their respective
subsidiaries (other than the Securities) without the prior written
consent of the Initial Purchaser;
(l) during the period from the Closing Date until three years
after the Closing Date, without the prior written consent of the
Initial Purchaser, not to, and not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the
Securities that have been reacquired by them, except for Securities
purchased by the Company or any of its affiliates and resold in a
transaction registered under the Securities Act;
(m) not to, for so long as the Securities are outstanding, be
or become, or be or become owned by, an open-end investment
company, unit investment trust or face-amount certificate company
that is or is required to be registered un-
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der Section 8 of the Investment Company Act, and to not be or
become, or be or become owned by, a closed-end investment company
required to be registered, but not registered thereunder;
(n) in connection with the offering of the Securities, until
the Initial Purchaser shall have notified the Issuers of the
completion of the resale of the Securities, not to, and to cause
its affiliated purchasers (as defined in Regulation M under the
Exchange Act) not to, either alone or in association with one or
more other persons, bid for or purchase, for any account in which
it or any of its affiliated purchasers has a beneficial interest,
any Securities, or attempt to induce any person to purchase any
Securities; and not to, and to cause its affiliated purchasers not
to, make bids or purchase for the purpose of creating actual, or
apparent, active trading in or of raising the price of the
Securities;
(o) in connection with the offering of the Securities, to make
its officers, employees, independent accountants and legal counsel
reasonably available upon request by the Initial Purchaser;
(p) to furnish to the Initial Purchaser on the date hereof a
copy of the independent auditors' reports included in the Offering
Memorandum signed by the accountants rendering such report;
(q) to do and perform all things required to be done and
performed by it under this Agreement that are within its control
prior to or after the Closing Date, and to use its best efforts to
satisfy all conditions precedent on its part to the delivery of the
Securities;
(r) to not take any action prior to the execution and delivery
of the Indentures which, if taken after such execution and
delivery, would have violated any of the covenants contained in the
Indentures;
(s) to not take any action prior to the Closing Date which
would require the Offering Memorandum to be amended or supplemented
pursuant to Section 4(d);
(t) prior to the Closing Date, not to issue any press release
or other communication directly or indirectly or hold any press
conference with respect to any Issuer, its condition, financial or
otherwise, or earnings, business affairs or business prospects
(except for routine oral marketing communications in the ordinary
course of business and consistent with the past practices of such
Issuer and of which the Initial Purchaser is notified), without the
prior written consent of the Initial Purchaser, unless in the
judgment of such Issuer and its counsel, and after notification to
the Initial Purchaser, such press release or communication is
required by law rule or regulation; and
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(u) to apply the net proceeds from the sale of the Securities
as set forth in the Offering Memorandum under the heading "Use of
Proceeds".
5. Conditions of Initial Purchaser's Obligations. The
obligations of the Initial Purchaser hereunder are subject to the accuracy, on
and as of the date hereof and the Closing Date, of the representations and
warranties of each of the Issuers and Millbrook contained herein, to the
accuracy of the statements of each of the Issuers and Millbrook and their
respective officers made in any written certificates delivered pursuant hereto,
to the performance by each of the Issuers and Millbrook of their respective
obligations hereunder, and to each of the following additional terms and
conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the
Initial Purchaser as promptly as practicable on or following the
date of this Agreement or at such other date and time as to which
the Initial Purchaser may agree; and no stop order suspending the
sale of the Securities in any jurisdiction by any governmental
authority or regulatory body shall have been issued and no
proceeding for that purpose shall have been commenced or shall be
pending or threatened in writing.
(b) The Initial Purchaser shall not have discovered and
disclosed to Holdings or the Company on or prior to the Closing
Date that the Offering Memorandum or any amendment or supplement
thereto contains an untrue statement of a fact which, in the
opinion of counsel for the Initial Purchaser, is material or omits
to state any fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to
make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of each of the Transaction
Documents and the Offering Memorandum, and all other legal matters
relating to the Transaction Documents and the transactions
contemplated thereby, shall be satisfactory in all material
respects to the Initial Purchaser, and the Issuers shall have
furnished to the Initial Purchaser all documents and information
that they or their counsel may reasonably request to enable them to
pass upon such matters.
(d) Parker Chapin Flattau & Klimpl, LLP shall have furnished
to the Initial Purchaser a written opinion, as counsel to the
Issuers, addressed to the Initial Purchaser and dated the Closing
Date, in form and substance reasonably satisfactory to the Initial
Purchaser, substantially to the effect set forth in Annex B hereto.
In addition such opinion letter shall include appropriate opinions
with respect to the Holdings Escrow Agreement and the security
interests granted thereunder.
(e) The Initial Purchaser shall have received from Cahill
Gordon & Reindel (a partnership including a professional
corporation), counsel for the Initial
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Purchaser, such opinion or opinions, dated the Closing Date, with
respect to such matters as the Initial Purchaser may reasonably
require, and the Issuers shall have furnished to such counsel such
documents and information as they request for the purpose of
enabling them to pass upon such matters.
(f) Holdings shall cause to be furnished to the Initial
Purchaser (i) a "comfort" letter of Arthur Andersen, LLP, addressed
to the Initial Purchaser and dated the date hereof, in form and
substance satisfactory to the Initial Purchaser, substantially to
the effect set forth in Annex C hereto and (ii) a "bring-down"
letter of Arthur Andersen, LLP, addressed to the Initial Purchaser
and dated the Closing Date (A) confirming that they are independent
accountants with respect to Manischewitz and its subsidiaries
within the meaning of Rule 101 of the Code of Professional Conduct
of the AICPA and its interpretations and rulings thereunder, (B)
stating, as of the date of the bring-down letter (or, with respect
to matters involving changes or developments since the respective
dates as of which specified financial information is given in the
Offering Memorandum, as of a date not more than three business days
prior to the date of the bring-down letter), that the conclusions
and findings of such auditors with respect to the financial
information and other matters covered by the initial "comfort"
letter are accurate and (C) confirming in all material respects the
conclusions and findings set forth in their initial "comfort"
letter.
(g) Holdings shall cause to be furnished to the Initial
Purchaser (i) a "comfort" letter of Deloitte & Touche, LLP,
addressed to the Initial Purchaser and dated the date hereof, in
form and substance satisfactory to the Initial Purchaser,
substantially to the effect set forth in Annex D hereto and (ii) a
"bring-down" letter of Deloitte & Touche, LLP, addressed to the
Initial Purchaser and dated the Closing Date (A) confirming that
they are independent auditors with respect to Holdings and its
subsidiaries within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and
rulings thereunder, (B) stating, as of the date of the bring-down
letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified
financial information is given in the Offering Memorandum, as of a
date not more than three business days prior to the date of the
bring-down letter), that the conclusions and findings of such
auditors with respect to the financial information and other
matters covered by the initial "comfort" letter are accurate and
(C) confirming in all material respects the conclusions and
findings set forth in their initial "comfort" letter.
(h) Each of the Issuers shall have furnished to the Initial
Purchaser a certificate, dated the Closing Date, of its chief
executive officer and its chief financial officer stating that (A)
such officers have carefully examined the Offering Memorandum, (B)
in their opinion, the Offering Memorandum, as of its date, did not
include any untrue statement of a material fact and did not omit to
state a ma-
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<PAGE>
terial fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, and since the date of the Offering Memorandum, no event
has occurred which should have been set forth in a supplement or
amendment to the Offering Memorandum so that the Offering
Memorandum (as so amended or supplemented) would not include any
untrue statement of a material fact and would not omit to state a
material fact or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading and (C) as of the Closing Date, the representations and
warranties made by Holdings and its subsidiaries in this Agreement
are true and correct in all material respects (except to the extent
any such representation or warranty applied to a specific date),
Holdings has complied or has caused each of its subsidiaries to
comply with all agreements and satisfied all conditions on their
part to be performed or satisfied hereunder on or prior to the
Closing Date, and subsequent to the date of the most recent
financial statements contained in the Offering Memorandum, there
has been no material adverse change in the financial position or
results of operation of Holdings or any of its subsidiaries or, to
the knowledge of the Issuers and Millbrook, Manischewitz or any of
its subsidiaries, or any change in or affecting the condition
(financial or otherwise), results of operations or business, as
presently conducted or currently contemplated, of the Company and
its subsidiaries taken as a whole or Manischewitz and its
subsidiaries taken as a whole, except as set forth in the Offering
Memorandum.
(i) The Initial Purchaser shall have received a counterpart of
each of the Holdings Registration Rights Agreement and the Company
Registration Rights Agreement which shall have been executed and
delivered by duly authorized officers of each of the Issuers and
Millbrook and Manischewitz, to the extent each is a party thereto.
(j) The Indentures shall have been duly executed and delivered
by each of the Issuers and Millbrook and Manischewitz, to the
extent each is a party thereto, and by the trustee, and the
Securities shall have been duly executed and delivered by each of
the Issuers and Millbrook and Manischewitz, as applicable, and duly
authenticated by the trustee.
(k) The Securities shall have been approved by the NASD for
trading in The Portal Market.
(l) If any event shall have occurred that requires the Issuers
under Section 4(d) to prepare an amendment or supplement to the
Offering Memorandum, such amendment or supplement shall have been
prepared, the Initial Purchaser shall have been given a reasonable
opportunity to comment thereon, and copies thereof shall have been
delivered to the Initial Purchaser reasonably in advance of the
Closing Date.
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(m) There shall not have occurred any invalidation of Rule
144A under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities
Act or the Exchange Act by the Commission or any amendment or
proposed amendment thereof by the Commission which in the judgment
of the Initial Purchaser would materially impair the ability of the
Initial Purchaser to purchase, hold or effect resales of the
Securities as contemplated hereby.
(n) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the
Offering Memorandum (exclusive of any amendment or supplement
thereto), there shall not have been any change in the capital stock
or long-term debt (except as described in the Offering Memorandum)
or any change, or any development involving a prospective change,
in or affecting the condition (financial or otherwise), results of
operations or business, as presently conducted or currently
contemplated, of the Company and its subsidiaries taken as a whole,
or any development involving a prospective change in or affecting
the condition (financial or otherwise), results of operations or
business, as presently conducted or currently contemplated, of
Manischewitz and its subsidiaries, the effect of which, in any such
case described above, is, in the reasonable judgment of the Initial
Purchaser, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or delivery of the Securities
on the terms and in the manner contemplated by this Agreement and
the Offering Memorandum (exclusive of any amendment or supplement
thereto).
(o) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by
any governmental agency or body which would, as of the Closing
Date, prevent the issuance or sale of any of the Securities; and no
injunction, restraining order or order of any other nature by any
federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the issuance or
sale of the Securities.
(p) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Securities or any of the Issuers' other debt securities or
preferred stock by any "nationally recognized statistical rating
organization", as such term is defined by the Commission for
purposes of Rule 436(g)(2) of the rules and regulations of the
Commission under the Securities Act and (ii) no such organization
shall have publicly announced that it has under surveillance or
review (other than an announcement with positive implications of a
possible upgrading), its rating of the Securities or any of the
Issuers' other debt securities or preferred stock.
(q) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, the American
Stock Exchange or the over-the-
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counter market shall have been suspended or limited, or minimum
prices shall have been established on any such exchange or market
by the Commission, by any such exchange or by any other regulatory
body or governmental authority having jurisdiction, or trading in
any securities of the Issuers on any exchange or in the
over-the-counter market shall have been suspended or (ii) any
general moratorium on commercial banking activities shall have been
declared by federal or New York state authorities or (iii) an
outbreak or escalation of hostilities or a declaration by the
United States of a national emergency or war or (iv) a material
adverse change in general economic, political or financial
conditions (or the effect of international conditions on the
financial markets in the United States shall be such) the effect of
which, in the case of this clause (iv), is, in the reasonable
judgment of the Initial Purchaser, so material and adverse as to
make it impracticable or inadvisable to proceed with the sale or
the delivery of the Securities on the terms and in the manner
contemplated by this Agreement and in the Offering Memorandum
(exclusive of any amendment or supplement thereto).
(r) The Amended Credit Agreement shall have been duly executed
and delivered by each party thereto. There shall exist at and as of
the Closing Date (after giving effect to the Transactions) no
condition that would constitute a default (or an event that with
notice, a lapse of time, or both, would constitute a default) under
the Amended Credit Agreement.
(s) The Stock Contribution shall have been duly consummated.
(t) The Acquisition shall have been consummated concurrently
with the issuance and sale of the Securities and the Guarantees by
the Issuers and Millbrook and Manischewitz, as the case may be. The
Initial Purchaser shall have received conformed counterparts of all
documents and agreements entered into or received in connection
with the consummation of the Acquisition.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchaser.
6. Termination. The obligations of the Initial Purchaser
hereunder may be terminated by the Initial Purchaser, in its absolute
discretion, by notice given to and received by the Issuers prior to delivery of
and payment for the Securities if, prior to that time, any of the events
described in Section 5(m), (n), (o), (p) or (q) shall have occurred and be
continuing.
7. Reimbursement of Initial Purchaser's Expenses. If (a) this
Agreement shall have been terminated pursuant to Section 6, (b) the Issuers
shall fail to tender the Securities for delivery to the Initial Purchaser or (c)
the Initial Purchaser shall decline to purchase the Securities for any reason
permitted under this Agreement, the Issuers, jointly and severally, shall
reimburse the Initial Purchaser for such reasonable out-of-pocket expenses
(including reasonable fees and disbursements of counsel) as shall have been
reasonably incurred
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by the Initial Purchaser in connection with this Agreement and the proposed
purchase and resale of the Securities.
8. Indemnification. (a) Each of the Issuers and Millbrook,
jointly and severally, shall indemnify and hold harmless the Initial Purchaser,
its affiliates, their respective officers, directors, employees, representatives
and agents, and each person, if any, who controls the Initial Purchaser within
the meaning of the Securities Act or the Exchange Act (collectively referred to
for purposes of this Section 8(a) and Section 9 as an "Initial Purchaser"), from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, without limitation, any loss, claim,
damage, liability or action relating to purchases and sales of the Securities),
to which the Initial Purchaser may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Preliminary Offering Memorandum or the Offering Memorandum or in any
amendment or supplement thereto or in any information provided by the Issuers
pursuant to Section 4(e) or (ii) the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
shall reimburse the Initial Purchaser promptly upon demand for any reasonable
legal or other reasonable expenses incurred by the Initial Purchaser in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Issuers and Millbrook shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with any Initial Purchaser's Information; and provided, further, that with
respect to any such untrue statement in or omission from the Preliminary
Offering Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of the Initial Purchaser to the extent that the
sale to the person asserting any such loss, claim, damage, liability or action
was an initial resale by the Initial Purchaser and any such loss, claim, damage,
liability or action of or with respect to the Initial Purchaser results from the
fact that both (A) to the extent required by applicable law, a copy of the
Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities to such person and (B) the
untrue statement in or omission from the Preliminary Offering Memorandum was
corrected in the Offering Memorandum unless, in either case, such failure to
deliver the Offering Memorandum was a result of non-compliance by the Issuers
with Section 4(b).
(b) The Initial Purchaser shall indemnify and hold harmless
each of the Issuers and Millbrook, their respective affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls any Issuer within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 8(b) and
Section 9 as the "Issuers"), from and against any loss, claim, damage or li-
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ability, joint or several, or any action in respect thereof, to which the
Issuers may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with any Initial Purchaser's Information, and shall
reimburse each Issuer for any legal or other expenses reasonably incurred by
such Issuer in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 8(a) or 8(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 8 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon the written advice of counsel to the indemnified party)
that there may be legal defenses available to it that are different from or in
addition to those available to the indemnifying party, (3) a conflict exists
(based upon the written advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party) or (4) the indemnifying party has not in fact employed
counsel reasonably satisfactory to the indemnified party to assume the
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<PAGE>
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 8(a) and 8(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
The obligations of the Issuers, Millbrook and the Initial
Purchaser in this Section 8 and in Section 9 are in addition to any other
liability that the Issuers, Millbrook or the Initial Purchaser, as the case may
be, may otherwise have, including in respect of any breaches of representations,
warranties and agreements made herein by any such party.
9. Contribution. If the indemnification provided for in
Section 8 is unavailable or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Issuers, on the one hand, and the
Initial Purchaser, on the other hand, from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Issuers, on the one hand, and the Initial Purchaser, on the other hand, with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Issuers, on the
one hand, and the Initial Purchaser, on the other hand, with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before
deducting expenses) received by or on behalf of the Issuers, on the one hand,
and the total discounts and commissions received by the Initial Purchaser with
respect to the Securities purchased under this Agreement, on the other hand,
bear to the total gross proceeds from the sale of the Securities
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under this Agreement, in each case as set forth in the table on the cover page
of the Offering Memorandum. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to the Issuers or information supplied by the Issuers, on the one hand,
or to any Initial Purchaser's Information, on the other hand, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Issuers and the
Initial Purchaser agree that it would not be just and equitable if contributions
pursuant to this Section 9 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 9 shall be deemed to include, for
purposes of this Section 9, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 9, the Initial Purchaser shall not be required to contribute any
amount in excess of the amount by which the total discounts and commissions
received by the Initial Purchaser with respect to the Securities purchased by it
under this Agreement exceeds the amount of any damages which the Initial
Purchaser has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
10. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchaser, the
Issuers, Millbrook and their respective successors. This Agreement and the terms
and provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 8 and 9 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Issuers,
Millbrook and the Initial Purchaser and in Section 4(e) with respect to holders
and prospective purchasers of the Securities. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 10, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
11. Expenses. The Issuers and Millbrook, jointly and
severally, agree with the Initial Purchaser to pay (a) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Securities and
any taxes payable in that connection (other than income taxes of the Initial
Purchaser); (b) the costs incident to the preparation, printing and distribution
of the Preliminary Offering Memorandum, the Offering Memorandum and any
amendments or supplements thereto; (c) the costs of reproducing and distributing
each of the Transaction Documents; (d) the costs incident to the preparation,
printing and delivery of the certificates evidencing the Securities, including
stamp duties and transfer taxes, if any, payable upon the initial issuance of
the Securities; (e) the fees and expenses of the Issuers' counsel; (f) the fees
and expenses of the independent auditors referred to in Section 5(f) and 5(g);
(g) the
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fees and expenses of qualifying the Securities under the securities laws of the
several jurisdictions as provided in Section 4(h) and of preparing, printing and
distributing Blue Sky Memoranda; (h) any fees charged by rating agencies for
rating the Securities; (i) the fees and expenses of the trustee and any paying
agent (including related fees and expenses of any counsel to such parties); (j)
all expenses and application fees incurred in connection with the application
for the inclusion of the Securities on The Portal Market and the approval of the
Securities for book-entry transfer by DTC; and (k) all other costs and expenses
incident to the performance of the obligations of the Issuers and Millbrook
under this Agreement which are not otherwise specifically provided for in this
Section 11; provided, however, that except as provided in this Section 11 and
Section 7, the Initial Purchaser shall pay its own costs and expenses.
12. Survival. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Issuers,
Millbrook and the Initial Purchaser contained in this Agreement or made by or on
behalf of the Issuers, Millbrook or the Initial Purchaser pursuant to this
Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any of their respective
affiliates, officers, directors, employees, representatives, agents or
controlling persons.
13. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by
mail or telecopy transmission to Chase Securities Inc., 270 Park
Avenue, New York, New York 10017, Attention: James Casey
(telecopier no.: (212) 270-0994); or
(b) if to the Issuers or Millbrook, shall be delivered or sent
by mail or telecopy transmission to the address of the Company set
forth in the Offering Memorandum, Attention: Mr. Richard B.
Bernstein and James A. Cohen, Esq. (telecopier no.: (212)
888-5025), with a copy to Parker Chapin Flattau & Klimpl, LLP, 1211
Avenue of the Americas, New York, NY 10036 Attention: Martin Eric
Weisberg, Esq. (telecopier no.: (212) 704-6288).
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof by the intended recipient.
14. Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
15. Initial Purchaser's Information. The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the Initial
Purchaser's Information consists
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solely of the following information in the Preliminary Offering Memorandum and
the Offering Memorandum: (i) the last paragraph on the front cover page
concerning the terms of the offering by the Initial Purchaser; (ii) the legend
on page ii concerning over-allotment and trading activities by the Initial
Purchaser; and (iii) the statements concerning the Initial Purchaser contained
in the third, twelfth and thirteenth paragraphs under the heading "Plan of
Distribution".
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to conflicts of laws principles.
17. Counterparts. This Agreement may be executed in one or
more counterparts (which may include counterparts delivered by telecopier) and,
if executed in more than one counterpart, the executed counterparts shall each
be deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
18. Amendments. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by each of
the parties hereto.
19. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
20. No Waiver; No Third Party Beneficiaries. Nothing contained
in this Agreement shall be deemed to be, or construed as, a waiver of any claim
or other right of the Company under the Manischewitz Purchase Agreement. Except
as provided in Sections 8, 9 and 11, and only to the extent specified therein,
there are no third party beneficiaries of this Agreement, other than the
purchasers of the Securities from the Initial Purchaser and no rights are
conveyed to any person not a party hereto, other than such purchasers.
[Remainder of page intentionally left blank]
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If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Issuers, Millbrook and
the Initial Purchaser in accordance with its terms.
Very truly yours,
R.A.B. HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
R.A.B. ENTERPRISES, INC.
By:
----------------------------------
Name:
Title:
MILLBROOK DISTRIBUTION SERVICES INC.
By:
----------------------------------
Name:
Title:
S-1
<PAGE>
Agreed and Accepted by:
CHASE SECURITIES INC.
By:
----------------------------------
Name:
Title:
S-2
<PAGE>
SCHEDULE 1
Subsidiaries of R.A.B. Holdings, Inc.
R.A.B. Enterprises, Inc.
Millbrook Distribution Services Inc.
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SCHEDULE 2
Subsidiaries of The B. Manischewitz Company, LLC
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ANNEX A-1
[Form of Holdings Registration Rights Agreement]
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ANNEX A-2
[Form of Company Registration Rights Agreement]
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ANNEX B
[Form of Opinion of Counsel for the Issuers]
Parker Chapin Flattau & Klimpl, LLP shall have furnished to
the Initial Purchaser their written opinion, as counsel to the Issuers,
addressed to the Initial Purchaser and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchaser, substantially to the
effect set forth below:
1. Holdings and each of its subsidiaries has been duly
incorporated and or organized, as the case may be, is validly existing as a
corporation, limited partnership or limited liability company, as the case may
be, in good standing under its jurisdiction of formation, is duly qualified to
do business and is in good standing as a foreign corporation, partnership or
limited liability company, as the case may be, in each jurisdiction in which its
ownership or lease of property or the conduct of its businesses requires such
qualification, and has all power and authority necessary to own or hold its
properties and to conduct the businesses in which it is engaged (except where
the failure to so qualify or have such power or authority would not, singularly
or in the aggregate, have a Material Adverse Effect);
2. each of Holdings and the Company has the authorized
capitalization set forth in the Offering Memorandum, and all of the outstanding
shares of capital stock of Holdings have been duly and validly authorized and
issued and are fully paid and non-assessable; all of the outstanding shares of
capital stock or membership interests of each subsidiary of Holdings have been
duly and validly authorized and issued, are fully paid and non-assessable and
are owned directly or indirectly by Holdings, free and clear of any lien,
charge, encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party (except that the capital stock of Millbrook
is pledged pursuant to the Credit Agreement and will be pledged pursuant to the
Amended Credit Agreement);
3. the descriptions in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts and other documents are
accurate in all material respects; the statements in the Offering Memorandum
under the heading "Certain U.S. Federal Income Tax Considerations", to the
extent that they constitute summaries of matters of law or regulation or legal
conclusions, have been reviewed by such counsel and fairly summarize the matters
described therein in all material respects; and such counsel does not have
actual knowledge of any current or pending legal or governmental actions, suits
or proceedings which would be required to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 which are not described as so required;
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4. each Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder;
5. each of the Issuers has full right, power and authority to
execute and deliver each of the Transaction Documents, to the extent each is a
party thereto, and to perform its obligations thereunder; and all corporate
action required to be taken for the due and proper authorization, execution and
delivery of each of the Transaction Documents and the consummation of the
transactions contemplated thereby have been duly and validly taken;
6. each of the Purchase Agreement, the Holdings Registration
Rights Agreement and the Company Registration Rights Agreement has been duly
authorized, executed and delivered by each of the Issuers and constitutes a
valid and legally binding agreement of each of the Issuers enforceable against
each of the Issuers in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law) and except to the extent that
the indemnification provisions thereof may be unenforceable;
7. each Indenture has been duly authorized, executed and
delivered by each of the Issuers party thereto and, assuming due authorization,
execution and delivery thereof by the trustee, constitutes a valid and legally
binding agreement of each of such Issuers enforceable against each of such
Issuers in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law);
8. the Securities have been duly authorized and issued by each
of the Issuers, as applicable, and, assuming due authentication thereof by the
trustee and upon payment and delivery in accordance with the Purchase Agreement,
will constitute valid and legally binding obligations of each of the applicable
Issuers, entitled to the benefits of the applicable Indenture and enforceable
against each of such Issuers in accordance with their terms, except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law);
9. the Manischewitz Purchase Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
legally binding agreement of the Company enforceable against the Company in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law);
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10. the Amended Credit Agreement has been duly authorized,
executed and delivered by each of the Issuers party thereto and constitutes a
valid and legally binding agreement of each of such Issuers enforceable against
each of such Issuers in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law);
11. the Stock Contribution has been duly authorized and
consummated;
12. each Transaction Document conforms in all material
respects to the description thereof contained in the Offering Memorandum;
13. the execution, delivery and performance by each of the
Issuers of each of the Transaction Documents, the issuance, authentication, sale
and delivery of the Securities and compliance by each of the Issuers with the
applicable terms thereof and the consummation of the transactions contemplated
by the Transaction Documents will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of any of the Issuers or any of their respective
subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which any of the Issuers
or any of their respective subsidiaries is a party or by which any of the
Issuers or any of their respective subsidiaries is bound or to which any of the
property or assets of any of the Issuers or any of their respective subsidiaries
is subject, nor will such actions result in any violation of the provisions of
the charter or by-laws of any of the Issuers or any of their respective
subsidiaries or any statute or any judgment, order, decree, rule or regulation
of any court or arbitrator or governmental agency or body having jurisdiction
over any of the Issuers or any of their respective subsidiaries or any of their
properties or assets; and no consent, approval, authorization or order of, or
filing or registration with, any such court or arbitrator or governmental agency
or body under any such statute, judgment, order, decree, rule or regulation is
required for the execution, delivery and performance by the Issuers of each of
the Transaction Documents, the issuance, authentication, sale and delivery of
the Securities and compliance by the Issuers with the applicable terms thereof
and the consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations, filings,
registrations or qualifications (i) which have been obtained or made prior to
the Closing Date and (ii) as may be required to be obtained or made under the
Securities Act and applicable state securities laws as provided in the
Registration Rights Agreements;
14. to the best knowledge of such counsel, there are no
pending actions or suits or judicial, arbitral, rule-making, administrative or
other proceedings to which Holdings or any of its subsidiaries is a party or of
which any property or assets of Holdings or any of its subsidiaries is the
subject which (A) singularly or in the aggregate, if determined adversely to
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Holdings or any of its subsidiaries, could reasonably be expected to have a
Material Adverse Effect or (B) questions the validity or enforceability of any
of the Transaction Documents or any action taken or to be taken pursuant
thereto; and to the best knowledge of such counsel, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others;
15. neither Holdings nor any of its subsidiaries is (A) in
violation of its charter or by-laws, (B) in default in any material respect, and
no event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term,
covenant or condition contained in any material indenture, mortgage, deed of
trust, loan agreement or other material agreement or instrument to which it is a
party or by which it is bound or to which any of its property or assets is
subject or (C) in violation in any material respect of any law, ordinance,
governmental rule, regulation or court decree to which it or its property or
assets may be subject;
16. neither Holdings nor any of its subsidiaries is (A) an
"investment company" or a company "controlled by" an investment company within
the meaning of the Investment Company Act and the rules and regulations of the
Commission thereunder, without taking account of any exemption under the
Investment Company Act arising out of the number of holders of Holding's
securities or (B) a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" thereof within the meaning of the Public Utility
Holding Company Act of 1935, as amended;
17. neither the consummation of the transactions contemplated
by this Agreement nor the sale, issuance, execution or delivery of the
Securities will violate Regulation G, T, U or X of the Federal Reserve Board;
and
18. assuming the accuracy of the representations, warranties
and agreements of the Issuers and of the Initial Purchaser contained in the
Purchase Agreement, no registration of the Securities under the Securities Act
or qualification of the Indentures under the Trust Indenture Act is required in
connection with the issuance and sale of the Securities by the Issuers and the
offer, resale and delivery of the Securities by the Initial Purchaser in the
manner contemplated by the Purchase Agreement and the Offering Memorandum.
Such counsel shall also state that they have participated in
conferences with representatives of Holdings, the Company, Millbrook and
Manischewitz, representatives of their independent accountants and counsel and
representatives of the Initial Purchaser and its counsel at which conferences
the contents of the Preliminary Offering Memorandum and the Offering Memorandum
and any amendment and supplement thereto and related matters were discussed and,
although such counsel assumes no responsibility for the accuracy, completeness
or fairness of the Offering Memorandum or any amendment or supplement thereto
(except as expressly provided in paragraph 3 above), nothing has come to the
attention of such counsel to cause such counsel to believe that the Offering
Memorandum or any amendment or supplement thereto (other than the financial
statements and other financial and statistical data derived from the fi-
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<PAGE>
nancial statements, as to which such counsel need express no belief), as of the
date thereof and as of the Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials which are furnished to the Initial
Purchaser.
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ANNEX C
[Form of Arthur Andersen Comfort Letter]
Holdings shall have furnished to the Initial Purchaser a
letter of Arthur Andersen, LLP, addressed to the Initial Purchaser and dated the
date of the Purchase Agreement, in form and substance satisfactory to the
Initial Purchaser, substantially to the effect set forth below:
1. they are independent certified auditors with respect to
Manischewitz within the meaning of Rule 101 of the Code of Professional Conduct
of the AICPA and its interpretations and rulings;
2. based upon a reading of the latest unaudited financial
statements made available by Manischewitz, the procedures of the AICPA for a
review of interim financial information as described in Statement of Auditing
Standards No. 71, reading of minutes and inquiries of certain officials of
Manischewitz who have responsibility for financial and accounting matters and
certain other limited procedures requested by the Initial Purchaser and
described in detail in such letter, nothing has come to their attention that
causes them to believe that (A) any unaudited financial statements included in
the Offering Memorandum do not comply as to form in all material respects with
applicable accounting requirements, (B) any material modifications should be
made to the unaudited financial statements included in the Offering Memorandum
for them to be in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements included in the Offering Memorandum or (C) the information included
under the headings "Summary--Summary Historical Combined Financial Data--The B.
Manischewitz Company, LLC", "Selected Historical Combined Financial Data--The B.
Manischewitz Company, LLC", and "Management's Discussion and Analysis of Results
of Operations and Financial Condition--The B. Manischewitz Company, LLC" is not
in conformity with the disclosure requirements of Regulation S-K that would
apply to the Offering Memorandum if the Offering Memorandum were a prospectus
included in a registration statement on Form S-1 under the Securities Act;
3. based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available balance
sheet, including reading of minutes and inquiries of certain officials of
Manischewitz who have responsibility for financial and accounting matters,
nothing has come to their attention that causes them to believe that (A) at a
specified date not more than three business days prior to the date of such
letter, there was any change in capital stock, increase in long-term debt or
decrease in net current assets as compared with the amounts shown in the January
31, 1998 unaudited balance sheet included in the Offering Memorandum or (B) for
the period from February 1, 1998 to a specified date not more than three
business days prior to the date of such letter, there were any decreases, as
compared with the corresponding period in the preceding year, in net sales,
income from operations, EBITDA or net income, except in all instances for
changes, increases or decreases that the Offering Memorandum
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discloses have occurred or which are set forth in such letter, in which case the
letter shall be accompanied by an explanation by Holdings and the Company as to
the significance thereof unless said explanation is not deemed necessary by the
Initial Purchaser; and
4. they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of
Manischewitz) set forth in the Offering Memorandum agrees with the accounting
records of Manischewitz, excluding any questions of legal interpretation.
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ANNEX D
[Form of Deloitte & Touche Comfort Letter]
The Company shall have furnished to the Initial Purchaser a
letter of Deloitte & Touche, LLP, addressed to the Initial Purchaser and dated
the date of the Purchase Agreement, in form and substance satisfactory to the
Initial Purchaser, substantially to the effect set forth below:
1. they are independent certified auditors with respect to
Holdings within the meaning of Rule 101 of the Code of Professional Conduct of
the AICPA and its interpretations and rulings;
2. based upon a reading of the latest unaudited financial
statements made available by the Company, the procedures of the AICPA for a
review of interim financial information as described in Statement of Auditing
Standards No. 71, reading of minutes and inquiries of certain officials of the
Company who have responsibility for financial and accounting matters and certain
other limited procedures requested by the Initial Purchaser and described in
detail in such letter, nothing has come to their attention that causes them to
believe that (A) any unaudited financial statements included in the Offering
Memorandum do not comply as to form in all material respects with applicable
accounting requirements, (B) any material modifications should be made to the
unaudited financial statements included in the Offering Memorandum for them to
be in conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial statements
included in the Offering Memorandum or (C) the information included under the
headings "Summary--Summary Pro Forma Financial Data--R.A.B. Holdings, Inc.,"
"Selected Historical Financial Data----R.A.B. Holdings, Inc." and "Management's
Discussion and Analysis of Results of Operations and Financial Condition--R.A.B.
Holdings, Inc." is not in conformity with the disclosure requirements of
Regulation S-K that would apply to the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement on Form S-1
under the Securities Act;
3. based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available balance
sheet, including reading of minutes and inquiries of certain officials of the
Company who have responsibility for financial and accounting matters, nothing
has come to their attention that causes them to believe that (A) at a specified
date not more than three business days prior to the date of such letter, there
was any change in capital stock, increase in long-term debt or decrease in net
current assets as compared with the amounts shown in the December 31, 1997
audited balance sheet included in the Offering Memorandum or (B) for the period
from January 1, 1998 to a specified date not more than three business days prior
to the date of such letter, there were any decreases, as compared with the
corresponding period in the preceding year, in net sales, income from
operations, EBITDA or net in-
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come, except in all instances for changes, increases or decreases that the
Offering Memorandum discloses have occurred or which are set forth in such
letter, in which case the letter shall be accompanied by an explanation by
Holdings and the Company as to the significance thereof unless said explanation
is not deemed necessary by the Initial Purchaser;
4. they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company) set forth in the Offering Memorandum agrees with the accounting records
of the Company, excluding any questions of legal interpretation; and
5. on the basis of a reading of the unaudited pro forma
financial information included in the Offering Memorandum, carrying out certain
specified procedures, reading of minutes and inquiries of certain officials of
the Company who have responsibility for financial and accounting matters and
proving the arithmetic accuracy of the application of the pro forma adjustments
to the historical amounts in the pro forma financial information, nothing came
to their attention which caused them to believe that the pro forma financial
information does not comply in form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of such information.
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Exhibit 10.1
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AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of May 1, 1998
By and among
MILLBROOK DISTRIBUTION SERVICES INC.,
THE B. MANISCHEWITZ COMPANY, LLC,
THE LENDERS NAMED HEREIN,
and
THE CHASE MANHATTAN BANK, AS AGENT
and
NATIONSBANK, N.A., AS CO-AGENT
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TABLE OF CONTENTS
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I. DEFINITIONS.................................................................................................2
SECTION 1.01. Certain Defined Terms............................................................2
SECTION 1.02. Accounting Terms................................................................24
II. THE LOANS..................................................................................................25
SECTION 2.01. Term Loan Commitments and Revolving Credit
Commitments.....................................................................25
SECTION 2.02. Loans...........................................................................26
SECTION 2.03. Notice of Loans.................................................................28
SECTION 2.04. Notes; Repayment of Loans.......................................................28
SECTION 2.05. Interest on Loans...............................................................31
SECTION 2.06. Fees............................................................................31
SECTION 2.07. Termination and Reduction of Revolving Credit
Commitments and Term Loan Commitments...........................................32
SECTION 2.08. Interest on Overdue Amounts; Alternate Rate of Interest.........................32
SECTION 2.09. Prepayment of Loans.............................................................33
SECTION 2.10. Reserve Requirements; Change in
Circumstances...................................................................36
SECTION 2.11. Change in Legality..............................................................38
SECTION 2.12. Indemnity.......................................................................39
SECTION 2.13. Pro Rata Treatment; Assumption by and
Delegation of Authority to the Agent............................................40
SECTION 2.14. Sharing of Setoffs..............................................................43
SECTION 2.15. Payments and Computations.......................................................43
SECTION 2.16. Taxes...........................................................................45
SECTION 2.17. Issuance of Letters of Credit...................................................47
SECTION 2.18. Payment of Letters of Credit; Reimbursement.....................................48
SECTION 2.19. Agent's Actions with respect to Letters of Credit...............................50
SECTION 2.20. Letter of Credit Fees...........................................................50
SECTION 2.21. Duty to Mitigate; Assignment of Commitments
Under Certain Circumstances.....................................................51
III. COLLATERAL SECURITY........................................................................................51
SECTION 3.01. Security Documents..............................................................51
SECTION 3.02. Filing and Recording............................................................52
IV. REPRESENTATIONS AND WARRANTIES.............................................................................52
SECTION 4.01. Organization, Legal Existence...................................................52
SECTION 4.02. Authorization...................................................................53
SECTION 4.03. Governmental Approvals..........................................................53
SECTION 4.04. Binding Effect..................................................................53
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SECTION 4.05. Material Adverse Change.........................................................53
SECTION 4.06. Litigation; Compliance with Laws; etc...........................................54
SECTION 4.07. Financial Statements............................................................54
SECTION 4.08. Federal Reserve Regulations.....................................................55
SECTION 4.09. Taxes...........................................................................55
SECTION 4.10. Employee Benefit Plans..........................................................56
SECTION 4.11. No Material Misstatements.......................................................58
SECTION 4.12. Investment Company Act; Public Utility
Holding Company Act.............................................................58
SECTION 4.13. Security Interest...............................................................58
SECTION 4.14. Use of Proceeds.................................................................58
SECTION 4.15. Subsidiaries....................................................................58
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks......................................................................58
SECTION 4.17. Solvency........................................................................59
SECTION 4.18. Permits, etc....................................................................60
SECTION 4.19. Compliance with Environmental Laws..............................................60
SECTION 4.20. No Change in Credit Criteria or Collection
Policies........................................................................61
SECTION 4.21. Employee Matters................................................................61
SECTION 4.22. Manischewitz Acquisition........................................................61
SECTION 4.23. Year 2000.......................................................................62
V. CONDITIONS OF CREDIT EVENTS................................................................................62
SECTION 5.01. All Credit Events...............................................................62
SECTION 5.02. First Borrowing.................................................................62
VI. AFFIRMATIVE COVENANTS......................................................................................67
SECTION 6.01. Legal Existence.................................................................67
SECTION 6.02. Businesses and Properties.......................................................67
SECTION 6.03. Insurance.......................................................................68
SECTION 6.04. Taxes...........................................................................68
SECTION 6.05. Financial Statements, Reports, etc..............................................69
SECTION 6.06. Litigation and Other Notices....................................................71
SECTION 6.07. ERISA...........................................................................72
SECTION 6.08. Maintaining Records; Access to Properties and
Inspections; Right to Audit.....................................................73
SECTION 6.09. Use of Proceeds.................................................................74
SECTION 6.10. Fiscal Year-End.................................................................74
SECTION 6.11. Further Assurances..............................................................74
SECTION 6.12. Additional Grantors and Guarantors..............................................74
SECTION 6.13. Environmental Laws..............................................................74
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SECTION 6.14. Pay Obligations to Lenders and Perform Other
Covenants.......................................................................76
SECTION 6.15. Maintain Operating Accounts.....................................................77
SECTION 6.16. Interest Rate Protection........................................................77
SECTION 6.17. Landlord Waivers................................................................77
SECTION 6.18. Year 2000.......................................................................77
SECTION 6.19. Lock-Box Accounts...............................................................77
VII. NEGATIVE COVENANTS.........................................................................................77
SECTION 7.01. Liens...........................................................................77
SECTION 7.02. Sale and Lease-Back Transactions................................................79
SECTION 7.03. Indebtedness....................................................................79
SECTION 7.04. Dividends, Distributions and Payments...........................................80
SECTION 7.05. Consolidations, Mergers and Sales of Assets.....................................81
SECTION 7.06. Investments.....................................................................81
SECTION 7.07. Capital Expenditures............................................................82
SECTION 7.08. Debt Service Coverage Ratio.....................................................83
SECTION 7.09. Leverage Ratio; EBITDA; Availability............................................83
SECTION 7.10. Business........................................................................84
SECTION 7.11. Sales of Receivables............................................................84
SECTION 7.12. Use of Proceeds.................................................................84
SECTION 7.13. ERISA...........................................................................84
SECTION 7.14. Accounting Changes..............................................................85
SECTION 7.15. Prepayment or Modification of Indebtedness;
Modification of Charter Documents...............................................85
SECTION 7.16. Transactions with Affiliates....................................................85
SECTION 7.17. Negative Pledges, Etc...........................................................85
SECTION 7.18. Consulting Fees.................................................................85
VIII. EVENTS OF DEFAULT.........................................................................................86
IX. AGENT.....................................................................................................89
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND
OTHER COLLATERAL..........................................................................................94
SECTION 10.01. Collection of Receivables; Management
of Collateral..................................................................94
SECTION 10.02. Receivables Documentation......................................................96
SECTION 10.03. Status of Receivables and Other Collateral.....................................96
SECTION 10.04. Monthly Statement of Account...................................................98
SECTION 10.05. Collateral Custodian...........................................................98
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XI. MISCELLANEOUS...............................................................................................98
SECTION 11.01. Notices........................................................................98
SECTION 11.02. Survival of Agreement..........................................................99
SECTION 11.03. Successors and Assigns; Participations.........................................99
SECTION 11.04. Expenses; Indemnity...........................................................103
SECTION 11.05. Applicable Law................................................................104
SECTION 11.06. Right of Setoff...............................................................104
SECTION 11.07. Payments on Business Days.....................................................105
SECTION 11.08. Waivers; Amendments...........................................................105
SECTION 11.09. Severability..................................................................107
SECTION 11.10. Entire Agreement; Waiver of Jury Trial, etc...................................107
SECTION 11.11. Confidentiality...............................................................107
SECTION 11.12. Submission to Jurisdiction....................................................108
SECTION 11.13. Counterparts..................................................................108
SECTION 11.14. Headings......................................................................109
EXHIBITS
EXHIBIT A Form of Term Note
EXHIBIT B Form of Revolving Credit Note
EXHIBIT C Form of Opinion of Counsel
EXHIBIT D Form of Pledge Agreement
EXHIBIT E Form of Security Agreement (Millbrook)
EXHIBIT E-1 Form of Security Agreement (Manischewitz)
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Form of Security Agreement - Patents and
Trademarks
EXHIBIT G-1 Form of Security Agreement - Patents, Trademarks and
Copyrights (Manischewitz)
EXHIBIT H Form of Intercompany Indebtedness
SCHEDULES
SCHEDULE 2.01(a) Term Loan Commitments
SCHEDULE 2.01(b) Revolving Credit Commitments
SCHEDULE 2.02 Domestic Lending Offices
SCHEDULE 2.03 Eurodollar Lending Offices
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.05 Material Adverse Change
SCHEDULE 4.06(a) Litigation
SCHEDULE 4.06(b) Compliance with Laws
SCHEDULE 4.09 Taxes
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SCHEDULE 4.10 Multi-Employer Plans
SCHEDULE 4.16(a) Title to Properties
SCHEDULE 4.16(c) Ownership of Trademarks
SCHEDULE 4.18 Permits
SCHEDULE 4.19 Environmental Law Compliance
SCHEDULE 6.05(g) Borrowing Base Certificate
SCHEDULE 7.01 Existing Liens
SCHEDULE 7.03 Existing Indebtedness
SCHEDULE 7.06 Investments
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AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 1, 1998,
by and among MILLBROOK DISTRIBUTION SERVICES INC., a Delaware
corporation ("Millbrook"), THE B. MANISCHEWITZ COMPANY, LLC, a
Delaware limited liability company ("Manischewitz" and,
together with Millbrook, the "Borrowers"), the financial
institutions from time to time party hereto, initially
consisting of those financial institutions listed on Schedules
2.01(a) and 2.01(b) annexed hereto (collectively, the
"Lenders"), THE CHASE MANHATTAN BANK, as administrative and
collateral agent for the Lenders (in such capacity, the
"Agent"), and NATIONSBANK, N.A., as Co-Agent and Documentation
Agent.
The Lenders made Loans available to Millbrook under the
Original Credit Agreement (such term and all other capitalized terms used in
this paragraph having the respective meanings ascribed to such terms above or in
Article I) up to an aggregate principal amount of $99,510,000 in the form of (a)
a Term Loan to Millbrook in an aggregate original principal amount of $9,310,000
and (b) Revolving Credit Loans in an aggregate principal amount not in excess of
$90,200,000 at any time outstanding. All of the proceeds of the Term Loan and a
portion of the proceeds of the Revolving Credit Loans made on the Original
Closing Date were used to partially finance the consideration being paid
pursuant to the Millbrook Acquisition Agreement. The proceeds of Revolving
Credit Loans made prior to the Closing Date were also used by Millbrook for
working capital and other general corporate purposes of Millbrook.
The parties hereto desire to amend and restate the Original
Credit Agreement to provide for, among other things, Manischewitz becoming
jointly and severally liable, as a borrower hereunder, for the Term Loan and the
Revolving Credit Loans. The proceeds of Revolving Credit Loans made after the
Closing Date shall be used for working capital and other general corporate
purposes of the Borrowers. The Grantors will continue to provide Collateral in
accordance with the provisions of this Agreement and the Security Documents. The
Lenders are severally, and not jointly, willing to continue to extend such Loans
to the Borrowers subject to the terms and conditions hereinafter set forth.
Accordingly, the Borrowers, the Lenders, the Agent and the Co-Agent hereby agree
as follows:
I. DEFINITIONS
SECTION 1.01. Certain Defined Terms. For purposes hereof, the
following terms shall have the meanings specified below:
"Adjusted LIBO Rate" shall mean, with respect to any
Eurodollar Loan for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the product of (i) the
LIBO Rate in effect for such Interest Period and (ii) Statutory Reserves. For
purposes hereof, "Statutory Reserves" shall mean a fraction (expressed as a
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decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency, or
supplemental reserves) expressed as a decimal established by the Board and any
other banking authority to which the Agent is subject for Eurocurrency
Liabilities (as defined in Regulation D). Such reserve percentages shall
include, without limitation, those imposed under Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and as such shall be
deemed to be subject to such reserve requirements without benefit of or credit
for proration, exemptions or offsets which may be available from time to time to
any Lender under Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Affiliate" of any person shall mean any other person which,
directly or indirectly, controls or is controlled by or is under common control
with such person. For the purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of voting
securities or by contract.
"Agent" shall have the meaning assigned to such term in the
preamble to this Agreement except that, solely with respect to the Mortgages,
and the rights and obligations of the mortgagee thereunder, NationsBank, N.A.
shall act as Agent.
"Agreement" shall mean this agreement as originally executed
and as it may from time to time be supplemented or amended pursuant to the
applicable provisions hereof.
"Alternate Base Loan" shall mean a Loan based on the Alternate
Base Rate in accordance with Article II hereof.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1%, and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by the Agent at its principal office
in New York City as its prime rate in effect at such time. "Base CD Rate" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and
(ii) Statutory Reserves and (b) the Assessment Rate. "Three-Month Secondary CD
Rate" shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at
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approximately 10:00 a.m., New York City time, on such day (or, if such day shall
not be a Business Day, on the next preceding Business Day) by the Agent from
three New York City negotiable certificate of deposit dealers of recognized
standing selected by the Agent and whom the Agent regularly utilizes for such
purpose. "Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the maximum reserve percentage (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal, established
by the Board and any other banking authority to which the Agent is subject, for
new negotiable nonpersonal time deposits in dollars of over $100,000 with
maturities approximately equal to three months. Statutory Reserves shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage. "Assessment Rate" shall mean, for any day, the annual
assessment rate (net of refunds and rounded upwards, if necessary, to the next
1/16 of 1%) estimated by the Agent (in good faith, but in no event in excess of
statutory or regulatory maximums) to be payable by the Agent to the Federal
Deposit Insurance Corporation (or any successor) for insurance by such
Corporation (or such successor) of time deposits made in dollars at the Agent's
domestic offices during the current calendar year. "Federal Funds Effective
Rate" shall mean, for any day, 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 on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by the Agent and whom the Agent regularly utilizes
for such purpose. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any
reason, including, the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms hereof, the Alternate Base Rate shall be
determined without regard to clause (b) or (c), or both, of the first sentence
of this definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate, the Base CD
Rate or the Federal Funds Effective Rate, respectively.
"Applicable Lending Office" shall mean, with respect to each
Lender, such Lender's Domestic Lending Office in the case of an Alternate Base
Loan and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Loan.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee and accepted by the Agent,
in substantially the form of Exhibit F annexed hereto.
"Availability" shall mean at any time (i) the lesser at such
time of (x) the Total Revolving Credit Commitment and (y) the Borrowing Base,
minus (ii) the sum at such time, without duplication, of (x) the unpaid
principal balance on the Revolving Credit Loans together
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with all reserves established pursuant to this Agreement including, without
limitation, to the extent landlord waivers are not obtained within 60 days of
the Closing Date, a two month rent reserve for all Collateral locations where a
landlord's waiver has not been obtained, Section 2.01, with respect to any
exposure to any Lender pursuant to Section 6.16, and Section 7.01(c) hereof and
(y) the Letter of Credit Usage. The Agent shall notify the Borrowers of all
reserves established pursuant to this Agreement subsequent to the Closing Date
and such reserves shall become effective fifteen days after such notice has been
given in accordance with Section 11.01 hereof.
"Bernstein" shall mean, collectively, (i) Mr. Richard A.
Bernstein, (ii) trusts for the benefit of Mr. Bernstein and/or members of his
immediate family and (iii) in the event of the incompetence or death of Mr.
Bernstein, his estate, executor, administrator or other personal representative.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrowers" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Borrowing Base" shall have the meaning assigned to such term
in Section 2.01(b) hereof.
"Business Day" shall mean any day, other than a Saturday,
Sunday or legal holiday in the State of New York, on which banks are open for
substantially all their banking business in New York City, except that, if any
determination of a "Business Day" shall relate to a Eurodollar Loan, the term
"Business Day" shall in addition exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Buy-Out Amount" shall have the meaning assigned to such term
in Sec tion 7.04 hereof.
"Capital Expenditures" shall mean all expenditures with
respect to any fixed assets or improvements, or for replacements, substitutions
or additions thereto, which have a useful life of more than one year, including
the direct or indirect acquisition of such assets.
"Capitalized Lease Obligation" shall mean an obligation to pay
rent or other amounts under any lease of (or other arrangement conveying the
right to use) real and/or personal property which obligation is required to be
classified and accounted for as a capital lease on a balance sheet prepared in
accordance with GAAP, and for purposes hereof the amount of such obligation
shall be the capitalized amount thereof determined in accordance with GAAP.
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"Cash Interest Expense" shall mean, with respect to any person
for any period, the Interest Expense less any amounts payable with respect to
the Rate Agreements of such person for such period less all non-cash items
constituting or otherwise included in the definition of Interest Expense during
such period (including, without limitation, amortization of debt discounts and
payments of interest on Indebtedness by issuance of Indebtedness).
"Change of Control" shall mean any of (i) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of Enterprises to any
person or group of related persons for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (a "Group"), together with any
Affiliates thereof other than to Holdings or a wholly owned subsidiary of
Holdings (or any successor thereto) or to Bernstein or an entity controlled by
Bernstein, (ii) the approval by the holders of the issued and outstanding
capital stock of Enterprises of any plan or proposal for the liquidation or
dissolution of Enterprises, (iii) any person or Group (other than Bernstein)
shall become the owner, directly or indirectly, beneficially or of record, of
shares representing more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Enterprises, (iv) the
replacement of a majority of the Board of Directors of Enterprises over a
two-year period from the directors who constituted the Board of Directors of
Enterprises at the beginning of such period, and such replacement shall not have
been approved by a vote of at least a majority of the Board of Directors of
Enterprises then still in office who either were members of such Board of
Directors at the beginning of such period or whose election as a member of such
Board of Directors was previously so approved, (v) Enterprises shall cease to
own (directly or indirectly) 100% of all classes of stock of Millbrook or (vi)
Enterprises shall cease to own (directly or indirectly) 100% of the voting
equity interests of Manischewitz.
"Closing Date" shall mean the date of the first borrowing
under this Agreement, but in no event later than May 1, 1998.
"Co-Agent" shall mean NationsBank, N.A. in its capacity as
Co-Agent and Documentation Agent.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean all collateral and security as
described in the Security Documents.
"Commitment" shall mean, with respect to each Lender, the sum
of the Term Loan Commitment of such Lender as set forth in Schedule 2.01(a), and
the Revolving Credit Commitment of such Lender as set forth in Schedule 2.01(b),
as each may be adjusted from time to time pursuant to this Agreement including,
without limitation, Section 2.07 hereof.
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"Consolidated" shall mean, in respect of any person, as
applied to any financial or accounting term, such term determined on a
consolidated basis in accordance with GAAP for the person and all consolidated
subsidiaries thereof.
"Contaminant" shall mean all Hazardous Materials and all those
substances which are regulated by or form the basis of liability under Federal,
state or local environmental, health and safety statutes or regulations or any
other material or substance which constitutes a material health, safety or
environmental hazard to any person or property.
"Credit Event" shall mean each borrowing and each issuance of
a Letter of Credit hereunder.
"Credits" shall mean the Loans and Letters of Credit.
"Cure Loans" shall have the meaning assigned to such term in
Section 2.13(d) hereof.
"Customer" shall mean and include the account debtor or
obligor with respect to any Receivable.
"Debt Service Coverage Ratio" shall mean, with respect to any
person for any period, the ratio of (i) EBITDA for the four most recent
consecutive fiscal quarters ending on or prior to the date of determination
minus Capital Expenditures (including, without limitation, Capitalized Lease
Obligations) made during such period minus all Permitted Dividends and
Distributions made during such period minus federal, state and local income
taxes actually paid in cash during such period to (ii) the sum of (x) the Cash
Interest Expense of such person for the four most recent consecutive fiscal
quarters ending on or prior to the date of determination and (y) the aggregate
Debt Service Expense of such person for such period.
"Debt Service Expense" shall mean, with respect to any person
for any period, the aggregate of regularly scheduled principal payments (other
than a Mandatory Prepayment) of all long-term Indebtedness made in cash by such
person during such period on a Consolidated basis in accordance with GAAP.
"Default" shall mean any event or condition which, with notice
or lapse of time or both, would constitute an Event of Default.
"dollars" or the symbol "$" shall mean lawful currency of the
United States of America.
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"Domestic Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Domestic Lending Office"
opposite its name in Schedule 2.02 annexed hereto, or such other office of such
Lender as such Lender may from time to time specify to the Borrowers and the
Agent.
"EBITDA" shall mean with respect to any person for any period
of time, the sum of (i) Net Income, (ii) Interest Expense, (iii) depreciation
and amortization, (iv) provision for LIFO adjustment for inventory valuation,
(v) non-cash portion of deferred compensation expenses and other non-cash
charges which reduced Net Income, and (vi) federal, state and local income
taxes, in each case of such person for such period, computed and calculated in
accordance with GAAP.
"Eligible Inventory" shall mean inventory which is, in the
reasonable opinion of the Agent, not obsolete, slow-moving or unmerchantable and
is and at all times shall continue to be reasonably acceptable to the Agent;
provided, however, that Eligible Inventory shall in no event include inventory
which (i) is not located at one of the addresses for locations of Collateral set
forth on Schedule I to the Security Agreement (Millbrook) or Security Agreement
(Manischewitz), as applicable, and with respect to which the Agent has not been
granted and has not perfected a valid, first priority security interest, (ii) is
damaged, (iii) is in-transit or (iv) has been returned or rejected by a Customer
and is not readily available for resale to a Customer. Standards of eligibility
may be fixed and revised from time to time solely by the Agent in the Agent's
exclusive reasonable judgment; provided, that the Agent shall promptly notify
the Borrowers of any change in the standards of eligibility and such change
shall become effective 15 days following the date such notification has been
given in accordance with Section 11.01 hereof. In determining eligibility, the
Agent may, but need not, rely on reports and schedules furnished by the
Borrowers but reliance by the Agent thereon from time to time shall not be
deemed to limit the right of the Agent to revise standards of eligibility at any
time as to both present and future inventory of the Borrowers.
"Eligible Receivables" shall mean Receivables created by a
Borrower arising out of the sale of goods or rendition of services by such
Borrower, which are and at all times shall continue to be reasonably acceptable
to the Agent. Standards of eligibility may be fixed and revised from time to
time solely by the Agent in the Agent's reasonable judgment; provided, that the
Agent shall promptly notify the Borrowers of any change in the standards of
eligibility and such change shall become effective 15 days following the date
such notification has been given in accordance with Section 11.01 hereof. In
general, without limiting the foregoing, a Receivable shall in no event be
deemed to be an Eligible Receivable unless: (a) all payments due on the
Receivable have been invoiced and the underlying goods shipped or services
performed, as the case may be; (b) the payment due on the Receivable is not more
than 90 days past the invoice date (or in the case of Manischewitz, the due
date, if the
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due date is consistent with past practices (subject to field examination
confirmation reasonably satisfactory to the Agent)); (c) the payments due on
more than 50% of all Receivables from the same Customer are less than 90 days
past the invoice date (or in the case of Manischewitz, the due date, if the due
date is consistent with past practices (subject to field examination
confirmation reasonably satisfactory to the Agent)); (d) the Receivable arose
from a completed and bona fide transaction (and with respect to a sale of goods,
a transaction in which title has passed to the Customer) which requires no
further act under any circumstances on the part of the applicable Borrower in
order to cause such Receivable to be payable in full by the Customer; (e) the
Receivable is free and clear of all security interests and Liens of any nature
whatsoever other than any security interest deemed to be held by the applicable
Borrower or any security interest created in favor of the Agent for the benefit
of the Lenders pursuant to the Security Documents or permitted by Section 7.01
hereof; (f) the Receivable constitutes an "account" or "chattel paper" within
the meaning of the Uniform Commercial Code of the state in which the Receivable
is located; (g) the Customer has not asserted that the Receivable, and the
applicable Borrower is not aware that the Receivable, arises out of a bill and
hold (except for any such arrangement that would not in accordance with GAAP be
recorded as a sale), consignment or progress billing arrangement or is subject
to any setoff, contra, net-out contract, offset, deduction, dispute, credit,
counterclaim or other defense arising out of the transactions represented by the
Receivables or independently thereof (provided that such Receivable shall only
be ineligible to the extent thereof) and the Customer has finally accepted the
goods from the sale out of which the Receivable arose and has not objected to
its liability thereon or returned, rejected or repossessed any of such goods,
except for complaints made or goods returned in the ordinary course of business
for which, in the case of goods returned, goods of equal or greater value have
been shipped in return; (h) the Receivable arose in the ordinary course of
business of the applicable Borrower; (i) the Customer is not (x) the United
States government or the government of any state or political subdivision
thereof or therein, or any agency or department of any thereof or (y) an
Affiliate of Holdings, Enterprises, a Borrower or any subsidiary of any thereof;
(j) the Customer is a United States person or an obligor in the United States;
(k) the Receivable complies with all material requirements of all applicable
laws and regulations, whether Federal, state or local (including, without
limitation, usury laws and laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy); (l) to the knowledge of the
applicable Borrower, the Receivable is in full force and effect and constitutes
a legal, valid and binding obligation of the Customer enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and by general equity principles; (m)
the Receivable is denominated in and provides for payment by the Customer in
dollars; (n) the Receivable has not been and is not required to be charged off
or written off as uncollectible in accordance with GAAP or the customary
business practices of the
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applicable Borrower as then in effect; (o) the Agent on behalf of the Lenders
possesses a valid, perfected first priority security interest in such Receivable
as security for payment of the Obligations; (p) the Receivable is not with
respect to a Customer located in New Jersey, Minnesota, or any other state
denying creditors access to its courts in the absence of a Notice of Business
Activities Report or other similar filing, unless the applicable Borrower has
either qualified as a foreign corporation authorized to transact business in
such state or has filed a Notice of Business Activities Report or similar filing
with the applicable state agency for the then current year; and (q) the Agent is
reasonably satisfied with the credit standing of the Customer in relation to the
amount of credit extended.
"Eligible Manischewitz Inventory" shall mean Eligible
Inventory of Manischewitz comprised solely of raw materials, work-in-progress
(subject to field examination confirmation reasonably satisfactory to the Agent)
and finished goods (but in no event shall include supplies or capitalization
costs).
"Eligible Manischewitz Receivables" shall mean Eligible
Receivables created by Manischewitz, including receipt of royalties from the
licensing of trademarks (subject to field examination confirmation reasonably
satisfactory to the Agent), which are and at all times shall continue to be
reasonably acceptable to the Agent.
"Eligible Millbrook Inventory" shall mean Eligible Inventory
of Millbrook comprised solely of finished goods (but in no event shall include
materials, supplies or capitalization costs).
"Eligible Millbrook Receivables" shall mean Eligible
Receivables created by Millbrook, which are and at all times shall continue to
be reasonably acceptable to the Agent.
"Enterprises" shall mean R.A.B. Enterprises, Inc., a Delaware
corporation, together with its successors and assigns.
"Environmental Claim" shall mean any written notice of
violation, claim, demand, abatement or other order by any governmental authority
or any person for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or deed or use restrictions, resulting from or based upon (i)
the existence, or the continuation of the existence, of a Release (including,
without limitation, sudden or non-sudden, accidental or nonaccidental Releases),
of, or exposure to, any Contaminant at, in, by or from any of the properties of
the Borrowers or their subsidiaries, (ii) the environmental aspects of the
transportation, storage, treatment or disposal of Contaminants in connection
with the operation of any of the properties of the Borrowers or their
subsidiaries or (iii) the
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violation, or alleged violation by the Borrowers or any of their subsidiaries,
of any statutes, ordinances, orders, rules, regulations, Permits or licenses of
or from any governmental authority, agency or court relating to environmental
matters connected with any of the properties of the Borrowers or their
subsidiaries, under any applicable Environmental Law.
"Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Oil
Pollution Act of 1990 (33 U.S.C. ss. 2701 et seq.), the Safe Drinking Water Act
(42 U.S.C. ss. 300f, et seq.), the Clear Air Act (42 U.S.C. ss. 7401 et seq.),
the Toxic Substances Control Act, as amended (15 U.S.C. ss. 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), as such
laws have been and hereafter may be amended or supplemented, and any related or
analogous present or future Federal, state or local, statutes, rules,
regulations, ordinances, licenses, permits and interpretations (having the force
of law, rules or regulations) and orders of regulatory and administrative
bodies.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder, as in
effect from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) which together with a Borrower or any subsidiary of a Borrower
would be treated as a single employer under the provisions of Title I or Title
IV of ERISA.
"Eurodollar Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name in Schedule 2.03 annexed hereto (or, if no such office is
specified, its Domestic Lending Office), or such other office of such Lender as
such Lender may from time to time specify to the Borrowers and the Agent.
"Eurodollar Loan" shall mean a Loan based on the Adjusted LIBO
Rate in accordance with Article II hereof.
"Event of Default" shall have the meaning assigned to such
term in Article VIII hereof.
"Excess Cash Flow" shall mean, with respect to any person for
any period, the amount, if any, by which Net Cash Flow of such person and its
subsidiaries on a Consolidated basis for such period exceeds the sum of (a) the
Debt Service
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Expense of such person and its subsidiaries on a Consolidated basis for such
period plus (b) the aggregate amount of all Permitted Dividends and
Distributions, if any, made during such period.
"Fee Letter" shall mean the letter dated the Closing Date from
The Chase Manhattan Bank to the Borrowers.
"Final Maturity Date" shall mean March 31, 2003.
"FIRREA" shall mean the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended from time to time.
"Fiscal Year" shall mean the fiscal year of each of the
Borrowers, Holdings and Enterprises for accounting purposes which in each case
ends on March 31 of each year.
"Funded Debt" shall mean with respect to any person as of the
date of determination thereof, all Indebtedness of such person and its
subsidiaries on a Consolidated basis outstanding at such time which matures more
than one year after the date of calculation, and any such Indebtedness maturing
within one year from such date of calculation which is renewable or extendable
at the sole option of the obligor without the requirement to satisfy any
conditions to a date more than one year from such date and including in any
event the Revolving Credit Loans.
"GAAP" shall have the meaning assigned to such term in Section
1.02 hereof.
"Grantor" shall mean any Grantor, Pledgor or Debtor, as such
terms are defined in any of the Security Documents.
"Guarantee" shall mean any obligation, evidenced in writing,
contingent or otherwise, of any person guaranteeing or having the economic
effect of guaranteeing any Indebtedness or obligation of any other person in any
manner, whether directly or indirectly, and shall include, without limitation,
any obligation of such person, direct or indirect, to (i) purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
obligation or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness or obligation, (ii) purchase
property, securities or services for the purpose of assuring the owner of such
Indebtedness or obligation of the payment of such Indebtedness or obligation, or
(iii) maintain working capital, equity capital, available cash or other
financial condition of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or obligation; provided, however, that the term
Guarantee shall not include
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(x) endorsements for collection or collections for deposit, in either case in
the ordinary course of business, or (y) security deposits for rental property.
"Guarantor" shall mean any subsidiary of any of the Borrowers
which becomes a guarantor of the Obligations after the date hereof.
"Harrison Property" shall mean the owned real property of
Millbrook located in the City of Harrison, Boone County, Arkansas.
"Hazardous Material" shall mean any pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous waste, substance or
material, defined or regulated as such in (or for purposes of) any Environmental
Law and any other toxic, reactive, or flammable chemicals, including (without
limitation) any asbestos, any petroleum (including crude oil or any fraction),
any radioactive substance and any polychlorinated biphenyls; provided, in the
event that any Environmental Law is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment; and provided, further, to the extent that the
applicable laws of any state establish a meaning for "hazardous material,"
"hazardous substance," "hazardous waste," "solid waste" or "toxic substance"
which is broader than that specified in any Federal Environmental Law, such
broader meaning shall apply.
"Holdings" shall mean R.A.B. Holdings, Inc., a Delaware
corporation, together with its successors and assigns.
"Holdings Transactions" shall mean, collectively, the issuance
by Enterprises of the Senior Notes and the issuance by Holdings of the Interest
Reserve Notes.
"Increased Costs" shall have the meaning assigned to such term
in Section 2.10(d) hereof.
"Indebtedness" shall mean, with respect to any person, without
duplication, (a) all obligations of such person for borrowed money or with
respect to deposits or advances received of any kind, (b) all obligations of
such person evidenced by bonds, debentures, notes or other similar instruments
or upon which interest charges are customarily paid, (c) all obligations of such
person to pay for the deferred purchase price of property or services, except
current accounts payable arising in the ordinary course of business and not
overdue beyond such period as is commercially reasonable for such person's
business, (d) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such person and all
Capitalized Lease Obligations, (e) all payment obligations of such person with
respect to interest rate or currency protection agreements, including,
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<PAGE>
without limitation, the Rate Agreements, (f) all obligations of such person as
an account party under any letter of credit or in respect of bankers'
acceptances, (g) all obligations of any third party secured by property or
assets of such person (regardless of whether or not such person is liable for
repayment of such obligations), (h) all Guarantees of such person and (i) the
redemption price of all redeemable preferred stock of such person, but only to
the extent that such stock is redeemable at the option of the holder or requires
sinking fund or similar payments at any time prior to the Final Maturity Date.
"Indemnitees" shall have the meaning assigned to such term in
Section 11.04(c) hereof.
"Information" shall have the meaning assigned to such term in
Section 11.11 hereof.
"Interest Expense" shall mean, with respect to any person for
any period, the interest expense of such person during such period determined on
a Consolidated basis in accordance with GAAP, and shall in any event include,
without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense, (iii) the portion of
any Capitalized Lease Obligation allocable to interest expense, (iv) all fixed
and all calculable dividend payments on preferred stock, and (v) payments of
interest expense in kind.
"Interest Margin" shall mean, with respect to any Loan, the
amount as set forth below as corresponds to the amount of Availability set forth
below, determined on the Closing Date and adjusted thereafter, three (3)
Business Days after the delivery of the applicable borrowing base certificate
and the financial statements for the fiscal periods ending March 31 and
September 30 in each year to the Agent required pursuant to Section 6.05(a) or
(b), as applicable, together with the corresponding compliance certificates
required pursuant to Section 6.05(e), commencing with the financial statements
and certificates for the period ending September 30, 1998, or if the Borrowers
shall fail to timely deliver such statements and certificates for any such
period and until such statements and certificates are delivered, or if a Default
or Event
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<PAGE>
of Default shall have occurred and be continuing, then at the highest Interest
Margin provided for herein:
<TABLE>
<CAPTION>
Alternate Base
LIBO Rate Rate Interest Alternate Base
Interest Margin LIBO Rate Margin for Rate Interest
for Revolving Interest Margin Revolving Credit Margin for Term
Credit Eurodollar for Term Alternate Base Alternate Base
Availability Loans Eurodollar Loan Loans Loans
------------ ----------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C>
Greater than 1.50% 1.75% 0% 0%
$47,500,000
Equal to or less 1.75% 2.00% 0% 0%
than $47,500,000
but greater than
$35,000,000
Equal to or less 2.00% 2.25% 0% 0.25%
than $35,000,000
but greater than
$22,500,000
$22,500,000 or 2.25% 2.50% 0.25% 0.50%
less
</TABLE>
On the Closing Date, the LIBO Rate Interest Margin for Revolving Credit
Eurodollar Loans shall be 1.75% and for Term Eurodollar Loans shall be 2.00%,
and the Alternate Base Rate Interest Margin for Revolving Credit Alternate Base
Loans shall be 0% and for Term Alternate Base Loans shall be 0%; each shall
thereafter be adjusted in accordance with the provisions hereof, commencing
after the delivery of financial statements and certificates for the period
ending September 30, 1998.
"Interest Payment Date" shall mean (i) in the case of an
Alternate Base Loan, the first Business Day of each month, commencing May 1,
1998 (which shall include Alternate Base Loans outstanding under the Original
Credit Agreement and which are being continued and extended under this
Agreement), and (ii) with respect to any Eurodollar Loan (which shall include
Eurodollar Loans outstanding under the Original Credit Agreement and which are
being continued and extended under this Agreement) , the last day of the
Interest Period applicable thereto, and, in addition, in respect of any
Eurodollar Loan of more than three (3) months' duration, each earlier day which
is three (3) months after the first day of such Interest Period.
"Interest Period" shall mean, as to any Eurodollar Loan, the
period commencing on the date of such Eurodollar Loan and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is one (1), two (2), three (3) or
six (6) months thereafter, as the Borrowers may elect with respect to its
Eurodollar Loans; provided, however, that (x) if
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<PAGE>
an Interest Period would end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, with
respect to Eurodollar Loans, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (y) no Interest Period shall end later than the Final
Maturity Date and (z) interest shall accrue from and including the first day of
an Interest Period to but excluding the last day of such Interest Period.
"Interest Reserve Notes" shall mean Holdings' 13% Senior Notes
due 2008.
"Lender" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Letter of Credit" shall have the meaning assigned to such
term in Section 2.17 hereof.
"Letter of Credit Usage" shall mean at any time, (i) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(ii) the unreimbursed drawings at such time under all such Letters of Credit.
"Leverage Ratio" with respect to any person at the end of any
fiscal quarter shall mean the ratio of (i) Funded Debt as at the date of
determination to (ii) EBITDA of such person for the four (or such lesser number
of quarters as shall have elapsed from the Closing Date) most recent consecutive
fiscal quarters ending on or prior to the date of determination; provided,
however, that for the purposes of this definition, Funded Debt shall not include
the intercompany Indebtedness permitted under Section 7.03(xi).
"LIBO Rate" shall mean, with respect to any Eurodollar Loan
for any Interest Period, (x) the rate appearing on Page 3750 of the Telerate
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Agent from time to time for purposes of providing quotations
of interest rates applicable to dollar deposits in the London interbank market)
at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period; and in the event that such rate is
not available at such time for any reason, then the "LIBO Rate" with respect to
such Eurodollar Loan for such Interest Period shall be (y) the rate (rounded
upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Agent in immediately available funds in the
London interbank market at
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<PAGE>
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period. Notwithstanding the foregoing, if at any
time neither The Chase Manhattan Bank nor NationsBank, N.A. is the Agent, then
LIBO Rate shall mean the lesser of the rate determined by applying (x) and (y)
above.
"Lien" shall mean, with respect to any asset, (i) any
mortgage, lien, pledge, encumbrance, charge or security interest in or on such
asset, (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset, (iii) in the case of securities, any purchase option, call or similar
right of a third party (other than the issuer thereof) with respect to such
securities or (iv) any other right of or arrangement with any creditor to have
such creditor's claim satisfied out of such assets, or the proceeds therefrom,
prior to the general creditors of the owner thereof.
"Loan" shall mean the Term Loan or any Revolving Credit Loan.
"Loan Documents" shall mean this Agreement, each Security
Document, each Guarantee executed and delivered at any time with respect to the
Obligations and the Notes.
"Loan Party" shall mean each Borrower, each Grantor, each
Guarantor and each subsidiary thereof.
"Mandatory Prepayment" shall mean an amount equal to 50
percent (50%) of Excess Cash Flow, if any, of the Borrowers and their
Consolidated subsidiaries for the Fiscal Year then ended, but not in excess of
$2,000,000 in any Fiscal Year; provided, however, that solely with respect to
the Fiscal Year ended March 31, 1998, the Mandatory Prepayment shall be
determined by reference to the Excess Cash Flow, if any, of Millbrook and its
Consolidated subsidiaries.
"Manischewitz" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Manischewitz Acquisition" shall mean the acquisition of all
of the membership interests of Manischewitz pursuant to the Manischewitz
Acquisition Agreement.
"Manischewitz Acquisition Agreement" shall mean the Purchase
Agreement dated as of March 3, 1998 by and among Enterprises, MANO Holdings I,
LLC, KBMC Acquisition Company, L.P., MANO Holdings Corporation and the
stockholders of MANO Holdings Corporation, as amended by the First Amendment,
dated as of April 8, 1998 and the Second Amendment dated as of May 1, 1998, to
the Purchase Agreement.
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<PAGE>
"Manischewitz Acquisition Documents" shall mean the
Manischewitz Acquisition Agreement and all agreements, documents and instruments
(other than opinions of legal counsel) executed and delivered pursuant thereto
or in connection therewith, in each case as in effect on the Closing Date.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean a material adverse effect
on (i) the business, assets, prospects, operations or financial or other
condition of the Borrowers and their Consolidated subsidiaries, taken as a
whole, (ii) the ability of the Borrowers and their Consolidated subsidiaries,
taken as a whole, to perform or pay the Obligations in accordance with the terms
hereof or of any other Loan Document, (iii) the rights of, or benefits available
to, the Lenders or the Agent under any Loan Document or (iv) the Agent's Lien on
any material portion of the Collateral or the priority of such Lien.
"Millbrook" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Millbrook Acquisition" shall mean the acquisition of all of
the stock of Millbrook pursuant to the Millbrook Acquisition Agreement.
"Millbrook Acquisition Agreement" shall mean the Stock
Purchase Agreement dated as of February 21, 1997 by and between Holdings and
McKesson Corporation, as amended by the Amendment to Stock Purchase Agreement
dated as of March 31, 1997.
"Millbrook Acquisition Documents" shall mean the Millbrook
Acquisition Agreement, the Transitional Services Agreement between Millbrook and
McKesson Corporation, and all agreements, documents and instruments (other than
opinions of legal counsel) executed and delivered pursuant thereto or in
connection therewith, in each case as in effect on the Original Closing Date.
"Mortgage" shall mean the real property mortgage dated as of
the Original Closing Date, and executed by Millbrook in favor of the Agent, for
its own benefit and for the benefit of the Lenders, as amended, modified or
supplemented from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
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<PAGE>
"Net Amount of Eligible Manischewitz Inventory" shall mean, at
any time, without duplication, the aggregate value, computed at the lower of
cost (on a FIFO basis) and current market value, of Eligible Manischewitz
Inventory.
"Net Amount of Eligible Manischewitz Receivables" shall mean
and include at any time, without duplication, the gross amount of Eligible
Manischewitz Receivables at such time less (i) applicable sales, excise or
similar taxes and (ii) returns, discounts, claims (telephonic in the case of
claims to a responsible party of a Loan Party or in writing), credits, rebates
and allowances of any nature at any time issued, owing, granted, outstanding or
available with respect to such Eligible Manischewitz Receivables.
"Net Amount of Eligible Millbrook Inventory" shall mean, at
any time, without duplication, the aggregate value, computed at the lower of
cost (on a FIFO basis) and current market value, of Eligible Millbrook
Inventory.
"Net Amount of Eligible Millbrook Receivables" shall mean and
include at any time, without duplication, the gross amount of Eligible Millbrook
Receivables at such time less (i) applicable sales, excise or similar taxes and
(ii) returns, discounts, claims (telephonic in the case of claims to a
responsible party of a Loan Party or in writing), credits, rebates and
allowances of any nature at any time issued, owing, granted, outstanding or
available with respect to such Eligible Millbrook Receivables.
"Net Cash Flow" shall mean, with respect to any person for any
period, without duplication of addition or subtraction of items, (A) the sum for
such period of (i) Net Income, (ii) depreciation and amortization, (iii) the
change (expressed as a positive number in the event of an increase or a negative
number in the event of a decrease) in deferred tax liabilities, (iv) other
noncash items properly deducted in arriving at Net Income and (v) the change
(expressed as a negative number in the event of an increase or a positive number
in the event of a decrease), if any, in deferred tax assets minus (B) the sum
for such period of (i) all Capital Expenditures during such period (excluding
the cash component of any Capitalized Lease Obligations but including the
financed components of any Capitalized Lease Obligations) and (ii) any principal
payment made during such period as a result of Excess Cash Flow.
"Net Income" shall mean, with respect to any person for any
period, the aggregate income (or loss) of such person for such period which
shall be an amount equal to net revenues and other proper items of income for
such person less the aggregate for such person of any and all items that are
treated as expenses under GAAP, and less Federal, state and local income taxes,
but excluding any extraordinary gains or losses or any gains or losses from the
sale or disposition of assets other than
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<PAGE>
in the ordinary course of business, all computed and calculated in accordance
with GAAP.
"Non Pro Rata Loans" shall have the meaning ascribed to such
term in Section 2.13(d) hereof.
"Notes" shall mean the Term Notes and the Revolving Credit
Notes.
"Obligations" shall mean all obligations, liabilities and
Indebtedness of the Borrowers to the Lenders and the Agent arising under this
Agreement and the transactions contemplated hereby, including, without
limitation, administration fees pursuant to the Fee Letter, whether now existing
or hereafter created, direct or indirect, due or not, whether created directly
or acquired by assignment or participation pursuant hereto, including, without
limitation, all obligations, liabilities and Indebtedness of the Borrowers with
respect to cash management accommodations provided by the Agent, the Rate
Agreements (if and to the extent any Lender is a party thereto), the Security
Documents and other Loan Documents, the principal of and interest on the
Revolving Credit Loans, the Term Loan and the payment or performance of all
other obligations, liabilities, and Indebtedness of the Borrowers to the Lenders
and the Agent under the Letters of Credit or under any one or more of the other
Loan Documents, including, without limitation, all fees, costs, expenses and
indemnity obligations hereunder and thereunder.
"Original Closing Date" shall mean March 31, 1997.
"Original Credit Agreement" shall mean the Credit Agreement,
dated as of the Original Closing Date, among Millbrook, the lenders named
therein, NationsBank, N.A. and the Agent, as amended by the Amendment, dated as
of May 16, 1997, to the Credit Agreement.
"Other Taxes" shall have the meaning assigned to such term in
Section 2.16(b) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any Plan which is subject to the
provisions of Title IV of ERISA.
"Permits" shall have the meaning assigned to such term in
Section 4.18 hereof.
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<PAGE>
"Permitted Dividends and Distributions" shall mean the
dividends, distributions and payments permitted to be made pursuant to the
provisions of Section 7.04 hereof.
"Permitted Overadvances" shall mean (i) involuntary
overadvances that may result from time to time due to the fact that any
borrowing formulas set forth in the Loan Documents were unintentionally exceeded
(whether at the time of any Loan or at the time of the issuance of any Letter of
Credit or otherwise) for any reason (other than the Agent's gross negligence or
willful misconduct), including Collateral believed to be eligible in fact being
or becoming ineligible and the return of uncollected checks or other items
applied to the reduction of the Loans, Letters of Credit or other Obligations,
and overadvances made by the Agent without Lenders' consent for up to two weeks
after discovering the unintentional overadvance, provided that the Agent does
not during that period voluntarily increase the amount by which the borrowing
formulas had been exceeded as of the start of that period, and (ii) voluntary
overadvances made by the Agent in its sole discretion which shall (x) not cause
the Obligations to exceed Availability by an amount in excess of $3,000,000 at
any one time outstanding, and (y) not be made on a date which is beyond ten (10)
days after the first voluntary overadvance is made during such overadvance
period, or (z) be with the consent of all Lenders. To the extent any Permitted
Overadvances are made, each Lender shall bear its pro rata (based on its
Revolving Credit Commitment) share thereof.
"person" shall mean any natural person, corporation, business
trust, limited liability company, association, company, joint venture,
partnership or government or any agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan within the meaning
of Section 3(3) of ERISA and which is maintained (in whole or in part) for
employees of any Borrower, any subsidiary of any Borrower thereof or any ERISA
Affiliate.
"Pledge Agreement" shall mean the Amended and Restated
Non-Recourse Pledge Agreement dated as of the Closing Date, amending the Pledge
Agreement dated as of the Original Closing Date, by and between Enterprises and
the Agent, for its own benefit and for the benefit of the Lenders, in
substantially the form of Exhibit D annexed hereto, as amended, modified or
supplemented from time to time.
"Pledged Stock" shall have the meaning assigned to such term
in the Pledge Agreement.
"Rate Agreements" shall have the meaning assigned to such term
in Section 6.16 hereof.
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<PAGE>
"Receivables" shall mean and include all of the Borrowers'
accounts, instruments, documents, chattel paper and general intangibles, whether
secured or unsecured, whether now existing or hereafter created or arising out
of the sale of goods or rendition of services, and whether or not specifically
assigned to the Agent for its own benefit and/or the ratable benefit of the
Lenders.
"Register" shall have the meaning assigned to such term in
Section 11.03(e) hereof.
"Regulation D" shall mean Regulation D of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Release" shall mean any releasing, spilling, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, in each case as defined in Environmental Law,
and shall include any "Threatened Release," as defined in Environmental Law.
"Remedial Work" shall mean any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature with respect to any property of the Borrowers or their subsidiaries
(whether such property is owned, leased or subleased), including, without
limitation, with respect to Contaminants and the Release thereof for which a
Borrower or any subsidiary of a Borrower is liable under any Environmental Law.
"Repayment Date" shall have the meaning assigned to such term
in Section 2.04(c) hereof.
"Reportable Event" shall mean a Reportable Event as defined in
Sec tion 4043(b) of ERISA.
"Required Lenders" shall mean Lenders having 51% of the Total
Commitment.
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<PAGE>
"Responsible Officer" shall mean, with respect to any person,
any vice president or president, or the chief financial officer or controller,
of such person.
"Revolving Credit Alternate Base Loan" shall mean a Revolving
Credit Loan that is an Alternate Base Loan.
"Revolving Credit Commitment" shall mean, with respect to any
Lender, the Revolving Credit Commitment of such Lender as set forth in Schedule
2.01(b) annexed hereto, as the same may be reduced from time to time pursuant to
this Agreement including, without limitation, Section 2.07 and 2.09 hereof.
"Revolving Credit Commitment Fee" shall have the meaning set
forth in Section 2.06(a) hereof.
"Revolving Credit Eurodollar Loan" shall mean a Revolving
Credit Loan that is a Eurodollar Loan.
"Revolving Credit Loan" shall mean a Revolving Credit Loan
made pursuant to Sections 2.01 and 2.02 hereof.
"Revolving Credit Notes" shall mean the Revolving Credit Notes
of the Borrowers, executed and delivered as provided in Section 2.04 hereof, in
substantially the form of Exhibit B annexed hereto, as amended, modified or
supplemented from time to time.
"Revolving Credit Termination Date" shall mean the earlier to
occur of (i) March 31, 2002 and (ii) such date as the Revolving Credit Loans
shall otherwise be payable in full and the Revolving Credit Commitment shall
terminate, expire or be canceled in accordance with the terms of this Agreement.
"Security Agreement (Millbrook)" shall mean the Security
Agreement, dated as of the Original Closing Date, between the Grantor(s), as
such term is defined therein, and the Agent, for its own benefit and for the
benefit of the Lenders, in the form of Exhibit E annexed hereto, as amended,
modified or supplemented from time to time, including Schedule 1 to the Security
Agreement which may be amended, modified or supplemented from time to time in
accordance with the terms of the Security Agreement.
"Security Agreement (Manischewitz)" shall mean the Security
Agreement (Manischewitz) dated as of the date hereof, between the Grantor(s), as
such term is defined therein, and the Agent, for its own benefit and for the
benefit of the Lenders, substantially in the form of Exhibit E-1 annexed hereto
as amended, modified or supplemented from time to time.
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"Security Agreement - Patents and Trademarks (Millbrook)"
shall mean the Security Agreement and Mortgage - Patents and Trademarks, dated
as of the Original Closing Date, between the Debtor(s), as such term is defined
therein, and the Agent, for its own benefit and for the benefit of the Lenders,
in the form of Exhibit G annexed hereto, as amended, modified or supplemented
from time to time.
"Security Agreement - Patents and Trademarks (Manischewitz)"
shall mean the Security Agreement and Mortgage - Patents and Trademarks, dated
as of the date hereof, between the Debtor(s), as such term is defined therein,
and the Agent, for its own benefit and for the benefit of the Lenders,
substantially in the form of Exhibit G-1 annexed hereto, as amended, modified or
supplemented from time to time.
"Security Documents" shall mean the Pledge Agreement, the
Security Agreement (Millbrook), the Security Agreement (Manischewitz), the
Security Agreement - Patents and Trademarks (Millbrook), the Security Agreement
- - Patents and Trademarks (Manischewitz), the Mortgage and each other agreement
now existing or hereafter entered into by any obligor providing collateral
security for the payment or performance of any Obligations.
"Senior Notes" shall mean Enterprises' 10 1/2% Senior Notes
due 2005.
"Settlement Date" shall have the meaning assigned to such term
in Section 2.15(c) hereof.
"Subordinated Indebtedness" shall mean, with respect to either
Borrower or the Borrowers, Indebtedness other than intercompany Indebtedness
permitted pursuant to Section 7.03(xi) (x) subordinated in right of payment to
such person's monetary obligations under this Agreement upon terms reasonably
satisfactory to and approved in writing by the Agent and (y) after giving effect
to the incurrence thereof, the Leverage Ratio of the Borrowers and their
subsidiaries is not greater than 4.00:1.00.
"subsidiary" shall mean, with respect to any person, any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the ordinary voting power are,
at the time as of which any determination is being made, owned or controlled,
directly or indirectly, by the parent of such person or one or more subsidiaries
of the parent of such person.
"Taxes" shall have the meaning assigned to such term in
Section 2.16(a) hereof.
"Term Alternate Base Loan" shall mean a Term Loan that is an
Alternate Base Loan.
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"Term Eurodollar Loan" shall mean a Term Loan that is a
Eurodollar Loan.
"Term Loan" shall mean the Term Loan made pursuant to the
Original Credit Agreement and as continued pursuant to Sections 2.01 and 2.02.
"Term Loan Commitment" shall mean, with respect to any Lender,
the Term Loan Commitment of such Lender as set forth in Schedule 2.01(a).
"Term Notes" shall mean the Term Notes of the Borrowers,
executed and delivered as provided in Section 2.04, in substantially the form of
Exhibit A hereto, as amended, modified or supplemented from time to time.
"Total Commitment" shall mean the sum of the Lenders' Total
Term Loan Commitment and Total Revolving Credit Commitment, as the same may be
reduced from time to time pursuant to Section 2.07 or Section 2.09 of this
Agreement.
"Total Revolving Credit Commitment" shall mean the sum of the
Lenders' Revolving Credit Commitments, as the same may be reduced from time to
time pursuant to Section 2.07 or Section 2.09 of this Agreement.
"Total Term Loan Commitment" shall mean the sum of the
Lenders' Term Loan Commitments, as the same may be reduced from time to time
pursuant to Section 2.07 or Section 2.09 of this Agreement.
"Transactions" shall have the meaning assigned to such term in
Sec tion 4.02 hereof.
SECTION 1.02. Accounting Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under generally accepted accounting principles in effect from time to time in
the United States applied on a basis consistent with those used in preparing the
financial statements referred to in Section 6.05 hereof ("GAAP"); provided,
however, that each reference in Article VII hereof, or in the definition of any
term used in Article VII hereof, to GAAP shall mean GAAP as in effect on the
date hereof.
II. THE LOANS
SECTION 2.01. Term Loan Commitments and Revolving Credit
Commitments. (a) Subject to the terms and conditions herein set forth, each
Lender, severally and not jointly, agrees to continue the Term Loan made to
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Millbrook on the Original Closing Date, of which $9,310,000 is outstanding on
the Closing Date, (provided, that, from and after the Closing Date, the
Borrowers shall be jointly and severally liable with respect to such Term Loan),
in a principal amount not to exceed the amount of such Lender's Term Loan
Commitment set forth opposite its name in Schedule 2.01(a) hereto.
(b) Subject to the terms and conditions herein set forth, each
Lender, severally and not jointly, agrees to make Revolving Credit Loans to the
Borrowers, at any time and from time to time from the date hereof to the
Revolving Credit Termination Date, in an aggregate principal amount at any time
outstanding not to exceed the amount of such Lender's Revolving Credit
Commitment set forth opposite its name in Schedule 2.01(b) annexed hereto, as
such Revolving Credit Commitment may be reduced from time to time in accordance
with the provisions of this Agreement. Not withstanding the foregoing, the
aggregate principal amount of Revolving Credit Loans outstanding at any time to
the Borrowers shall not exceed (1) the lesser of (A) the Total Revolving Credit
Commitment and (B) an amount equal to the sum of (i) up to eighty-five percent
(85%) of the Net Amount of Eligible Millbrook Receivables, plus (ii) the lesser
of (a) $55,000,000 and (b) up to sixty-five percent (65%) of the Net Amount of
Eligible Millbrook Inventory plus, following the completion by the Agent of the
field examination and site visit of Manischewitz's material locations
(including, without limitation, the Jersey City, New Jersey and Vineland, New
Jersey locations), (iii) a percentage, to be determined by the Agent (in its
sole but reasonable discretion but, in any event, not in excess of 65%)
following such field examination and visit, of the Net Amount of Eligible
Manischewitz Inventory plus (iv) a percentage, to be determined by the Agent (in
its sole but reasonable discretion but, in any event, not in excess of 85%)
following such field examination and visit, of the Net Amount of Eligible
Manischewitz Receivables (this clause (1)(B) referred to herein as the
"Borrowing Base") minus (2) the Letter of Credit Usage at such time (not to
exceed $10,000,000 at any time). The Borrowing Base will be computed monthly and
a compliance certificate from a Responsible Officer of the Borrowers presenting
its computation will be delivered to the Agent in accordance with Section 6.05
hereof.
Subject to the foregoing and within the foregoing limits, the
Borrowers may borrow, repay (or, subject to the provisions of Section 2.09
hereof, prepay) and reborrow Revolving Credit Loans, on and after the date
hereof and prior to the
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Revolving Credit Termination Date, subject to the terms, provisions and
limitations set forth herein, including, without limitation, the requirement
that no Revolving Credit Loan shall be made hereunder if the amount thereof
exceeds the Availability outstanding at such time.
SECTION 2.02. Loans. (a) The Revolving Credit Loans made by
the Lenders on any date shall be in integral multiples of $100,000 (except that
the foregoing limitation shall not be applicable to the extent that the proceeds
of such Loans are disbursed to the Borrowers' controlled disbursement account
maintained with the Agent); provided, however, that the Eurodollar Loans made on
any date shall be in a minimum aggregate principal amount equal to the product
of $500,000 times the number of Lenders on such date.
(b) Loans shall be made ratably by the Lenders in accordance
with their respective Term Loan Commitments or Revolving Credit Commitments, as
the case may be; provided, however, that the failure of any Lender to make any
Loan shall not in itself relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be responsible for
the failure of any other Lender to make any Loan required to be made by such
Lender). The Term Loan shall be continued by the Lenders hereunder against
delivery of Term Notes, payable to the order of the Lenders, as referred to in
Section 2.04. The initial Revolving Credit Loans shall be made by the Lenders
against delivery of Revolving Credit Notes, payable to the order of the Lenders,
as referred to in Section 2.04 hereof.
(c) Each Loan shall be either an Alternate Base Loan or a
Eurodollar Loan as the Borrowers may request pursuant to Section 2.03 hereof.
Each Lender may fulfill its obligations under this Agreement by causing its
Applicable Lending Office to make such Loan; provided, however, that the
exercise of such option shall not affect the obligation of the Borrowers to
repay such Loan in accordance with the terms of the applicable Note. Not more
than six (6) Eurodollar Loans may be outstanding at any one time.
(d) Subject to the provisions of paragraph (e) below, each
Lender has made its Term Loan and shall make Revolving Credit Loans on the
proposed dates thereof by paying the amount required to the Agent in New York,
New York in immediately available funds not later than 2:00 p.m., New York City
time, and the Agent shall as soon as practicable, but in no event later than
3:00 p.m., New York City
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<PAGE>
time, credit the amounts so received to the general deposit account of the
Borrowers with the Agent in immediately available funds or, if Loans are not to
be made on such date because any condition precedent to a borrowing herein
specified is not met, return the amounts so received to the respective Lenders.
(e) The Borrowers shall have the right at any time upon prior
irrevocable written, telex or facsimile notice (promptly confirmed in writing)
to the Agent given in the manner and at the times specified in Section 2.03 with
respect to the Loans into which conversion or continuation is to be made, to
convert all or any portion of Eurodollar Loans into Alternate Base Loans, to
convert all or any portion of Alternate Base Loans into Eurodollar Loans
(specifying the Interest Period to be applicable thereto), to convert the
Interest Period with respect to all or any portion of any Eurodollar Loans to
another permissible Interest Period, and to continue all or any portion of any
Eurodollar Loans into a subsequent Interest Period, subject to the terms and
conditions of this Agreement (including the last sentence of Section 2.02(c)
hereof) and to the following:
(i) each conversion or continuation shall be made pro
rata among the Lenders in accordance with the respective
principal amounts of the Loans comprising the conversion or
continuation; and in the case of a conversion or continuation
of fewer than all the Loans, the aggregate principal amount of
Loans converted or continued shall not be less than $100,000
in the case of Alternate Base Loans (except that the foregoing
limitation shall not be applicable to the extent that the
proceeds of such Loans are disbursed to the Borrowers'
controlled disbursement account maintained with the Agent) or
$500,000 times the number of Lenders on such date in the case
of Eurodollar Loans and shall be an integral multiple of
$100,000;
(ii) accrued interest on a Eurodollar Loan (or
portion thereof) being converted shall be paid by the
Borrowers at the time of conversion;
(iii) if any Eurodollar Loan is converted at any time
other than the end of an Interest Period applicable thereto,
the Borrowers shall make such payments associated therewith as
are required pursuant to Section 2.12, if any such payments
are due;
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(iv) any portion of a Revolving Credit Loan which is
subject to an Interest Period ending on a date that is less
than one month prior to the Revolving Credit Termination Date
may not be converted into, or continued as, a Eurodollar Loan
and shall be automatically converted at the end of such
Interest Period into an Alternate Base Loan;
(v) any portion of a Term Eurodollar Loan required to
be paid on any Repayment Date occurring less than one month
after the end of the then current Interest Period applicable
to such Loan, may not be converted into, or continued as, a
Term Eurodollar Loan and shall be automatically converted at
the end of such Interest Period into a Term Alternate Base
Loan; and
(vi) no Default or Event of Default shall have
occurred and be continuing.
The Interest Period applicable to any Eurodollar Loan
resulting from a conversion shall be specified by the Borrowers in the
irrevocable notice of conversion delivered pursuant to this Section; provided,
however, that if no such Interest Period shall be specified, the Borrowers shall
be deemed to have selected an Interest Period of one month's duration. If the
Borrowers shall not have given timely notice to continue any Eurodollar Loan
into a subsequent Interest Period (and shall not otherwise have given notice to
convert such Loan), such Loan (unless repaid or required to be repaid pursuant
to the terms hereof) shall, subject to (iv) and (v) above, automatically be
converted into an Alternate Base Loan. The Agent shall promptly advise the
Lenders of any notice given pursuant to this Section 2.02(e) and of each
Lender's portion of the continuation or conversion hereunder.
SECTION 2.03. Notice of Loans. The Borrowers shall, through a
Responsible Officer of any of the Borrowers, give the Agent irrevocable written,
telex or facsimile notice (promptly confirmed in writing) of each borrowing
(including, without limitation, a conversion as permitted by Section 2.02(e)
hereof) not later than 2:00 p.m., New York City time, (i) three (3) Business
Days before a proposed Eurodollar Loan borrowing or conversion and (ii) one
Business Day before an Alternate Base Loan borrowing or conversion (except that
no such notice will be required, to the extent that the proceeds of such
borrowing are requested to be disbursed to Borrowers' controlled disbursement
account maintained with the Agent). Such notice shall specify (w) whether the
Loans then being requested are to be Alternate Base Loans or Eurodollar Loans,
(x) the date of such borrowing
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(which shall be a Business Day) and amount thereof and (y) if such Loans are to
be Eurodollar Loans, the Interest Period with respect thereto. If no election as
to the type of Loan is specified in any such notice, all such Loans shall be
Alternate Base Loans. If no Interest Period with respect to any Eurodollar Loan
is specified in any such notice, then an Interest Period of one (1) month's
duration shall be deemed to have been selected; subject to the proviso set forth
in the last paragraph of Section 2.02 hereof. The Agent shall promptly advise
the Lenders of any notice given pursuant to this Section 2.03 and of each
Lender's portion of the requested borrowing.
SECTION 2.04. Notes; Repayment of Loans. (a) The Term Loan, as
continued hereunder made by a Lender shall be evidenced by a single Term Note,
duly executed on behalf of the Borrowers, dated the Closing Date, in
substantially the form of Exhibit A annexed hereto, delivered and payable to
such Lender in a principal amount equal to its Term Loan Commitment on such
date. All Revolving Credit Loans made by a Lender to the Borrowers shall be
evidenced by a single Revolving Credit Note, duly executed on behalf of the
Borrowers, dated the Closing Date, in substantially the form of Exhibit B
annexed hereto, delivered and payable to such Lender in a principal amount equal
to its Revolving Credit Commitment on such date. The outstanding balance of each
Revolving Credit Loan, as evidenced by any such Revolving Credit Note, shall
mature and be due and payable on the Revolving Credit Termination Date.
(b) Each Revolving Credit Loan shall bear interest from its
date on the outstanding principal balance thereof, as provided in Section 2.05
hereof.
(c) The aggregate principal amount of the Term Loan as
evidenced by the Term Notes, shall be payable in 20 consecutive quarterly
installments (the date of each such installment, a "Repayment Date") in the
amounts set forth below, and such payments shall be made by the Borrowers to the
Agent and distributed ratably among the Lenders in accordance with their
respective Term Loan Commitments:
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<TABLE>
<CAPTION>
Date Payment
---- -------
<S> <C>
June 30, 1998, September 30, 1998, December 31, 1998 and March 31, 1999 203,750
June 30, 1999, September 30, 1999, December 31, 1999 and March 31, 2000 326,250
June 30, 2000, September 30, 2000, December 31, 2000 and March 31, 2001 490,000
June 30, 2001, September 30, 2001, December 31, 2001 and March 31, 2002 490,000
June 30, 2002, September 30, 2002, December 31, 2002 and March 31, 2003 817,500
</TABLE>
To the extent not previously paid, the Term Loan shall be due
and payable on the Final Maturity Date. The Term Loan shall bear interest from
its date on the outstanding principal balance thereof, as provided in Section
2.05. All principal payments in respect of the Term Loan shall be accompanied by
accrued interest on the principal amount being repaid to the date of payment. No
scheduled payment of principal in respect of the Term Loan shall be made to the
extent that a lesser principal payment would result in the payment in full of
the outstanding amount of the Term Loan, and such lesser amount is paid.
(d) Each Lender, or the Agent on its behalf, shall, and is
hereby authorized by the Borrowers to, endorse on the schedule attached to the
Term Note or Revolving Credit Note, as applicable, of such Lender (or on a
continuation of such schedule attached to such Note and made a part thereof) an
appropriate notation evidencing the date and amount of each Loan to the
Borrowers from such Lender, as well as the date and amount of each payment and
prepayment with respect thereto; provided, however, that the failure of any
person to make such a notation on a Note shall not affect any obligations of the
Borrowers under such Note. Any such notation shall be conclusive and binding as
to the date and amount of such Loan or portion thereof, or payment or prepayment
of principal or interest thereon, absent manifest error.
(e) Each of the Borrowers shall be jointly and severally
liable with the other Borrower for the Obligations, and each of the Obligations
shall be secured by all of the Collateral. Each of the Borrowers acknowledges
that it is a co-borrower hereunder and is jointly and severally liable under
this Agreement and the other Loan Documents. All Credits extended to either of
the Borrowers or requested by either of the Borrowers shall be deemed to be
Credits extended for the Borrowers, and each of the Borrowers hereby authorizes
the other Borrower to effectuate Credits on its behalf. Notwithstanding anything
to the contrary contained in this Agreement or any of the other Loan Documents,
the Agent and the Lenders shall be entitled to rely upon any request, notice or
other communication received by them from either of the Borrowers on
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behalf of all Borrowers, and shall be entitled to treat their giving of any
notice hereunder to any of the Borrowers as notice to each and all Borrowers.
Each of the Borrowers agrees that the joint and several
liability of the Borrowers provided for in this subsection (e) shall not be
impaired or affected by any modification, supplement, extension or amendment or
any contract or agreement to which the other Borrower(s) may hereafter agree
(other than an agreement signed by the Agent and the Lenders specifically
releasing such liability), nor by any delay, extension of time, renewal,
compromise or other indulgence granted by the Agent or any Lender with respect
to any of the Obligations, nor by any other agreements or arrangements
whatsoever with the other Borrower(s) or with any other person, each of the
Borrowers hereby waiving all notice of such delay, extension, release,
substitution, renewal, compromise or other indulgence, and hereby consenting to
be bound thereby as fully and effectually as if it had expressly agreed thereto
in advance. The liability of each of the Borrowers is direct as to all of the
Obligations, and may be enforced without requiring the Agent or any Lender first
to resort to any other right, remedy or security. Each of the Borrowers hereby
expressly waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Obligations, the Notes, this Agreement or any
other Loan Document, other than any notice required by this Agreement or any
other Loan Document and any requirement that the Agent or any Lender protect,
secure, perfect or insure any Lien or any property subject thereto or exhaust
any right or take any action against any of the Borrowers or any other person or
any collateral.
Each of the Borrowers hereby irrevocably subordinates to the
prior payment in full of all Obligations all "claims" (as defined in Section
101(5) of the Bankruptcy Code) to which such Borrower is or would be entitled by
virtue of the provisions of the first paragraph of this subsection (e) or the
performance of such Borrower's obligations thereunder including, without
limitation, any right of subrogation (whether contractual, under Section 509 of
the Bankruptcy Code or otherwise), reimbursement, contribution, exoneration or
similar right, or indemnity, or any right of recourse to security for any of the
Obligations.
SECTION 2.05. Interest on Loans. (a) Subject to the provisions
of Section 2.05(c) and Section 2.08 hereof, each Revolving Credit Alternate Base
Loan and Term Alternate Base Loan shall bear interest at a rate per annum equal
to the Alternate Base Rate plus the applicable Interest Margin.
(b) Subject to the provisions of Section 2.05(c) and Section
2.08 hereof, each Revolving Credit Eurodollar Loan and Term Eurodollar Loan
shall bear interest at a rate per annum equal to the Adjusted LIBO Rate plus the
applicable Interest Margin.
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<PAGE>
(c) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date and on the Final Maturity Date. Interest on
each Alternate Base Loan shall be computed based on the number of days elapsed
in a year of 365 days and interest on each Eurodollar Loan shall be computed
based on the number of days elapsed in a year of 360 days. The Agent shall
determine each interest rate applicable to the Loans and shall promptly advise
the Borrowers and the Lenders of the interest rate so determined.
SECTION 2.06. Fees. (a) The Borrowers shall pay each Lender,
through the Agent, (i) on the first Business Day of each January, April, July
and October commencing July 1, 1998, (ii) on the date of any reduction of the
Revolving Credit Commitments pursuant to this Agreement including, without
limitation, Section 2.07 hereof and (iii) on the Revolving Credit Termination
Date, in immediately available funds, a commitment fee (the "Revolving Credit
Commitment Fee") of three-sixteenths of one percent (3/16 of 1%) per annum on
the average daily unused amount of the Revolving Credit Commitment of such
Lender, during the quarter (or shorter period commencing with the date hereof or
ending with the Revolving Credit Termination Date) ending on such date;
provided, however, that with respect to the period April 1, 1998 to the Closing
Date, the Borrowers shall pay each Lender, through the Agent, on July 1, 1998,
the "Revolving Credit Commitment Fee" under the Original Credit Agreement of
one-quarter of one percent (1/4 of 1%) per annum on the average daily unused
amount of such Lender's "Revolving Credit Commitment" under the Original Credit
Agreement during such period. The Revolving Credit Commitment Fee due to each
Lender under this Section 2.06 shall commence to accrue on the date hereof and
cease to accrue on the earlier of (i) the Revolving Credit Termination Date and
(ii) the termination of the Revolving Credit Commitment of such Lender pursuant
to this Agreement including, without limitation, pursuant to Section 2.07
hereof. The Revolving Credit Commitment Fee shall be calculated on the basis of
the actual number of days elapsed in a year of 365 days.
(b) The Borrowers shall pay to the Agent for its own account
the administration fees set forth in the Fee Letter, as and when due.
(c) The Borrowers on the Closing Date shall pay to the Agent
for the ratable benefit of the Lenders a facility fee equal to 0.10% of the
Total Commitment.
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SECTION 2.07. Termination and Reduction of Revolving Credit
Commitments and Term Loan Commitments. (a) Upon at least three (3) Business
Days' prior irrevocable written notice (or facsimile notice promptly confirmed
in writing) to the Agent, the Borrowers may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Total Revolving
Credit Commitment, ratably among the Lenders in accordance with the amounts of
their Revolving Credit Commitments; provided, however, that the Total Revolving
Credit Commitment shall not be reduced at any time to an amount less than the
Revolving Credit Loans outstanding under the Revolving Credit Commitments and
the Letter of Credit Usage at such time; and provided, further, that the
Borrowers shall pay to the Agent for the ratable benefit of the Lenders a
prepayment penalty (x) in the amount of $250,000 if the Borrowers shall
permanently terminate in whole the Total Revolving Credit Commitment during the
period from the Closing Date to and including March 31, 1999 or (y) in the
amount of $100,000 if the event described in (x) above should occur during the
period from April 1, 1999 to and including March 31, 2000. Each permanent
partial reduction of the Total Revolving Credit Commitment shall be in a minimum
of $500,000 or an integral multiple of $100,000.
(b) Simultaneously with any termination or reduction of the
Total Revolving Credit Commitment pursuant to paragraph (a) of this Section
2.07, the Borrowers shall pay to each Lender, through the Agent, the Revolving
Credit Commitment Fee due and owing through and including the date of such
termination or reduction on the amount of the Revolving Credit Commitment of
such Lender so terminated or reduced.
(c) The Revolving Credit Commitment of each Lender shall
automatically and permanently terminate on the Revolving Credit Termination
Date, and all Revolving Credit Loans still outstanding on such date shall be due
and payable in full together with accrued interest thereon.
(d) The Total Term Loan Commitment shall be permanently
reduced by the amount of any repayment or prepayment of the outstanding
principal amount of the Term Loans on the date of any such repayment or
prepayment. In any event, all amounts due and owing under the Total Term Loan
Commitment shall be due and payable on the Final Maturity Date.
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SECTION 2.08. Interest on Overdue Amounts; Alternate Rate of
Interest. (a) If the Borrowers shall default in the payment of the principal of
or interest on any Loan or any other amount becoming due hereunder, by
acceleration or otherwise, the Borrowers shall on demand from time to time pay
interest, to the extent permitted by law, on such defaulted amount outstanding
up to the date of actual payment of such defaulted amount (after as well as
before judgment) at a rate per annum equal to two percent (2%) in excess of the
rates otherwise applicable thereto.
(b) In the event, and on each occasion, that on the day two
(2) Business Days prior to the commencement of any Interest Period for a
Eurodollar Loan the Agent shall have determined that dollar deposits in the
amount of each Eurodollar Loan are not generally available in the London
interbank market, or that the rate at which dollar deposits are being offered
will not reflect adequately and fairly the cost to any Lender of making or
maintaining such Eurodollar Loan during such Interest Period, or that reasonable
means do not exist for ascertaining the Adjusted LIBO Rate, the Agent shall as
soon as practicable thereafter give written notice (or facsimile notice promptly
confirmed in writing) of such determination to the Borrowers and the Lenders,
and any request by the Borrowers for the making of a Eurodollar Loan pursuant to
Section 2.03 hereof or conversion or continuation of any Loan into a Eurodollar
Loan pursuant to Section 2.02 hereof shall, until the circumstances giving rise
to such notice no longer exist, be deemed to be a request for an Alternate Base
Loan. When the circumstances giving rise to such notice no longer exist, the
Agent shall as soon as practicable thereafter give written or facsimile notice
(or telephonic notice promptly confirmed by written or facsimile notice) of such
change to the Borrowers and the Lenders. Each determination by the Agent made
hereunder shall be conclusive absent manifest error.
SECTION 2.09. Prepayment of Loans. (a) Subject to the terms
and conditions contained in this Section 2.09 and in Section 2.07 hereof, the
Borrowers shall have the right to prepay any Loan at any time in whole or from
time to time in part (except in the case of a Eurodollar Loan only on the last
day of an Interest Period) without penalty (except as otherwise provided for
herein); provided, however, that each such partial prepayment of a Loan shall be
in an integral multiple of $100,000.
(b) On the date of any termination or reduction of the Total
Revolving Credit Commitment pursuant to Section 2.07(a) hereof or this
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Section 2.09, the Borrowers shall pay or prepay so much of the Revolving Credit
Loans as shall be necessary in order that the Availability equals or exceeds
zero following such termination or reduction. Any prepayments required by this
paragraph (b) shall be applied to outstanding Revolving Credit Alternate Base
Loans up to the full amount thereof before they are applied to outstanding
Revolving Credit Eurodollar Loans; provided, however, that the Borrowers shall
not be required to make any prepayment of any Eurodollar Loan pursuant to this
Section until the last day of the Interest Period with respect thereto so long
as an amount equal to such prepayment is deposited by the Borrowers in an
interest bearing cash collateral account for the benefit of the Borrowers with
the Agent to be held in such account on terms reasonably satisfactory to the
Agent.
(c) The Borrowers shall make prepayments of the Revolving
Credit Loans from time to time such that the Availability equals or exceeds zero
(or so long as Section 7.09(c) shall remain in effect, $10,000,000) at all
times. Any prepayments required by this paragraph (c) shall be applied to
outstanding Revolving Credit Alternate Base Loans up to the full amount thereof
before they are applied to outstanding Revolving Credit Eurodollar Loans;
provided, however, that the Borrowers shall not be required to make any
prepayment of any Eurodollar Loan pursuant to this Section until the last day of
the Interest Period with respect thereto so long as an amount equal to such
prepayment is deposited by the Borrowers in a cash collateral account with the
Agent to be held in such account on terms reasonably satisfactory to the Agent.
(d) Within three Business Days of the sale or other
disposition of any assets of any Loan Party (excluding sales of inventory in the
ordinary course of business and, subject to Sections 6.02 and 7.05 hereof,
wornout or obsolete assets but only to the extent that the net proceeds realized
are applied within 90 days of any sale or other disposition to purchase other
assets and pending such application or prepayment all such net proceeds are
applied to prepay Revolving Credit Loans), the proceeds received (net of taxes
due and any reasonable expenses of sale) shall be applied as set forth in
paragraph (g) below.
(e) Within 105 days of the end of each Fiscal Year of the
Borrowers, commencing with the Fiscal Year ending March 31, 1998, the Borrowers
shall prepay the Term Loan in an amount equal to the
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Mandatory Prepayment for the Fiscal Year then ended, such prepayment to be
applied as set forth in paragraph (g) below.
(f) (i) Except as provided in clause (ii) below, promptly and
in any event not more than two Business Days following the receipt by the Agent
or a Borrower or any subsidiary of a Borrower of any net proceeds of (x) any
casualty insurance required to be maintained pursuant to Section 6.03 hereof on
account of each separate loss, damage or injury (each, a "Casualty Event") in
excess of $500,000 (or, if there shall be continuing a Default or an Event of
Default, of the full amount of net proceeds) to any asset of such Borrower or
such subsidiary (including, without limitation, any Collateral), or (y) any
business interruption insurance required to be maintained pursuant to Section
6.03 hereof on account of any business interruption event (each, a "BI Event")
in excess of $500,000 (or, if there shall be continuing a Default or Event of
Default, of the full amount of net proceeds), such Borrower or such subsidiary
shall notify the Agent of such receipt in writing or by telephone promptly
confirmed in writing, and not later than two Business Days following receipt by
the Agent or such Borrower or such subsidiary of any such proceeds, there shall
become due and payable a prepayment of the Revolving Credit Loans in an amount
equal to 100% of such proceeds (not in permanent reduction of the Revolving
Credit Commitment).
(ii) In the case of the receipt of net proceeds described in
clause (i) above with respect to a Casualty Event which is greater than
$2,000,000, the Borrowers may elect, by written notice delivered to the
Agent not later than the day on which a prepayment would otherwise be
required under clause (i), to apply all or a portion of such net
proceeds for the purpose of replacing, repairing, restoring, rebuilding
or purchasing comparable tangible assets (referred to herein as a
"Rebuilding"). An election under this clause (ii) shall not be
effective unless: (x) at the time of such election there is continuing
no Default or Event of Default; (y) the Borrowers shall have certified
to the Agent that: (i) the net proceeds of the insurance adjustment
with respect to a Casualty Event, together with other funds available
to the Borrowers, shall be sufficient to complete such proposed
Rebuilding in accordance with all applicable laws, regulations and
ordinances; and (ii) no Default or Event of Default has arisen or will
arise as a result of such Casualty Event or Rebuilding.
(iii) If the amount of net proceeds in question exceeds
$2,000,000 and arises from a Casualty Event involving the premises
subject to the Mortgage and/or machinery and equipment subject to a
Lien in favor of the Agent, then the
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Agent may establish reserves against Availability as determined by the
Agent in its reasonable discretion until any Rebuilding is completed;
and if such Rebuilding has not been commenced within 360 days of the
occurrence of such Casualty Event, then the Borrowers shall apply an
amount equal to such net proceeds to prepay the Term Loan as set forth
in paragraph (g) below.
(iv) If as the result of a Casualty Event which involves the
loss or destruction of Eligible Inventory and as a result thereof the
Borrowers are or would be in Default under Section 2.09(c) hereof, then
the Borrowers may request that for the purpose of computing Eligible
Receivables the Agent permit the sums due from the applicable insurance
carriers to be deemed Eligible Receivables and the Agent may in its
sole discretion do so (determining in its sole discretion the amount
and advance percentage of any such receivable).
(g) When making a prepayment, whether mandatory or otherwise,
pursuant to paragraph (a), (b), (c), (d), (e) or (f)(iii) above, the Borrowers
shall furnish to the Agent, not later than 2:00 p.m. (New York City time) (i)
one (1) Business Day prior to the date of such prepayment of Alternate Base
Loans and (ii) three (3) Business Days prior to the date of such prepayment of
Eurodollar Loans, written, telex or facsimile notice (promptly confirmed in
writing) of prepayment which shall specify the prepayment date and the principal
amount of each Loan (or portion thereof) to be prepaid, which notice shall be
irrevocable and shall commit the Borrowers to prepay such Loan by the amount
stated therein on the date stated therein. All prepayments shall be accompanied
by accrued interest on the principal amount being prepaid to the date of
prepayment. Prepayments made pursuant to paragraph (d) or (e) above shall be
applied as follows: (A) first, to outstanding Term Alternate Base Loans in the
order described in (j) below up to the full amount thereof and then to
outstanding Term Eurodollar Loans in the order described in (j) below up to the
full amount thereof and (B) second, to outstanding Revolving Credit Alternate
Base Loans up to the full amount thereof and then to Revolving Credit Eurodollar
Loans up to the full amount thereof; provided, however, that the Borrowers shall
not be required to make any prepayment of any Term or Revolving Credit
Eurodollar Loan required pursuant to this paragraph until the last day of the
Interest Period with respect thereto so long as an amount equal to such
prepayment is deposited by the Borrowers into an interest bearing cash
collateral account for the benefit of the Borrowers with the Agent to be held in
such account pursuant to terms reasonably satisfactory to the Agent.
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(h) All prepayments of any Eurodollar Loan under this Section
2.09 shall be subject to Section 2.12 hereof.
(i) Except as otherwise expressly provided in this Section
2.09, payments with respect to any paragraph of this Section 2.09 are in
addition to payments made or required to be made under any other paragraph of
this Section 2.09.
(j) All prepayments of the Term Loan under this Section 2.09
shall be applied 50% in the inverse order of the Repayment Dates and 50% ratably
over the remaining Repayment Dates. The amount of the Term Loan prepaid may not
be reborrowed.
SECTION 2.10. Reserve Requirements; Change in Circumstances.
(a) Notwithstanding any other provision herein, if after the date of this
Agreement (or in the case of any assignee of any Lender, the date of assignment)
any change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall: (i) subject the Agent or any Lender (which shall for the purpose of
this Section 2.10 include any assignee or lending office of the Agent or any
Lender) to any charge, fee, deduction or withholding of any kind or to any tax
with respect to any amount paid or to be paid to either the Agent or any Lender
with respect to any Eurodollar Loans made by such Lender to the Borrowers or
with respect to the obligations of any Lender under Sections 2.17 through 2.20
hereof or under any Letter of Credit (other than (x) taxes imposed on the
overall net income of the Agent or such Lender and (y) franchise taxes imposed
on the Agent or such Lender, in either case by the jurisdiction in which such
Lender or the Agent has its principal office or Applicable Lending Office or any
political subdivision or taxing authority of either thereof); (ii) change the
basis of taxation of payments to any Lender or the Agent of the principal of or
interest on any Eurodollar Loan or any other fees or amounts payable with
respect to any Letter of Credit or otherwise hereunder (other than taxes imposed
on the overall net income of, or franchise taxes imposed on, such Lender or the
Agent by the jurisdiction in which such Lender or the Agent has its principal
office or Applicable Lending Office or by any political subdivision or taxing
authority therein); (iii) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or loans or loan commitments extended by, or Letters of Credit
issued and maintained by, such Lender; or (iv) impose on any Lender or, with
respect to Eurodollar Loans, the London interbank market, any other condition
affecting this Agreement, Letters of Credit issued and maintained by or
Eurodollar Loans made by such Lender; and the result of any of the foregoing
shall be to increase the direct cost to any such Lender of making or maintaining
any Eurodollar Loan or Letter of Credit, or to reduce the amount of any
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payment (whether of principal, interest, fee, compensation or otherwise)
receivable by such Lender or to require such Lender to make any payment in
respect of any Eurodollar Loan or Letter of Credit, then the Borrowers shall pay
to such Lender or the Agent, as the case may be, upon such Lender's or the
Agent's demand, such additional amount or amounts as will compensate such Lender
or the Agent for such additional costs or reduction. The Agent and each Lender
agree to give notice to the Borrowers of any such change in law, regulation,
interpretation or administration with reasonable promptness after becoming
actually aware thereof and of the applicability thereof to the Transactions.
Notwithstanding anything contained herein to the contrary, nothing in clause (i)
or (ii) of this Section 2.10(a) shall be deemed to (x) permit the Agent or any
Lender to recover any amount thereunder which would not be recoverable under
this Agreement or (y) require the Borrowers to make any payment of any amount to
the extent that such payment would duplicate any payment made by the Borrowers
pursuant to this Agreement.
(b) If at any time and from time to time after the date of
this Agreement, any Lender shall determine that the adoption of any applicable
law, rule, regulation or guideline regarding capital adequacy, or any change in
any applicable law, rule, regulation or guideline regarding capital adequacy,
including, without limitation, the July 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or any change in the
interpretation or administration of any thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or admin
istration thereof, or compliance by such Lender (or its lending office) with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or will
have the effect of reducing the rate of return on such Lender's capital or on
the capital of such Lender's holding company, if any, as a consequence of its
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies and the policies of such Lender's holding company with
respect to capital adequacy), then from time to time the Borrowers shall pay to
such Lender such additional amount or amounts as will compensate such Lender for
such reduction. Each Lender agrees to give notice to the Borrowers of any
adoption of, change in, or change in interpretation or administration of, any
such law, rule, regulation or guideline with reasonable promptness after
becoming actually aware thereof and of the applicability thereof to the
Transactions.
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(c) A statement of any Lender or the Agent setting forth such
amount or amounts, supported by calculations in reasonable detail, as shall be
necessary to compensate such Lender (or the Agent) as specified in paragraphs
(a) and (b) above shall be delivered to the Borrowers and shall be conclusive
absent manifest error. The Borrowers shall pay each Lender or the Agent the
amount shown as due on any such statement within ten (10) days after its receipt
of the same.
(d) Failure on the part of any Lender or the Agent to demand
compensation for any increased costs, reduction in amounts received or
receivable with respect to any Interest Period or any Letter of Credit or
reduction in the rate of return earned on such Lender's capital (collectively,
"Increased Costs"), shall not constitute a waiver of such Lender's or the
Agent's rights to demand compensation for any such Increased Costs; provided,
that if any Lender or the Agent shall fail to demand compensation for any such
Increased Costs within 365 days after such Lender or the Agent has knowledge of
such Increased Costs or the event causing such Increased Costs, then such
failure shall constitute a waiver of such Lender's or the Agent's right to
demand compensation for such Increased Costs and the Borrowers shall have no
obligation to reimburse such Lender or the Agent for such Increased Costs. The
protection under this Section 2.10 shall be available to each Lender and the
Agent regardless of any possible contention of the invalidity or inapplicability
of any law, regulation or other condition which shall give rise to any demand by
such Lender or the Agent for compensation. In the event a Lender or the Agent
challenges the validity or applicability of any law, regulation or other
condition giving rise to a demand for compensation, and the Lender or the Agent
prevails in its challenge, the Lender or the Agent shall reimburse the Borrowers
in an amount equal to the amount paid by the Borrowers to the Lender or the
Agent.
(e) Any Lender claiming any additional amounts payable
pursuant to this Section 2.10 agrees to use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for, or reduce
the amount of, any such additional amounts and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender.
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SECTION 2.11. Change in Legality. (a) Notwithstanding anything
to the contrary herein contained, if any change in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations to
make Eurodollar Loans as contemplated hereby, then, by written notice to the
Borrowers and to the Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter
be made by such Lender hereunder, whereupon the Borrowers
shall be prohibited from requesting Eurodollar Loans from such
Lender hereunder unless such declaration is subsequently
withdrawn; and
(ii) require that all outstanding Eurodollar Loans made
by such Lender be converted to Alternate Base Loans, in which
event (A) all such Eurodollar Loans shall be automatically
converted to Alternate Base Loans as of the effective date of
such notice as provided in paragraph (b) below and (B) all
payments of principal which would otherwise have been applied
to repay the converted Eurodollar Loans shall instead be
applied to repay the Alternate Base Loans resulting from the
conversion of such Eurodollar Loans.
(b) For purposes of Section 2.11(a) hereof, a notice to the
Borrowers by any Lender shall be effective, if lawful, on the last day of the
then current Interest Period or, if there are then two or more current Interest
Periods, on the last day of each such Interest Period, respectively; otherwise,
such notice shall be effective with respect to the Borrowers on the date of
receipt by the Borrowers.
(c) Any Lender claiming any additional amounts payable
pursuant to this Section 2.11 agrees to use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for, or reduce
the amount of, any such additional amounts and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender.
SECTION 2.12. Indemnity. The Borrowers shall indemnify the
Agent and each Lender against any loss or reasonable expense which the Agent or
such Lender may sustain or incur as a consequence of the following events
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(regardless of whether such events occur as a result of the occurrence of an
Event of Default or the exercise of any right or remedy of the Agent or the
Lenders under this Agreement or any Loan Document, or at law): any failure of
the Borrowers to fulfill on the date of any Credit Event in connection with a
Eurodollar Loan the applicable conditions set forth in Article V hereof
applicable to it; any failure of the Borrowers to borrow hereunder after irrevo
cable notice of borrowing pursuant to Section 2.03 hereof has been given; any
payment, prepayment or conversion of a Eurodollar Loan on a date other than the
last day of the relevant Interest Period; or any default in payment or
prepayment of the principal amount of any Eurodollar Loan or any part thereof or
interest accrued thereon, or with respect to any Letter of Credit, in each case
as and when due and payable (at the due date thereof, by irrevocable notice of
prepayment or otherwise). Such loss or reasonable expense shall include, without
limitation, an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal or other amount so paid, prepaid or
converted or not borrowed for the period from the date of such payment,
prepayment or conversion or failure to borrow to, in the case of a Eurodollar
Loan, the last day of the Interest Period for such Eurodollar Loan (or, in the
case of a failure to borrow, the Interest Period for such Eurodollar Loan which
would have commenced on the date of such failure to borrow), at the applicable
rate of interest for such Loan provided for herein over (ii) the amount of
interest (as reasonably determined by such Lender) that would be realized by
such Lender in reemploying the funds so paid, prepaid or converted or not
borrowed for such period or Interest Period, as the case may be. Any such Lender
shall provide to the Borrowers a statement, signed by an officer of such Lender,
explaining any loss or expense and setting forth, if applicable, the computation
pursuant to the preceding sentence, and such statement shall be conclusive
absent manifest error. The Borrowers shall pay such Lender the amount shown as
due on any such statement within ten (10) days after the receipt of the same.
SECTION 2.13. Pro Rata Treatment; Assumption by and Delegation
of Authority to the Agent. (a) Except as permitted under Sections 2.10, 2.11,
2.15(c) and 2.16 hereof, or as described in subsection (d) below each borrowing,
each payment or prepayment of principal of the Notes, each payment of interest
on the Notes, each payment of any fee or other amount payable hereunder and each
reduction of the Total Revolving Credit Commitment and Total Term Loan
Commitment shall be made to the Agent and distributed pro rata among the Lenders
in the proportions that their Revolving Credit
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Commitments bear to the Total Revolving Credit Commitment or that their Term
Loan Commitments bears to the Total Term Loan Commitment, as the case may be.
(b) Notwithstanding the occurrence or continuance of a Default
or Event of Default or other failure of any condition to the making of Loans or
occurrence of other Credit Events hereunder subsequent to the Credit Events on
the Closing Date, unless the Agent shall have been notified in writing by any
Lender in accordance with the provisions of paragraph (c) below prior to the
date of a proposed Credit Event that such Lender will not make the amount that
would constitute its pro rata share of the applicable Credits on such date
available to the Agent, the Agent may assume that such Lender has made such
amount available to the Agent on such date, and the Agent may, in reliance upon
such assumption, make available to the Borrowers a corresponding amount. If such
amount is made available to the Agent on a date after such Credit Event date,
such Lender shall pay to the Agent on demand an amount equal to the product of
(i) the daily average Federal funds rate during such period as quoted by the
Agent, times (ii) the amount of such Lender's pro rata share of such Credits,
times (iii) a fraction the numerator of which is the number of days that elapse
from and including such Credit Event date to the date on which such Lender's pro
rata share of such Credits shall have become immediately available to the Agent
and the denominator of which is 360. A certificate of the Agent submitted to any
Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's pro rata share of
such Credits is not in fact made available to the Agent by such Lender within
three Business Days of such Credit Event date, the Agent shall be entitled to
recover such amount with interest thereon (without duplication of any interest
paid pursuant to Section 2.05) at the rate per annum applicable to the Loans
hereunder, on demand, from the Borrowers.
(c) Unless and until the Agent shall have received notice from
the Required Lenders as to the existence and continuance of a Default, an Event
of Default or some other circumstance which would relieve the Lenders of their
respective obligations to extend Credits hereunder, which notice shall be in
writing and shall be signed by the Required Lenders and shall expressly state
that the Required Lenders do not intend to make available to the Agent such
Lenders' ratable share of Credits extended after the effective date of such
notice, the Agent shall be entitled to continue to make
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the assumptions described in Section 2.13(b) above. After receipt of the notice
described in the preceding sentence, which shall become effective on the third
Business Day after receipt of such notice by the Agent (unless otherwise agreed
by the Agent), the Agent shall be entitled to make the assumptions described in
Section 2.13(b) above as to any Credits as to which it has not received a
written notice to the contrary prior to 11:00 a.m. (New York time) on the
Business Day next preceding the day on which such Credits are to be extended.
The Agent shall not be required to extend any Credits as to which it shall have
received notice by a Lender of such Lender's intention not to make its ratable
portion of such Credits available to the Agent. Any withdrawal of authorization
as described under this Section 2.13(c) shall not affect the validity of any
Credits extended prior to the effectiveness thereof.
(d) In the event that any Lender fails to fund its ratable
portion (based on its Revolving Credit Commitment) of any Revolving Credit Loan
which such Lender is obligated to fund under the terms of this Agreement (the
funded portion of such borrowing being hereinafter referred to as a "Non Pro
Rata Loan"), until the earlier of such Lender's cure of such failure or the
termination of the Total Revolving Credit Commitment, in the Agent's sole
discretion, the proceeds of all amounts thereafter repaid to Agent by the
Borrowers and otherwise required to be applied to such Lender's share of all
other Obligations pursuant to the terms of this Agreement, may be advanced to
the Borrowers by the Agent on behalf of such Lender to cure, in full or in part,
such failure by such Lender, but shall nevertheless be deemed to have been paid
to such Lender in satisfaction of such other Obligations. Notwithstanding
anything in this Agreement to the contrary:
(i) the foregoing provisions to this subsection (d)
shall apply only with respect to the proceeds of payments of
Obligations and shall not affect the conversion or
continuation of Loans pursuant to Section 2.02;
(ii) any such Lender shall be deemed to have cured its
failure to fund at such time as an amount equal to such
Lender's ratable portion (based on its applicable Revolving
Credit Commitment) of the requested principal portion of such
Revolving Credit Loan is fully funded to the Borrowers whether
made by such Lender itself or by operation of the
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terms of this subsection (d) and whether or not the Non Pro
Rata Loan with respect thereto has been converted or
continued;
(iii) amounts advanced to the Borrowers to cure, in full
or in part, any such Lender's failure to fund its Revolving
Credit Loans ("Cure Loans") shall bear interest at the rate
applicable to Alternate Base Loans under Section 2.05 in
effect from time to time, and for all other purposes of this
Agreement shall be treated as if they were Alternate Base
Loans;
(iv) regardless of whether or not an Event of Default
has occurred and is continuing, and notwithstanding the
instructions of the Borrowers as to their desired application,
all repayments of principal which would be applied to the
outstanding Revolving Credit Alternate Base Loans shall be
applied first, ratably to Revolving Credit Alternate Base
Loans constituting Non Pro Rata Loans, second, ratably to
Revolving Credit Alternate Base Loans other than those
constituting Non Pro Rata or Cure Loans and, third, ratably to
Revolving Credit Alternate Base Loans constituting Cure Loans;
(v) for so long as, and until the earlier of any such
Lender's cure of the failure to fund its ratable portion
(based on its applicable Revolving Credit Commitment) of any
Revolving Credit Loan and the termination of the Total
Revolving Credit Commitment, the term "Required Lenders" for
all purposes of this Agreement shall exclude all Lenders whose
failure to fund their ratable portion (based on their
respective applicable Revolving Credit Commitments) of any
Revolving Credit Loan have not been cured; and
(vi) for so long as, and until any such Lender's
failure to fund its ratable portion (based on its applicable
Revolving Credit Commitment) of any Revolving Credit Loan is
cured in accordance with this subsection (d), such Lender
shall not be entitled to any Revolving Credit Commitment Fee
with respect to its Revolving Credit Commitment and such
Lender shall remain liable to the Borrowers for its failure to
fund regardless of such cure.
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SECTION 2.14. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against the Borrowers, including, but not limited to, a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, obtain payment (voluntary or involuntary) in respect of a Note or
exposure under the Letter of Credit Usage held by it as a result of which the
unpaid principal portion of the Notes or exposure under the Letter of Credit
Usage held by it shall be proportionately less than the unpaid principal portion
of the Notes or exposure under the Letter of Credit Usage held by any other
Lender, it shall be deemed to have simultaneously purchased from such other
Lender a participation in the Notes and exposure under the Letter of Credit
Usage held by such other Lender, so that the aggregate unpaid principal amount
of the Notes and exposure under the Letter of Credit Usage and participations in
Notes and exposure under the Letter of Credit Usage held by it shall be in the
same proportion to the aggregate unpaid principal amount of all Notes and
exposure under the Letter of Credit Usage then outstanding as the principal
amount of the Notes and exposure under the Letter of Credit Usage held by it
prior to such exercise of banker's lien, setoff or counterclaim was to the
principal amount of all Notes and exposure under the Letter of Credit Usage
outstanding prior to such exercise of banker's lien, setoff or counterclaim;
provided, however, that if any such purchase or purchases or adjustments shall
be made pursuant to this Section 2.14 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustments restored without interest. The Borrowers expressly consent to the
foregoing arrangements and agree that any Lender holding a participation in a
Note or exposure under the Letter of Credit Usage deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrowers to such
Lender as fully as if such Lender held a Note or exposure under the Letter of
Credit Usage in the amount of such participation.
SECTION 2.15. Payments and Computations. (a) The Borrowers
shall make each payment hereunder and under any instrument delivered hereunder
not later than 2:00 p.m. (New York City time) on the day when due in lawful
money of the United States (in freely transferable dollars) to the Agent at its
offices at 200 Jericho Quadrangle, Jericho, New York 11753 for the account of
the Lenders, in immediately available funds, without set-off or counterclaim.
Any amounts received after such time on any date may, in
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the discretion of the Agent, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon. The Agent
shall distribute any such payments received by it for the account of any other
person to the appropriate recipient promptly following receipt thereof. The
Agent may charge, when due and payable, the Borrowers' account or accounts, as
the case may be, with the Agent for all interest, principal and Revolving Credit
Commitment Fees, letter of credit fees and any administration fee owing to the
Agent or the Lenders on or with respect to this Agreement and/or the Loans and
other Loan Documents. If at any time there is not sufficient availability to
cover any of the payments referred to in the prior sentence, and in any event
upon the occurrence of any Default, the Borrowers shall make any such payments
upon demand.
(b) If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be received
by the Agent from the Borrowers and such related payment is not received by the
Agent, then the Agent will be entitled to recover such amount from such Lender
without setoff, counterclaim or deduction of any kind. If the Agent reasonably
determines at any time that any amount received by the Agent under this
Agreement must be returned to the Borrowers or paid to any other person pursuant
to any bankruptcy or solvency law then, notwithstanding any other term or
condition of this Agreement, the Agent will not be required to distribute any
portion thereof to any Lender. In addition, each Lender will repay to the Agent
on demand any portion of such amount that the Agent has distributed to such
Lender, together with interest at such rate, if any, as the Agent is required to
pay to the Borrowers or such other person, without setoff, counterclaim or
deduction of any kind.
(c) The outstanding principal balance of Revolving Credit
Loans may fluctuate from day to day, through the Agent's disbursement of funds
to, and receipt of funds from, the Borrowers. In order to minimize the frequency
of transfers of funds between the Agent and each Lender, Revolving Credit Loans
and payments may be settled according to the following procedures. On the fourth
Business Day of each week, or more frequently (including daily), if the Agent so
elects (each such day being a "Settlement Date"), the Agent will advise each
Lender by telephone, telex or telecopy of the amount of each such Lender's
actual dollar investment and its ratable portion (based on its applicable
Revolving Credit Commitment) of the outstanding principal balance of Revolving
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Credit Loans as of the close of business on the Business Day immediately
preceding the Settlement Date. In the event that payments are necessary to
adjust the amount of such Lender's actual dollar investment in the outstanding
principal balance of Revolving Credit Loans to such Lender's ratable portion
(based on its applicable Revolving Credit Commitment) of the outstanding
principal balance of Revolving Credit Loans as of any Settlement Date, the party
from which such payment is due will pay the other, in immediately available
funds, by wire transfer to the other's account not later than 2:00 p.m. (New
York time) on the Business Day immediately following the Settlement Date.
Notwithstanding the foregoing, if the Agent so elects, the Agent may require
that each Lender make its ratable portion (based on its applicable Revolving
Credit Commitment) of any requested Revolving Credit Loan available to the Agent
for disbursement on the date of funding applicable to such Revolving Credit Loan
in accordance with Section 2.03 hereof. Notwithstanding these procedures, each
Lender's obligation to fund its portion of each Revolving Credit Loan made by
the Agent to the Borrowers will commence on the date such advance is made by the
Agent.
SECTION 2.16. Taxes. (a) Any and all payments by the Borrowers
hereunder shall be made, in accordance with Section 2.15 hereof, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings in any such case imposed by the
United States or any political subdivision thereof, excluding:
(i) in the case of the Agent and each Lender, (A)
taxes imposed or based on its net income, and franchise or
capital taxes imposed on it, and (B) withholding taxes payable
with respect to payments to the Agent or such Lender under
laws (including, without limitation, any treaty, ruling,
determination or regulation) in effect on the date hereof, but
not any increase in withholding tax resulting from any
subsequent change in such laws (other than withholding with
respect to taxes imposed or based on its net income or with
respect to franchise or capital taxes), and
(ii) taxes (including withholding taxes) imposed by
reason of the failure of the Agent or any Lender, in either
case that is organized outside the United States, to comply
with Section 2.16(f) hereof (or the inaccuracy at any time of
the
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certificates, documents and other evidence delivered
thereunder)
(all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrowers
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Lenders or the Agent, (x) the sum payable shall be
increased by the amount necessary so that after making all required deductions
(including without limitation deductions applicable to additional sums payable
under this Section 2.16) such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (y) the Borrowers shall make such deductions and (z) the Borrowers shall
pay the full amount deducted to the relevant tax authority or other authority in
accordance with applicable law.
(b) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "Other Taxes").
(c) The Borrowers will indemnify each Lender and the Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction (except as specified in clauses
(a)(i) and (ii)) on amounts payable under this Section 2.16) paid by such Lender
or the Agent (as the case may be) and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender or the
Agent (as the case may be) makes written demand therefor. If any Lender receives
a refund in respect of any Taxes or Other Taxes for which such Lender has
received payment from the Borrowers hereunder, such Lender shall promptly notify
the Borrowers of such refund and such Lender shall promptly repay such refund to
the Borrowers, provided that the Borrowers, upon the request of such Lender,
agree to return such refund (plus any penalties, interest or other charges) to
such Lender in the event such Lender is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Borrowers in respect of any payment to any Lender,
the Borrowers will furnish to the Agent, at its address referred to in Section
11.01 hereof, such certificates, receipts and
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other documents as may be reasonably requested in writing to evidence payment
thereof.
(e) Without prejudice to the survival of any other agreement
hereunder, the agreements and obligations contained in this Section 2.16 shall
survive the payment in full of principal and interest hereunder.
(f) Each Lender that is organized outside of the United States
shall deliver to the Borrowers on the date hereof (or, in the case of an
assignee, on the date of the assignment) and from time to time as required for
renewal under applicable law duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 (or any successor or additional forms), as
appropriate, indicating in each case that such Lender is entitled to receive
payments under this Agreement without any deduction or withholding of any United
States federal income taxes. The Agent (if the Agent is an entity organized
outside the United States) and each Lender that is organized outside the United
States shall promptly notify the Borrowers and the Agent of any change in its
Applicable Lending Office and upon written request of the Borrowers such Lender
or the Agent, as applicable, shall, prior to the immediately following due date
of any payment by the Borrowers or any Guarantor hereunder or under any other
Loan Document, deliver to the Borrowers or such Guarantor, as the case may be
(with copies to the Agent), such certificates, documents or other evidence, as
required by the Code or Treasury Regulations issued pursuant thereto, including
without limitation Internal Revenue Service Form 4224, Form 1001 and any other
certificate or statement of exemption required by Treasury Regulation Section
1.1441-4(a) or Section 1.1441-6(c) or any subsequent version thereof, properly
completed and duly executed by such Lender establishing that such payment is (i)
not subject to withholding under the Code because such payment is effectively
connected with the conduct by such Lender of a trade or business in the United
States or (ii) totally exempt from United States tax under a provision of an
applicable tax treaty. The Borrowers shall be entitled to rely on such forms in
their possession until receipt of any revised or successor form pursuant to this
Section 2.16(f). If the Agent or a Lender fails to provide a certificate,
document or other evidence required pursuant to this Section 2.16(f), then (i)
the Borrowers shall be entitled to deduct or withhold on payments to the Agent
or such Lender as a result of such failure, as required by law, and
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(ii) the Borrowers shall not be required to make payments of additional amounts
with respect to such withheld Taxes pursuant to Sec tion 2.16(a) to the extent
such withholding is required solely by reason of the failure of the Agent or
such Lender to provide the necessary certificate, document or other evidence.
(g) Each Lender and the Agent shall use reasonable efforts to
avoid or minimize any amounts which might otherwise be payable pursuant to this
Section 2.16 (including seeking refunds of any amounts that are reasonably
believed not to have been correctly or legally asserted); provided, however,
that such efforts shall not include the taking of any actions by such Lender or
the Agent that would result in any tax, cost or other expense to such Lender or
the Agent (other than a tax, cost or other expense for which such Lender or the
Agent shall have been reimbursed or indemnified by the Borrowers pursuant to
this Agreement or otherwise) or any action which would or might in the
reasonable opinion of such Lender or the Agent have a material adverse effect
upon its business, operations or financial condition or otherwise be
disadvantageous to such Lender or the Agent.
SECTION 2.17. Issuance of Letters of Credit. Upon the request
of the Borrowers, and subject to the conditions set forth in Article V hereof
and such other conditions to the opening of Letters of Credit as the Agent
reasonably requires of its customers generally, the Agent shall from time to
time open commercial and standby letters of credit (each, a "Letter of Credit")
for the account of the Borrowers, the aggregate undrawn amount of all
outstanding Letters of Credit not at any time to exceed $10,000,000; provided,
however, that neither Borrower may request the Agent to open a Letter of Credit
if after giving effect thereto (measured by the face amount of such Letter of
Credit) Availability would be less than zero (or so long as Section 7.09(c)
shall remain in effect, $10,000,000). The issuance of each Letter of Credit
shall be made on at least three Business Days' prior written notice from the
Borrowers to the Agent, at its Domestic Lending Office, which written notice
shall be an application for a Letter of Credit on the Agent's customary form
completed to the reasonable satisfaction of the Agent, together with the
proposed form of the Letter of Credit (which shall be reasonably satisfactory to
the Agent) and such other certificates, documents and other papers and
information as the Agent may reasonably request. The Agent shall not at any time
be obligated to issue any Letter of Credit if such issuance would conflict with
any applicable provisions of law or cause the Agent or any Lender to exceed any
limits imposed by any Lender's Revolving Credit Commitment
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or the Letter of Credit sublimit. The expiration date of any (i) commercial
Letter of Credit shall not be later than 180 days from the date of issuance
thereof and (ii) any standby Letter of Credit shall not be later than 365 days
from the date of issuance thereof, and, in any event, no Letter of Credit shall
have an expiration date later than 30 days prior to the Revolving Credit
Termination Date. The Letters of Credit shall be issued with respect of
transactions occurring in the ordinary course of business of the Borrowers.
SECTION 2.18. Payment of Letters of Credit; Reimbursement.
Upon the issuance of any Letter of Credit, the Agent shall notify each Lender of
the principal amount, the number, and the expiration date thereof and the amount
of such Lender's participation therein. By the issuance of a Letter of Credit
hereunder and without further action on the part of the Agent or the Lenders,
each Lender hereby accepts from the Agent a participation (which participation
shall be nonrecourse to the Agent) in such Letter of Credit equal to such
Lender's pro rata (based on its Revolving Credit Commitment) share of such
Letter of Credit, effective upon the issuance of such Letter of Credit. Each
Lender hereby absolutely and unconditionally assumes, as primary obligor and not
as a surety, and agrees to pay and discharge, and to indemnify and hold the
Agent harmless from liability in respect of, such Lender's pro rata share of the
amount of any drawing under a Letter of Credit. Each Lender acknowledges and
agrees that its obligation to acquire participations in each Letter of Credit
issued by the Agent and its obligation to make the payments specified herein,
and the right of the Agent to receive the same, in the manner specified herein,
are absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or an Event of Default hereunder, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever. The
Agent shall review, on behalf of the Lenders, each draft and any accompanying
documents presented under a Letter of Credit and shall notify each Lender of any
such presentment. Promptly after it shall have ascertained that any draft and
any accompanying documents presented under such Letter of Credit appear on their
face to be in substantial conformity with the terms and conditions of the Letter
of Credit, the Agent shall give telephonic or facsimile notice to the Lenders
and the Borrowers of the receipt and amount of such draft and the date on which
payment thereon will be made, and the Lenders shall, by 11:00 a.m., New York
City time on the date such payment is to be made, pay the amounts required to
the Agent in New York, New York in immediately available funds, and the Agent,
not later than 3:00 p.m. on such day, shall make the appropriate
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payment to the beneficiary of such Letter of Credit; provided, however, the
Agent shall, subject to Availability, finance such payment with an Alternate
Base Loan in an equivalent amount and, to the extent so financed, the Borrowers'
obligation to make such payment shall be discharged and replaced by the
resulting Alternate Base Loan. If in accordance with the prior sentence the
Agent cannot finance such payment because of the lack of Availability and the
Agent shall pay any draft presented under a Letter of Credit, then the Agent, on
behalf of the Lenders, shall charge the general deposit account of the Borrowers
with the Agent for the amount thereof, together with the Agent's customary
overdraft fee in the event the funds available in such account shall not be
sufficient to reimburse the Lenders for such payment and the Borrowers shall not
otherwise have discharged such reimbursement obligation by 2:00 p.m., New York
City time, on the date of such payment. If the Lenders have not been reimbursed
with respect to such drawing as provided above, or if an Alternate Base Loan is
not made as provided above, the Borrowers shall pay to the Agent, for the
account of the Lenders, the amount of the drawing together with interest on such
amount at a rate per annum (computed on the basis of the actual number of days
elapsed over a year of 365 days) equal to the rate applicable to Alternate Base
Loans hereunder plus two percent (2%), payable on demand. The obligations of the
Borrowers under this Section 2.18 to reimburse the Lenders and the Agent for all
drawings under Letters of Credit shall be joint and several, absolute,
unconditional and irrevocable and shall be satisfied strictly in accordance with
their terms, irrespective of:
(a) any lack of validity or enforceability of any Letter of
Credit;
(b) the existence of any claim, setoff, defense or other right
which the Borrowers or any other person may at any time have against the
beneficiary under any Letter of Credit, the Agent (other than the defense of
payment in accordance with the terms of this Agreement or a defense based on the
gross negligence or willful misconduct of the Agent) or any other person in
connection with this Agreement or any other transaction;
(c) any draft 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; provided
that payment by the Agent under such Letter of Credit against presentment of
such draft or document shall not have constituted gross negligence or willful
misconduct of the Agent;
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(d) payment by the Agent under any Letter of Credit against
presentation of a draft or other document which does not comply with the terms
of such Letter of Credit; provided that such payment shall not have constituted
gross negligence or willful misconduct of the Agent; and
(e) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing; provided that such other circumstance or event
shall not have been the result of gross negligence or willful misconduct of the
Agent.
It is understood that in making any payment under any Letter
of Credit (x) the Agent's exclusive reliance on the documents presented to it
under such Letter of Credit as to any and all matters set forth therein,
including, without limitation, reliance on the amount of any draft presented
under such Letter of Credit, whether or not the amount due to the beneficiary
equals the amount of such draft and whether or not any document presented
pursuant to such Letter of Credit proves to be insufficient in any respect, if
such document on its face appears to be in order, and whether or not any other
statement or any other document presented pursuant to such Letter of Credit
proves to be forged or invalid or any statement therein proves to be inaccurate
or untrue in any respect whatsoever and (y) any noncompliance in any immaterial
respect of the documents presented under such Letter of Credit with the terms
thereof shall, in each case, not be deemed willful misconduct or gross
negligence of the Agent.
SECTION 2.19. Agent's Actions with respect to Letters of
Credit. Any Letter of Credit may, in the discretion of the Agent or its
correspondents, be interpreted by them (to the extent not inconsistent with such
Letter of Credit) in accordance with the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce, as adopted or
amended from time to time, or to the extent the foregoing is not applicable, any
other rules, regulations and customs prevailing at the place where any Letter of
Credit is available or the drafts are drawn or negotiated. The Agent and its
correspondents may accept and act upon the name, signature, or act of any party
purporting to be the executor, administrator, receiver, trustee in bankruptcy,
or other legal representative of any party designated in any Letter of Credit in
the place of the name, signature, or act of such party.
SECTION 2.20. Letter of Credit Fees. The Borrowers agree to
pay (i) to the Agent for the account of each Lender a participation fee with
respect to its participations in Letters of Credit, which shall accrue at a rate
per annum equal to (x) in the case of a standby Letter of Credit the margin over
the
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Adjusted LIBO Rate applicable to interest on Revolving Credit Eurodollar
Loans and (y) in the case of a commercial Letter of Credit 1/2 of 1% less than
the margin over the Adjusted LIBO Rate applicable to interest on Revolving
Credit Eurodollar Loans, in each case minus 1/4 of 1%, on the average daily
amount of such Lender's pro rata share of the Letter of Credit Usage (excluding
any portion attributable to unreimbursed drawings) during the period from and
including the Closing Date to but excluding the later of the date on which such
Lender's Revolving Credit Commitment terminates and the date on which such
Lender ceases to have any share of the Letter of Credit Usage, and (ii) to the
Agent a fronting fee, which shall accrue at the rate of 1/4% per annum on the
average daily amount of the Letter of Credit Usage (excluding any portion
thereof attributable to unreimbursed drawings) during the period from and
including the Closing Date to but excluding the later of the date of termination
of the Revolving Credit Commitments and the date on which there ceases to be any
Letter of Credit Usage, as well as the Agent's standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder. The Agent will promptly notify the Borrowers of any
change in the Agent's standard fees. Participation fees and fronting fees
accrued through and including the last day of March, June, September and
December of each year shall be payable on the first Business Day following each
such period, commencing July 1, 1998; provided that all such fees shall be
payable on the date on which the Revolving Credit Commitment terminates and any
such fees accruing after the date on which the Revolving Credit Commitment
terminates shall be payable on demand. Any other fees payable to the Agent
pursuant to this paragraph shall be payable on demand, and may be charged by the
Agent against the Borrowers' account maintained with the Agent. All
participation fees and fronting fees shall be computed on the basis of a year of
365 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).
SECTION 2.21. Duty to Mitigate; Assignment of Commitments
Under Certain Circumstances. (a) Any Lender claiming or expecting to claim any
payment or additional amounts payable pursuant to Section 2.10 or Section 2.16
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Applicable Lending Office if the making of
such a change, in the judgment of such Lender, would avoid the need for or
reduce the amount of any such payment or additional amounts that may thereafter
accrue or avoid the circumstances giving rise to such exercise and would not, in
the sole determination of such Lender, be otherwise disadvantageous to such
Lender.
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(b) In the event that any Lender shall have delivered a notice
or certificate pursuant to Section 2.10 or 2.11, or the Borrowers shall be
required to make additional payments to any Lender under Section 2.16, the
Borrowers shall have the right, at their own expense, upon notice to such Lender
and the Agent, to require such Lender to transfer and assign without recourse
(in accordance with and subject to the restrictions contained in Section 11.03)
all its interests, rights and obligations under this Agreement to one or more
other financial institutions approved by the Agent (which approval shall not be
unreasonably withheld) which shall assume such obligations. A Lender shall not
be required to make any such transfer and assignment unless all Obligations
owing to such Lender, including those pursuant to Sections 2.10, 2.11 and 2.16,
have been paid in full, and no Lender shall be required to make any such
transfer and assignment if prior thereto, as a result of a waiver, the
circumstances entitling the Borrowers to require such transfer and assignment
cease to apply.
III. COLLATERAL SECURITY
SECTION 3.01. Security Documents. The Obligations shall be
secured by the Collateral described in the Security Documents and are entitled
to the benefits thereof. Each Borrower shall duly execute and deliver the
Security Documents to which such Borrower is a party, all consents of third
parties reasonably necessary to permit the effective granting of the Liens
created in such agreements, financing statements pursuant to the Uniform
Commercial Code and other documents, all in form and substance reasonably
satisfactory to the Agent, as may be reasonably required by the Agent to grant
to the Lenders a valid, perfected and enforceable first priority Lien on and
security interest in (subject only to the Liens permitted under Section 7.01
hereof) the Collateral to the extent such Collateral may be perfected by filing.
SECTION 3.02. Filing and Recording. The Borrowers shall, at
their sole cost and expense, cause all instruments and documents given as
evidence of security pursuant to this Agreement to be duly recorded and/or filed
or otherwise perfected in all places necessary, in the reasonable opinion of the
Agent, and take such other actions as the Agent may reasonably request, in order
to perfect and protect the Liens of the Agent and Lenders in the Collateral.
Each of the Borrowers, to the extent permitted
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by law, hereby authorize the Agent to file any financing statement in respect of
any Lien created pursuant to the Security Documents to which it is a party which
may at any time be required or which, in the opinion of the Agent, may at any
time be desirable although the same may have been executed only by the Agent or,
at the option of the Agent, to sign such financing statement on behalf of such
Borrower and file the same, and each of the Borrowers hereby irrevocably
designates the Agent, its agents, representatives and designees as its agent and
attorney-in-fact for this purpose provided that the rights granted to the Agent
in this sentence may only be exercised upon the occurrence and during the
continuance of an Event of Default, or if such financing statement is being
filed to correct an error or omission or if a Borrower has failed to promptly
execute a financing statement prepared by the Agent in accordance with the
Security Documents to which it is a party for the purpose of perfecting its Lien
on Collateral. In the event that any re-recording or refiling thereof (or the
filing of any statements of continuation or assignment of any financing
statement) is required to protect and preserve such Lien, the Borrowers shall,
at the Borrowers' cost and expense, cause the same to be recorded and/or refiled
at the time and in the manner requested by the Agent.
IV. REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to each of the Lenders
that both before and after giving effect to the consummation of the Transactions
(including, without limitation, under the Manischewitz Acquisition Documents):
SECTION 4.01. Organization, Legal Existence. Each Borrower and
each of their subsidiaries is a legal entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, has
the requisite power and authority to own its property and assets and to carry on
its business as now conducted and as currently proposed to be conducted and is
qualified to do business in every jurisdiction where such qualification is
required (all such jurisdictions being listed in Schedule 4.01 annexed hereto),
except where the failure to be qualified would not have a Material Adverse
Effect. Each Borrower has the power to execute, deliver and perform its
obligations under this Agreement and the other Loan Documents to which it is a
party, and to borrow hereunder and to execute and deliver the Notes.
SECTION 4.02. Authorization. The execution, delivery and
performance by each Borrower of this Agreement and each of the other Loan
Documents to
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which it is a party, the borrowings hereunder by such Borrower, the execution
and delivery by such Borrower of the Notes, the grant of security interests in
the Collateral created by the Security Documents to which it is a party and, in
the case of Manischewitz, the transactions contemplated to occur under or in
connection with the Manischewitz Acquisition Documents (collectively, the
"Transactions") (a) have been duly authorized by all requisite corporate or
limited liability company and, if required, stockholder or member action, as
applicable, and (b) will not (i) violate (A) any provision of law, statute, rule
or regulation or the certificate or articles of incorporation, certificate of
formation or other applicable constitutive documents or the by-laws or operating
agreement, as applicable, of the Borrowers or their subsidiaries, as the case
may be, (B) any order of any court, or any rule, regulation or order of any
other agency of government binding upon the Borrowers, or their subsidiaries, or
(C) any provisions of any material indenture, agreement or other instrument to
which the Borrowers, or their subsidiaries, or any of their respective
properties or assets are or may be bound, (ii) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under any material indenture, agreement or other instrument referred to
in (b)(i)(C) above, except to the extent that any such default would not be
reasonably likely to result in a Material Adverse Effect or (iii) result in the
creation or imposition of any Lien of any nature whatsoever (other than in favor
of the Agent, for its own benefit and for the benefit of the Lenders, as
contemplated by this Agreement and the Security Documents) upon any property or
assets of the Borrowers, or their subsidiaries.
SECTION 4.03. Governmental Approvals. No registration or
filing (other than the filings necessary to perfect the Liens created by the
Security Documents) with consent or approval of, or other action by, any
Federal, state or other governmental agency, authority or regulatory body is or
will be required in connection with the Transactions, other than any which have
been made or obtained.
SECTION 4.04. Binding Effect. This Agreement and each of the
other Loan Documents to which it is a party constitutes, and each of the Notes
when duly executed and delivered will constitute, a legal, valid and binding
obligation of each of the Borrowers enforceable in accordance with its terms,
subject (a) as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally, from time to time in effect, and (b) to general
principles of equity.
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SECTION 4.05. Material Adverse Change. Except as set forth in
Schedule 4.05 annexed hereto, there has been no material adverse change in the
business, assets, operations or financial condition of (i) Millbrook and any of
its subsidiaries, taken as a whole, since December 31, 1997 or (ii) Manischewitz
and any of its subsidiaries, taken as a whole, since January 31, 1998.
SECTION 4.06. Litigation; Compliance with Laws; etc. (a)
Except as set forth in Schedule 4.06(a) annexed hereto, there are not any
actions, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority now pending
or, to the knowledge of any Responsible Officer of a Borrower, threatened
against a Borrower or any of the Borrowers' subsidiaries or the businesses,
assets or rights of a Borrower or any of the Borrowers' subsidiaries (i) which
involve any of the Transactions or (ii) as to which it is probable (within the
meaning of Statement of Financial Accounting Standards No. 5) that there will be
an adverse determination and which, if adversely determined, would, individually
or in the aggregate, materially impair the ability of a Borrower to conduct
business substantially as now conducted, or have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.06(b) annexed hereto, no
Borrower or any subsidiary thereof is in violation of any law, or in default
with respect to any judgment, writ, injunction, decree, rule or regulation of
any court or governmental agency or instrumentality which would have a Material
Adverse Effect.
SECTION 4.07. Financial Statements. (a) The Borrowers have
heretofore furnished to the Agent audited consolidated balance sheets and
statements of income and cash flows and statement of members' equity of
Manischewitz dated as of July 31, 1997, July 31, 1996 and July 31, 1995, the
unaudited consolidated balance sheet and related statements of cash flows,
income and changes of members' equity of Manischewitz and for the six month
period ended January 31, 1997 and the six month period ended January 31, 1998.
To the Borrowers' knowledge, such balance sheets and statements of income and
cash flows present fairly the financial condition and results of operations of
Manischewitz as of the dates and for the periods indicated, and such balance
sheets and statements have been prepared in accordance with GAAP, subject to
adjustment (consisting only of normal recurring year-end adjustments) and the
absence of footnotes in the case of any unaudited financial statements.
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(b) The Borrowers have heretofore furnished to the Agent
quarterly, through March 31, 1999, and annual, thereafter through March 31,
2001, projected income statements, balance sheets and cash flows of Holdings,
together with a schedule confirming the ability of the Borrowers to consummate
the Transactions and demonstrating prospective compliance with all financial
covenants contained in this Agreement, such projections disclosing all
assumptions made by the Borrowers in formulating such projections and giving
effect to the Transactions. The projections are based upon reasonable estimates
and assumptions, all of which are reasonable in light of the conditions which
existed at the time the projections were made, have been prepared on the basis
of the assumptions stated therein, and reflect as of the Closing Date the
reasonable estimate of the Borrowers of the results of operations and other
information projected therein.
(c) The Borrowers have heretofore furnished to the Agent a
Consolidated pro forma balance sheet of Holdings as at December 31, 1997 and
which sets forth certain information before and after giving effect to the
Transactions.
SECTION 4.08. Federal Reserve Regulations. (a) No Borrower or
any subsidiary thereof is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
(b) No part of the proceeds of the Loans will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including, without limitation, Regulation T, U or X thereof. If requested by any
Lender, the Borrowers or any of their subsidiaries shall furnish to such Lender
a statement on Federal Reserve Form U-1 referred to in said Regulation U.
SECTION 4.09. Taxes. Except as set forth in Schedule 4.09,
each Borrower and each subsidiary thereof has filed or caused to be filed all
Federal, state, local and foreign tax returns which are required to be filed by
it, on or prior to the date hereof, other than tax returns in respect of taxes
that (x) are not franchise, capital or income taxes, (y) in the aggregate are
not material
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and (z) would not, if unpaid, result in the imposition of any material Lien on
any material property or assets of the Borrowers or any of their subsidiaries,
taken as a whole. Each Borrower and each subsidiary thereof has paid or caused
to be paid all taxes shown to be due and payable on such filed returns or on any
assessments received by it, other than (i) any taxes or assess ments the
validity of which such Borrower or such subsidiary is contesting in good faith
by appropriate proceedings, and with respect to which such Borrower or such
subsidiary shall, to the extent required by GAAP have set aside on its books
adequate reserves and (ii) taxes other than income, capital or franchise taxes
that in the aggregate are not material and which would not, if unpaid, result in
the imposition of any material Lien on any property or assets of any of the
Borrowers or any of their subsidiaries. Except as set forth in Schedule 4.09, no
Federal income tax returns of any Borrower or any subsidiary thereof has been
audited during the last five years by the United States Internal Revenue Service
and no Borrower or any subsidiary thereof has as of the date hereof requested or
been granted any extension of time to file any Federal, state, local or foreign
income tax return. Except as may be approved by the Agent pursuant to Section
7.04 hereof or as set forth in Schedule 4.09 annexed hereto, no Borrower or any
subsidiary thereof is party to or has any obligation under any tax sharing
agreement.
SECTION 4.10. Employee Benefit Plans. With respect to the
provisions of ERISA:
(i) No Reportable Event has occurred with respect to
any Pension Plan, except for any such Event which would not
result in a Material Adverse Effect.
(ii) No prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) has occurred
with respect to any Plan subject to Part 4 of Subtitle B of
Title I of ERISA which could result in a Material Adverse
Effect.
(iii) Except as set forth in Schedule 4.10 annexed
hereto, no Borrower or any ERISA Affiliate is now, or has been
during the preceding five years, obligated to contribute to a
Multiemployer Plan. No Borrower or any ERISA Affiliate has (A)
ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA, (B) withdrawn as a
substantial employer so as to become subject to the provisions
of Section 4063 of ERISA, (C) ceased making contributions to
any Pension Plan subject to the provisions
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of Section 4064(a) of ERISA to which any Borrower, any
subsidiary of any Borrower or any ERISA Affiliate made
contributions, (D) incurred or caused to occur a "complete
withdrawal" (within the meaning of Section 4203 of ERISA) or a
"partial withdrawal" (within the meaning of Section 4205 of
ERISA) from a Multiemployer Plan that is a Pension Plan so as
to incur withdrawal liability under Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such
liability under Section 4207 or 4208 of ERISA), or (E) been a
party to any transaction or agreement under which the
provisions of Section 4204 of ERISA were applicable.
(iv) No notice of intent to terminate a Pension Plan
has been filed, nor has any Plan been terminated pursuant to
the provisions of Section 4041(e) of ERISA, the termination of
which would have a Material Adverse Effect.
(v) To the knowledge of the Borrowers, the PBGC has
not instituted proceedings to terminate (or appoint a trustee
to administer) a Pension Plan and no event has occurred or
condition exists which might constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or
the appointment of a trustee to administer) any such Plan.
(vi) The assets of each Pension Plan that is subject
to the provisions of Title I, Subtitle B, Part 3 of ERISA
(other than the Multiemployer Plans) are at least equal to the
present value of the greater of (i) accrued benefits (both
vested and non-vested) under such Plan, or (ii) "benefit
liabilities" (within the meaning of Section 4001(a)(16) of
ERISA) under such Plan, in each case as of the latest
actuarial valuation date for such Plan (determined in
accordance with the same actuarial assumptions and methods as
those used by the Plan's actuary in its valuation of such Plan
as of such valuation date). No such Pension Plan has incurred
any "accumulated funding deficiency" (as defined in Section
412(a) of the Code), whether or not waived.
(vii) There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge
of the Borrowers or any ERISA Affiliate, which could
reasonably be expected to be asserted, against any Plan or the
assets of
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any such Plan and which would result in a Material Adverse
Effect. To the Borrowers' knowledge, no civil or criminal
action brought pursuant to the provisions of Title I, Subtitle
B, Part 5 of ERISA is pending or, to the Borrowers' knowledge,
threatened against any fiduciary or any Plan. None of the
Plans or to the Borrowers' knowledge any fiduciary thereof (in
its capacity as such) has been the direct or indirect subject
of any audit, investigation or examination by any governmental
or quasi-governmental agency.
(viii) All of the Plans comply in all material
respects currently, both as to form and operation, with their
terms and with the provisions of ERISA and, where applicable,
the Code; all necessary governmental approvals for the Plans
have been obtained and a favorable determination as to the
qualification under Section 401(a) of the Code of each of the
Plans which is an employee pension benefit plan (within the
meaning of Section 3(2) of ERISA) has been made by the
Internal Revenue Service and a recognition of exemption from
federal income taxation under Section 501(c) of the Code of
each of the funded employee welfare benefit plans (within the
meaning of Section 3(1) of ERISA) has been made by the
Internal Revenue Service, and nothing has occurred since the
date of each such determination or recognition letter that
would materially adversely affect such qualification.
SECTION 4.11. No Material Misstatements. No information,
report, financial statement (other than the statements referred to in Section
4.07(a) hereof), exhibit or schedule prepared or furnished by or on behalf of
the Borrowers to the Agent or any Lender in connection with any of the
Transactions or this Agreement, the Security Documents, the Notes or any other
Loan Documents or included therein contained or contains any material
misstatement of fact.
SECTION 4.12. Investment Company Act; Public Utility Holding
Company Act. No Borrower or any subsidiary thereof is an "investment company" as
defined in, or is otherwise subject to regulation under, the Investment Company
Act of 1940. No Borrower or any subsidiary thereof is a "holding company" as
that term is defined in or is otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935.
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SECTION 4.13. Security Interest. Each of the Security
Documents creates and grants to the Agent, for its own benefit and for the
benefit of the Lenders, a legal and valid security interest in the Collateral
identified therein. Such Collateral is not subject to any other Liens
whatsoever, except Liens permitted by Section 7.01 hereof.
SECTION 4.14. Use of Proceeds. All proceeds of each borrowing
under the Revolving Credit Commitment on the Closing Date, if any, shall be used
to provide for working capital requirements and for general corporate purposes
of the Borrowers. All proceeds of each subsequent borrowing under the Revolving
Credit Commitment after the Closing Date shall be used to provide for working
capital requirements and for general corporate purposes of the Borrowers.
SECTION 4.15. Subsidiaries. As of the Closing Date, the
Borrowers have no subsidiaries.
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks. (a) Except as set forth in Schedule 4.16(a), the Borrowers and each
of their subsidiaries have good title to, or valid leasehold interest in, all of
their respective properties and assets shown on the most recent balance sheet
referred to in Section 4.07(a) hereof and all assets and properties acquired
since the date of such balance sheet, except for such properties as are no
longer used or useful in the conduct of its business or as have been disposed of
in the ordinary course of business, and except for minor defects in title that
do not interfere with the ability of a Borrower or any subsidiary thereof to
conduct its business as now conducted. All such assets and properties are free
and clear of all Liens, other than those permitted by Section 7.01 hereof.
(b) Each Borrower and each of its subsidiaries have complied
with all material obligations under all material leases to which they are a
party and under which they are in occupancy, and all such leases are in full
force and effect and the Borrowers and each of its subsidiaries enjoy peaceful
and undisturbed possession under all such leases.
(c) Except as set forth in Schedule 4.16(c), the Borrowers and
each of their subsidiaries own or control all material trademarks, trademark
rights, trade names, trade name rights, copyrights, patents, patent rights and
licenses which are necessary for the conduct of the business of the Borrowers
and each of their subsidiaries as it is presently engaged. To the Borrowers'
knowledge, no Borrower or any subsidiary thereof is infringing upon or otherwise
acting
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adversely to any of such trademarks, trademark rights, trade names, trade name
rights, copyrights, patent rights or licenses owned by any other person or
persons. There is no claim or action by any such other person pending, or to the
knowledge of any Responsible Officer of the Borrowers or any subsidiary thereof,
threatened, against the Borrowers or any subsidiary thereof with respect to any
of the rights or property referred to in this Section 4.16(c).
SECTION 4.17. Solvency. (a) The present fair salable value of
the assets of each Borrower and its Consolidated subsidiaries is not less than
the amount that will be required to be paid on or in respect of the probable
liability on the existing debts (including contingent liabilities) of such
Borrower and its Consolidated subsidiaries, as they become absolute and mature.
(b) The assets of such Borrower and its Consolidated
subsidiaries do not constitute unreasonably small capital for such Borrower and
its Consolidated subsidiaries to carry out their business as now conducted and
as proposed to be conducted including the capital needs of such Borrower and its
Consolidated subsidiaries, taking into account the particular capital
requirements of the business conducted by such Borrower and its Consolidated
subsidiaries and projected capital requirements and capital availability
thereof.
(c) No Borrower or any subsidiary thereof intends to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be received by such Borrower and any of its
subsidiaries, and of amounts to be payable on or in respect of debt of such
Borrower and any of its subsidiaries).
(d) No Borrower or any subsidiary thereof believes that final
judgments against it in actions for money damages presently pending will be
rendered at a time when, or in an amount such that, it will be unable to satisfy
any such judgments promptly in accordance with their terms (taking into account
the maximum reasonable amount of such judgments in any such actions and the
earliest reasonable time at which such judgments might be rendered).
SECTION 4.18. Permits, etc. Except as set forth in Schedule
4.18, each Borrower and each of its subsidiaries possess all licenses, permits,
approvals and consents, including, without limitation, all environmental, health
and safety licenses, permits, approvals and consents (collectively, "Permits")
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of all Federal, state and local governmental authorities as required to conduct
properly its business as presently conducted, each such Permit is and will be in
full force and effect, each Borrower and each of its subsidiaries is in
compliance in all material respects with all such Permits, and no event
(including, without limitation, any violation of any law, rule or regulation)
has occurred which allows the revocation or termination of any such Permit or
any restriction thereon, except in each case, where failure, noncompliance,
revocation or termination would not have a Material Adverse Effect.
SECTION 4.19. Compliance with Environmental Laws. Except as
disclosed in Schedule 4.19 hereto: (i) the operations of the Borrowers and their
subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) the Borrowers and their subsidiaries and all of their present
facilities or operations, as well as to the knowledge of the Borrowers and their
subsidiaries their past facilities or operations, are not subject to any
judicial proceeding or administrative proceeding or any outstanding written
order or agreement with any governmental authority or private party respecting
(a) any Environmental Law, (b) any Remedial Work, or (c) any Environmental
Claims arising from the Release of a Contaminant into the environment; (iii) to
the best of the knowledge of the Borrowers and their subsidiaries, none of their
operations is the subject of any Federal or state investigation evaluating
whether any Remedial Work is needed to respond to a Release of any Contaminant
into the environment in violation of any Environmental Law; (iv) to the
knowledge of the Borrowers, no Borrower or any subsidiary thereof or any
predecessor of any of the Borrowers or any of their subsidiaries has filed any
notice under any Environmental Law indicating past or present treatment,
storage, or disposal of a Hazardous Material or reporting a spill or Release of
a Contaminant into the environment; (v) to the best of the knowledge of the
Borrowers and their subsidiaries, no Borrower or any subsidiary thereof has any
contingent material liability in connection with any Release of any Contaminant
into the environment; (vi) none of the operations of the Borrowers or any of
their subsidiaries involves the generation, transportation, treatment or
disposal of Hazardous Materials; (vii) no Borrower or any subsidiary thereof has
disposed of any Contaminant by placing it in or on the ground or waters of any
premises owned, leased or used by any of them and to the knowledge of the
Borrowers and their subsidiaries neither has any lessee, prior owner, or other
person; (viii) no underground storage tanks or surface impoundments are on any
property of the Borrowers and their subsidiaries; and (ix) to the best of the
knowledge of the Borrowers and their subsidiaries, no Lien in favor of any
governmental authority for (A)
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any liability under any Environmental Law or regulation, or (B) damages arising
from or costs incurred by such governmental authority in response to a Release
of a Contaminant into the environment, has been filed or attached to the
property of the Borrowers and their subsidiaries.
SECTION 4.20. No Change in Credit Criteria or Collection
Policies. There has been no material change in credit criteria or collection
policies concerning account receivables of (i) Millbrook since December 31, 1997
or (ii) Manischewitz since January 31, 1998. To the best of the knowledge of the
Borrowers, without duplication, all Eligible Manischewitz Receivables and all
Eligible Millbrook Receivables are valid, binding and enforceable obligations of
account debtors and are not subject to any claims, defenses or setoffs.
SECTION 4.21. Employee Matters. Except as disclosed in
Schedule 4.21 hereto, (a) no Borrower or any subsidiary thereof or any of such
person's employees is subject to any collective bargaining agreement, (b) to the
knowledge of the Borrowers, no petition for certification or union election is
pending with respect to the employees of the Borrowers or any of their
subsidiaries and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of the Borrowers or
any of their subsidiaries and (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the knowledge of the Borrowers
threatened between a Borrower or any of its subsidiaries and their respective
employees, other than employee grievances arising in the ordinary course of
business none of which could have, either individually or in the aggregate, a
Material Adverse Effect.
SECTION 4.22. Manischewitz Acquisition. (a) (i) The execution,
delivery and performance by Enterprises of the Manischewitz Acquisition
Documents have been duly authorized by all necessary action on the part of
Enterprises, (ii) the Manischewitz Acquisition Documents constitute the valid,
binding and enforceable obligation of Enterprises, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and are in full force and effect without
default or waiver of any of the conditions thereunder and (iii) there are no
governmental consents, filings, approvals or notices required to be made or
obtained in connection with the execution, delivery and performance of the
Manischewitz Acquisition Documents except such as have been duly made, obtained
or delivered.
(b) To the best knowledge of Manischewitz, without having made
an independent investigation, each of the representations and warranties made by
the "Sellers" (as defined in the Manischewitz
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Acquisition Agreement) in the Manischewitz Acquisition Documents is true and
correct in all material respects, and to the best knowledge of Manischewitz, the
failure of such representations and warranties to be true and correct would not
have a Material Adverse Effect.
SECTION 4.23. Year 2000. To the best of Borrowers' knowledge,
the cost to the Borrowers of reprogramming and testing of the Borrowers'
computer systems and related equipment to permit proper functioning in and
following the year 2000 (including, without limitation, reprogramming errors)
will not have a Material Adverse Effect.
V. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and extend other
Credits hereunder shall be subject to the following conditions precedent:
SECTION 5.01. All Credit Events. On each date on which a
Credit Event is to occur:
(a) The Agent shall have received a notice of borrowing as
required by Section 2.03 hereof or a request for the issuance of a Letter of
Credit pursuant to Section 2.17 hereof.
(b) The representations and warranties set forth in Article IV
hereof and in the Loan Documents, shall be true and correct in all material
respects with the same effect as though made on and as of such date (except
insofar as such representations and warranties relate expressly to an earlier
date).
(c) The Borrowers shall be in material compliance with all the
terms and provisions contained herein on its part to be observed or performed,
and at the time of and immediately after such Credit Event no Default or Event
of Default shall have occurred and be continuing.
(d) The Agent shall have received a certificate signed by a
Responsible Officer of the Borrowers (i) as to the compliance with (b) and (c)
above and (ii) with respect to each Revolving Credit Loan and each Letter of
Credit, demonstrating that after giving effect thereto Availability is zero (or
so long as Section 7.09(c) shall remain in effect, $10,000,000) or greater.
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SECTION 5.02. First Borrowing. The obligations of the Lenders
in respect of the first Credit Event hereunder is subject to the following
additional conditions precedent:
(a) The Lenders shall have received the favorable written
opinion of counsel for the Borrowers and each of the Guarantors and Grantors,
substantially in the form of Exhibit C hereto, dated the Closing Date, addressed
to the Lenders and satisfactory to the Agent.
(b) The Lenders shall have received (i) a copy of the
certificate or articles of incorporation, certificate of formation or
constitutive documents, in each case as amended to date, of each Borrower,
Grantor and Guarantor, certified as of a recent date by the Secretary of State
or other appropriate official of the state of its organization, and a
certificate as to the good standing of each from such Secretary of State or
other official, in each case dated as of a recent date; (ii) a certificate of
the Secretary of each Borrower, Grantor and Guarantor, dated the Closing Date
and certifying (A) that attached thereto is a true and complete copy of such
person's By-laws or operating agreement, as the case may be, as in effect on the
date of such certificate and at all times since a date prior to the date of the
resolution described in item (B) below, (B) that attached thereto is a true and
complete copy of a resolution adopted by such person's Board of Directors (or
comparable governing body) authorizing the execution, delivery and performance
of this Agreement, the Security Documents, the Notes and the other Loan
Documents, as applicable, and that such resolution has not been modified,
rescinded or amended and is in full force and effect, (C) that such person's
certificate or articles of incorporation or constitutive documents has not been
amended since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to (i) above, and (D) as to the incumbency and
specimen signature of each of such person's officers executing this Agreement,
the Notes, each Security Document or any other Loan Document delivered in
connection herewith or therewith, as applicable; (iii) a certificate of another
of such person's officers as to incumbency and signature of its Secretary; and
(iv) such other documents as the Agent or any Lender may reasonably request.
(c) The Agent shall have received a certificate, dated the
Closing Date and signed by a Responsible Officer of the Borrowers, confirming
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compliance with the conditions precedent set forth in paragraphs (b) and (c) of
Section 5.01 hereof and the conditions set forth in this Section 5.02.
(d) Each Lender shall have received its Revolving Credit Note
and Term Note duly executed by the Borrowers (which Notes shall replace the
"Revolving Credit Note" and "Term Note", respectively, issued in connection with
the Original Credit Agreement, such replaced Notes to be returned to the
Borrowers by the Lenders holding same, marked "cancelled" promptly after the
Closing Date), payable to its order and otherwise complying with the provisions
of Section 2.04 hereof.
(e) The Agent shall have received (i) such amendments to or
confirmations (as requested by the Agent) of the Security Documents (including,
without limitation, the Mortgage, together with such endorsements as are
requested by the Agent) existing as of the Closing Date, (ii) such additional
Security Documents (as requested by the Agent) to be executed and delivered in
connection with the Transactions and (iii) certificates (together with undated
stock powers executed in blank) evidencing the Pledged Stock (including, without
limitation, replacement certificates (and stock powers) indicating that
Enterprises is the holder of the Pledged Stock consisting of stock of
Millbrook), each duly executed by the applicable Grantors.
(f) The Agent shall have received certified copies of requests
for copies or information on Form UCC-11 or certificates satisfactory to the
Lenders of a UCC Reporter Service, listing all effective financing statements
which name as debtor Manischewitz and which are filed in the appropriate offices
in the States in which are located the chief executive office and other
operating offices of such person, together with copies of such financing
statements. With respect to any Liens not permitted pursuant to Section 7.01
hereof, the Agent shall have received termination statements in form and
substance reasonably satisfactory to it.
(g) Each document (including, without limitation, each Uniform
Commercial Code financing statement) required by law or requested by the Agent
to be filed, registered or recorded in order to create in favor of the Agent for
its own benefit and for the benefit of the Lenders a first priority perfected
security interest in the Collateral acquired in connection with the Manischewitz
Acquisition
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shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested. The Agent shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or recordation.
(h) The Agent shall have received the results of a search of
tax and other Liens, and judgments and of the Uniform Commercial Code filings
made with respect to Manischewitz in the jurisdictions in which Manischewitz is
doing business and/or in which any Collateral is located, and in which Uniform
Commercial Code filings have been made against Manischewitz pursuant to
paragraph (g) above.
(i) The Lenders and the Agent shall have received and
determined to be in form and substance satisfactory to them:
(i) evidence that the Borrowers have at least
$35,000,000 of Availability on the Closing Date (after giving
effect to the Transactions and the Holdings Transactions);
(ii) evidence of the compliance by the Borrowers with
Section 6.03 hereof;
(iii) the financial statements described in Section
4.07 hereof;
(iv) internal management prepared financial statements
for Manischewitz for the month ended February 28, 1998;
(v) evidence that the Transactions are in compliance
with all applicable laws and regulations;
(vi) evidence of payment of all fees, costs and
expenses owed to the Agent, the Co-Agent and the Lenders by
the Borrowers under this Agreement, the Fee Letter or
otherwise;
(vii) evidence that all requisite third party consents
(including, without limitation, consents with respect to the
Borrowers and each of the Grantors and
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Guarantors) to the Transactions have been received, except
where the failure to obtain certain consents would not have a
Material Adverse Effect;
(viii) a schedule of all subsidiaries and Affiliates
of the Borrowers and the Guarantors;
(ix) a schedule of all material customer contracts,
supplier contracts, licensing agreements and other material
contracts with respect to Manischewitz;
(x) evidence that there has been no material adverse
change in the business, assets, operations or financial
condition of (x) Millbrook and its subsidiaries since December
31,1997 or (y) Manischewitz and its subsidiaries since January
31, 1998;
(xi) evidence of the repayment in full of exiting
credit arrangements with respect to Manischewitz and the
termination of all commitments to lend thereunder, and the
termination of all security interests securing such
indebtedness as required under paragraph (f) above; and
(xii) a schedule of all pending litigation of the
Borrowers and the Guarantors and evidence that there are no
actions, suits or proceedings at law or in equity or by or
before any governmental instrumentality or other agency or
regulatory authority now pending or threatened in writing
against a Borrower or any subsidiary thereof or any of their
respective businesses, assets or rights which involve any of
the Transactions.
(j) The Agent has received environmental reports and/or
information with respect to real property owned by Manischewitz and has
determined that such reports and/or information is in form and substance
satisfactory to it.
(k) Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP,
counsel to the Agent, shall have received payment in full for reasonable legal
fees charged, and all costs and expenses incurred, by such counsel through the
Closing Date in connection with the transactions contemplated under this
Agreement, the Security
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Documents and the other Loan Documents and instruments in connection herewith
and therewith.
(l) The Agent and the Lenders shall have:
(i) received copies of each of the Manischewitz
Acquisition Documents, including all amendments and schedules
thereto;
(ii) received evidence that the Manischewitz
Acquisition Agreement is in full force and effect and all
consents, filings and approvals required by applicable law in
connection therewith shall have been obtained and made; and
(iii) determined that the terms and provisions of all
agreements and documents in connection with the Manischewitz
Acquisition, including without limitation the Manischewitz
Acquisition Documents, are satisfactory in form and substance
and the Agent shall have received such legal opinions,
certificates and copies of necessary governmental filings and
consents as the Agent shall have requested in connection
therewith, and shall have determined to its satisfaction that
the consummation of the Manischewitz Acquisition and other
transactions contemplated by the Manischewitz Acquisition
Documents are in compliance with all applicable laws and
regulations.
(m) The Agent and the Lenders shall have received evidence (i)
of the reincorporation of Millbrook as a Delaware corporation, (ii) that all
Obligations of Millbrook are assumed (to the satisfaction of the Agent) by such
Delaware corporation and (iii) that such transaction did not have a Material
Adverse Effect.
(n) The corporate structure and capitalization of the
Borrowers shall be satisfactory to the Lenders in all respects.
(o) All legal matters in connection with the Transactions
shall be satisfactory to the Agent, the Lenders and their respective counsel in
their sole discretion.
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(p) The Borrowers shall have executed and delivered to the
Agent a disbursement authorization letter with respect to the disbursement of
the proceeds of the Credit Events made on the Closing Date, in form and
substance reasonably satisfactory to the Agent.
(q) The Agent shall have:
(i) received evidence satisfactory to the Agent in
all respects that Enterprises shall have received concurrently
with the execution of this Agreement not less than
$120,000,000 as gross cash proceeds from the issuance of the
Senior Notes; Holdings shall have received not less than
$48,000,000 as gross cash proceeds from the issuance of the
Interest Reserve Notes; and Enterprises shall have utilized
such gross cash proceeds (x) to fund the consideration to be
paid in connection with the Manischewitz Acquisition, to pay
fees and expenses associated therewith and with respect to the
Holdings Transactions and to repay in full the exiting credit
arrangements with respect to Manischewitz and (y) to make a
payment of the Revolving Credit Loans of approximately
$20,400,000 subject to adjustment based upon the determination
and payment of the actual fees and expenses referred to in
clause (x) above; and
(ii) determined that the terms and provisions of all
agreements in connection with each of the Holdings
Transactions, including, without limitation, the Senior Notes
and the Interest Reserve Notes, are reasonably satisfactory in
form and substance and the Agent and Lenders shall have
received such legal opinions, certificates and copies of
necessary governmental filings and consents as the Agent and
the Lenders shall have requested in connection therewith, and
shall have determined to their reasonable satisfaction that
the consummation of each of the Holdings Transactions is in
compliance with all applicable laws and regulations.
(r) The Agent shall have received such other documents as the
Lenders or the Agent or the Agent's counsel shall reasonably deem necessary.
VI. AFFIRMATIVE COVENANTS
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Each of the Borrowers covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect or the principal of or
interest on any Note, any amount under any Letter of Credit or any fee, expense
or other Obligation payable hereunder shall be unpaid, it will, and will cause
each of its subsidiaries and, with respect to Section 6.07 hereof, to:
SECTION 6.01. Legal Existence. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence.
SECTION 6.02. Businesses and Properties. At all times, except
as permitted pursuant to Section 7.05 hereof, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect the material
rights, licenses, Permits, franchises, patents, copyrights, trademarks and trade
names material to the conduct of its businesses; maintain and operate such
businesses in the same general manner in which they are presently conducted and
operated; comply with all laws, rules, regulations and governmental orders
(whether Federal, state or local) applicable to the operation of such businesses
whether now in effect or hereafter enacted (including, without limitation, all
applicable laws, rules, regulations and governmental orders relating to public
and employee health and safety and all Environmental Laws) and with any and all
other applicable laws, rules, regulations and governmental orders, the lack of
compliance with which would have a Material Adverse Effect; take all actions
which may be required to obtain, preserve, renew and extend all Permits and
other authorizations which are material to the operation of such businesses; and
at all times maintain, preserve and protect all property material to the conduct
of such businesses and keep such property in good repair (ordinary wear and tear
excepted), working order and condition and from time to time make, or cause to
be made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times.
SECTION 6.03. Insurance. (a) Keep its insurable properties
adequately insured at all times by financially sound insurers, (b) maintain such
other insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies
similarly situated and in the same or similar businesses, provided, however,
that such insurance shall insure the property of the Borrowers against all risk
of physical damage, including, without limitation, loss by fire, explosion,
theft, fraud and such other casualties as may be reasonably satisfactory to the
Agent, but in no event at any time in an amount less than the
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replacement value of the Collateral, (c) maintain in full force and effect
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by the Borrowers or any of their
subsidiaries, in such amount as the Agent shall reasonably deem necessary, (d)
maintain business interruption insurance to such extent as is customary with
companies similarly situated and in the same or similar businesses, and (e)
maintain such other insurance as may be required by law or as may be reasonably
requested by the Agent for purposes of assuring compliance with this Section
6.03. All insurance covering tangible personal property subject to a Lien in
favor of the Agent for its own benefit and for the benefit of the Lenders
granted pursuant to the Security Documents shall provide that, in the case of
each separate loss the full amount of insurance proceeds shall be payable to the
Agent and shall further provide for at least 30 days' prior written notice to
the Agent of the cancellation or substantial modification thereof.
SECTION 6.04. Taxes. Pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise, which, if unpaid, might give rise to Liens upon such
properties or any part thereof; provided, however, that such payment and/or
discharge shall not be required with respect to any such tax, assessment,
governmental charge or levy so long as the validity or amount thereof shall be
contested in good faith by appropriate actions or proceedings and the Borrowers
shall have set aside on their respective books, as applicable, reserves with
respect thereto that are adequate in accordance with GAAP and such contest
operates to suspend collection of the contested tax, assessment, charge, levy or
claim and enforcement of a Lien.
SECTION 6.05. Financial Statements, Reports, etc. Furnish to
the Agent, with copies for each of the Lenders:
(a) within 105 days after the end of each Fiscal Year of the
Borrowers (the 1998 Fiscal Year shall be for Millbrook only), (A) (i)
Consolidated and consolidating balance sheets and Consolidated and consolidating
income statements showing the financial condition of each Borrower and its
subsidiaries as of the close of such Fiscal Year and the results of their
operations during such year, and (ii) a Consolidated statement of shareholders'
or members' equity, as applicable, and a Consolidated and consolidating
statement of
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cash flow, as of the close of such Fiscal Year, comparing such financial
condition and results of operations to such financial condition and results of
operations for the immediately preceding Fiscal Year (the 1998 Fiscal Year shall
be for Millbrook only), all the foregoing financial statements to be audited by
Deloitte & Touche, LLP, or such other independent public accountants reasonably
acceptable to the Agent (which report shall not contain any qualification except
with respect to new accounting principles mandated by the Financial Accounting
Standards Board), and to be in form and substance reasonably acceptable to the
Agent and (B) unaudited combined financial statements, balance sheet and
statement of operations of the Borrowers and their subsidiaries, such financial
statements, balance sheet and statement of operations prepared and certified by
the chief financial officer of Holdings or Enterprises as showing all
eliminations of intercompany accounts and as having been prepared in accordance
with GAAP, other than the inclusion of footnotes;
(b) within 60 days, and after Holdings and Enterprises have
become reporting companies under the Securities Exchange Act of 1934, within 45
days, after the end of each of the first three (3) fiscal quarters of the
Borrowers, commencing with the fiscal quarter ending June 30, 1998, (A) (i)
unaudited condensed Consolidated and consolidating balance sheets and condensed
Consolidated and consolidating income statements showing the financial condition
and results of operations of each Borrower and its subsidiaries as of the end of
each such quarter and (ii) a condensed Consolidated and consolidating statement
of cash flow of each Borrower, in each case for the fiscal quarter just ended
and for the period commencing at the end of the immediately preceding Fiscal
Year (the 1998 Fiscal Year for Millbrook only) and ending with the last day of
such quarter, in each case prepared and certified by a Responsible Officer of
Holdings or Enterprises as presenting fairly in all material respects the
financial condition and results of operations of such Borrower and its
subsidiaries and as having been prepared in accordance with GAAP, in each case
subject to normal year-end adjustments and the absence of footnotes and (B)
unaudited combined financial statements, balance sheet and statement of
operations of the Borrowers and their subsidiaries showing the financial
condition and results of operations of the Borrowers and their subsidiaries on a
combined basis for the fiscal quarter then ended and for the period commencing
at the end of the immediately preceding Fiscal Year (other than the 1998 Fiscal
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Year) and ending with the last day of such quarter and comparing such financial
condition and results of operations to the projections for the applicable period
provided under paragraph (h) below, in each case prepared and certified by the
chief financial officer of Holdings or Enterprises as showing all eliminations
of intercompany transactions and as having been prepared in accordance with
GAAP, in each case subject to normal year-end adjustments and the absence of
footnotes;
(c) within 30 days after the end of each month (commencing, in
the case of Millbrook, with April and, in the case of Manischewitz, May), (i)
unaudited condensed Consolidated and consolidating balance sheets and income
statements showing the financial condition and results of operations of each
Borrower and its subsidiaries as of the end of each such month and (ii) a
condensed Consolidated and consolidating statement of cash flow, in each case
for the month just ended and for the period commencing at the end of the
immediately preceding Fiscal Year and ending with the last day of such month,
and comparing such financial condition and results of operations to the results
for the comparable period during the immediately preceding Fiscal Year (other
than the 1998 Fiscal Year for Manischewitz), prepared and certified by a
Responsible Officer of Holdings or Enterprises as presenting fairly in all
material respects the financial condition and results of operations of such
Borrower and its subsidiaries and as having been prepared in accordance with
GAAP, in each case subject to normal year-end audit adjustments and the absence
of footnotes;
(d) promptly after the same become publicly available, copies
of such registration statements, annual, periodic and other reports, and such
proxy statements and other information, if any, as shall be filed by the
Borrowers or any of their subsidiaries with the Securities and Exchange
Commission pursuant to the requirements of the Securities Act of 1933 or the
Securities Exchange Act of 1934;
(e) concurrently with any delivery under (a) or (b) above, a
certificate of a Responsible Officer of Holdings or Enterprises, certifying that
to the best of his or her knowledge no Default or Event of Default has occurred
(including calculations demonstrating compliance, as of the dates of the
financial statements being furnished, with the covenants set forth in Sections
7.07, 7.08 (including a detailed statement of Permitted Dividends and
Distributions) and 7.09
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hereof) and, if such a Default or Event of Default has occurred, specifying the
nature and extent thereof and any corrective action taken or proposed to be
taken with respect thereto;
(f) within 45 days after any delivery under (a) above, a
management letter prepared by the independent public accountants who reported on
the financial statements delivered under (a) above, with respect to the internal
audit and financial controls of the Borrowers and their subsidiaries;
(g) within 20 days of the end of each fiscal month, an aging
schedule of the Receivables of Millbrook, in the form of the aging schedule of
Receivables dated February 28, 1997 previously furnished to the Agent, and an
aging schedule of Receivables of Manischewitz following the field examination in
a form reasonably satisfactory to the Agent, an accounts payable listing of
Millbrook, in the form previously furnished to the Agent, and an accounts
payable listing of Manischewitz following the field examination in a form
reasonably satisfactory to the Agent, and a certificate substantially in the
form of Schedule 6.05(g) hereto executed by a Responsible Officer of Holdings or
Enterprises, together with an inventory location schedule and a certificate
executed by a Responsible Officer of Holdings or Enterprises demonstrating
compliance as at the end of such month with the Availability requirements;
(h) within 30 days prior to the beginning of each Fiscal Year,
a summary of business plans and financial operation projections (including,
without limitation, with respect to Capital Expenditures) for each Borrower and
its respective subsidiaries and for the Borrowers combined for such Fiscal Year
(including projected quarterly balance sheets, statements of operations and of
cash flow) and annual projections through the following three years (inclusive
of such Fiscal Year) but not exceeding Final Maturity Date prepared by
management and in form, substance and detail (including, without limitation,
significant assumptions) reasonably satisfactory to the Agent;
(i) within four Business Days after the end of each week a
report detailing weekly sales, collections, debit and credit adjustments, in
form reasonably satisfactory to the Agent;
(j) as soon as is reasonably practicable, copies of all
material reports, forms, filings, loan documents and financial information
submitted
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to governmental agencies and/or its shareholders, other than those in the
ordinary course of business;
(k) after obtaining actual knowledge thereof, notice to the
Agent of the breach by any party of any material agreement with a Borrower the
result of which could have a Material Adverse Effect; and
(l) such other information as the Agent or the Co-Agent may
reasonably request.
SECTION 6.06. Litigation and Other Notices. Give the Agent
prompt written notice of the following:
(a) to the extent directed to or served upon a Borrower or any
subsidiary in writing, the issuance by any court or governmental agency or
authority of any injunction, order, decision or other restraint prohibiting, or
having the effect of prohibit ing, the making of the Loans or occurrence of
other Credit Events, or invalidating, or having the effect of invalidating, any
provision of this Agreement, the Notes or the other Loan Documents, or the
initiation of any litigation or similar proceeding seeking any such injunction,
order, decision or other restraint;
(b) the filing or commencement of any action, suit or
proceeding against a Borrower or any subsidiary thereof, whether at law or in
equity or by or before any court or any Federal, state, municipal or other
governmental agency or authority, (i) which is material and is brought by or on
behalf of any governmental agency or authority, or in which injunctive or other
equitable relief is sought or (ii) as to which it is probable (within the
meaning of Statement of Financial Accounting Standards No. 5) that there will be
an adverse determination and which, if adversely determined, would (A)
reasonably be expected to result in liability of one or more Borrowers or a
subsidiary thereof in an aggregate amount of $1,500,000 or more, not
reimbursable by insurance, or (B) materially impair the right of a Borrower or
any subsidiary thereof to perform its obli gations under this Agreement, any
Note or any other Loan Document to which it is a party;
(c) after obtaining actual knowledge thereof, any continuing
Default or Event of Default, specifying the nature and extent thereof and the
action (if any) which is proposed to be taken with respect thereto; and
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(d) any development in the business or affairs of the
Borrowers and their subsidiaries, taken as a whole, which has had or which is
likely to have, in the reasonable judgment of any Responsible Officer of the
Borrowers, a Material Adverse Effect.
SECTION 6.07. ERISA. (a) Pay and discharge promptly any
liability imposed upon it pursuant to the provisions of Title IV of ERISA;
provided, however, that no Borrower or any ERISA Affiliate shall be required to
pay any such liability if the amount, applicability or validity thereof shall be
diligently contested in good faith by appropriate proceedings, and such person
shall have set aside on its books reserves which, in the opinion of the
independent certified public accountants of such person, are adequate with
respect thereto.
(b) Deliver to the Agent, promptly, and in any event within 15
days, after (i) the occurrence to the knowledge of a Responsible Officer of the
Borrowers of any Reportable Event, a copy of the materials that are filed with
the PBGC, or the materials that would have been required to be filed if the
30-day notice requirement to the PBGC was not waived, (ii) a Borrower or any
ERISA Affiliate or an administrator of any Pension Plan files with participants,
beneficiaries or the PBGC a notice of intent to terminate any such Plan, a copy
of any such notice, (iii) the receipt of notice by the a Borrower or any ERISA
Affiliate or an administrator of any Pension Plan from the PBGC of the PBGC's
intention to terminate any Pension Plan or to appoint a trustee to administer
any such Plan, a copy of such notice, (iv) the filing thereof with the Internal
Revenue Service, copies of each annual report that is filed on Treasury Form
5500 with respect to any Plan, together with certified financial statements (if
any) for the Plan and any actuarial statements on Schedule B to such Form 5500,
(v) a Borrower or any ERISA Affiliate knows or has reason to know of any event
or condition which might constitute grounds under the provisions of Section 4042
of ERISA for the termination of (or the appointment of a trustee to administer)
any Pension Plan, an explanation of such event or condition, (vi) the receipt by
a Borrower or any ERISA Affiliate of an assessment of withdrawal liability under
Section 4201 of ERISA from a Multiemployer Plan, a copy of such assessment,
(vii) a Borrower or any ERISA Affiliate knows or has reason to know of any event
or condition which might cause any one of them to incur a liability under
Section 4062, 4063, 4064 or 4069 of ERISA or Section 412(n) or 4971 of the Code,
an explanation of
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such event or condition, and (viii) a Borrower or any ERISA Affiliate knows or
has reason to know that an application is to be, or has been, made to the
Secretary of the Treasury for a waiver of the minimum funding standard under the
provisions of Section 412 of the Code, a copy of such application, and in each
case described in clauses (i) through (iii) and (v) through (vii) together with
a statement signed by the Responsible Officer of the Borrowers setting forth
details as to such Reportable Event, notice, event or condition and the action
which such Borrower or such ERISA Affiliate proposes to take with respect
thereto.
SECTION 6.08. Maintaining Records; Access to Properties and
Inspections; Right to Audit. Maintain financial records in accordance with
accepted financial practices and, upon reasonable notice (which may be
telephonic), which notice shall specify the purpose of such visit which shall be
during normal hours, permit any authorized representative designated by the
Agent or Co-Agent, who may be accompanied by any Lender, to visit with
reasonable frequency and inspect the proper ties and financial records of the
Borrowers and their subsidiaries and to make extracts from such financial
records at Borrowers' expense, and permit the Agent or Co-Agent to discuss the
affairs, finances and condition of the respective Borrowers and their
subsidiaries with the appropriate Responsible Officer and such other officers as
the Borrowers shall deem appropriate and the Borrowers' independent public
accountants, as applicable. The Agent or Co-Agent agrees that it shall schedule
any meeting with any such independent public accountant through the Borrowers
and a Responsible Officer of the Borrowers shall have the right to be present at
any such meeting. At the Borrowers' expense, the Agent and Co-Agent shall have
the right to audit, up to three times per annum (or as often as requested at
Borrowers' expense upon the occurrence and during the continuance of an Event of
Default), the existence and condition of the accounts receivables, inventory,
books and records and other Collateral of the combined Borrowers and their
subsidiaries and to review their compliance with the terms and conditions of
this Agreement and the other Loan Documents.
SECTION 6.09. Use of Proceeds. Use the proceeds of the Credit
Events only for the purposes set forth in Section 4.14 hereof.
SECTION 6.10. Fiscal Year-End. Cause the Fiscal Year of each
of the Borrowers, Holdings and Enterprises to end on March 31 in each year.
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SECTION 6.11. Further Assurances. Promptly execute any and all
further documents and take all further actions which may be required under
applicable law, or which the Agent may reasonably request, to grant, preserve,
protect and perfect the first priority security interest created by the Security
Documents in the Collateral.
SECTION 6.12. Additional Grantors and Guarantors. Promptly
inform the Agent of the creation or acquisition of any subsidiary (subject to
the provisions of Section 7.06 hereof) and cause each subsidiary not in
existence on the date hereof to enter into a Guarantee in form and substance
reasonably satisfactory to the Agent, and to execute the Security Documents, as
applicable, as a Grantor, and cause the direct parent of each such subsidiary to
pledge all of the capital stock of such subsidiary pursuant to the Pledge
Agreement and cause each such subsidiary to pledge its accounts receivable and
all other assets pursuant to the applicable Security Document.
SECTION 6.13. Environmental Laws. (a) Comply, and cause each
of its subsidiaries to comply, with the provisions of all applicable
Environmental Laws, and shall keep its properties and the properties of its
subsidiaries free of any Lien imposed pursuant to any such applicable
Environmental Law unless the failure to so comply would not have a Material
Adverse Effect. No Borrower shall cause or suffer or permit, and shall not
suffer or permit any of its subsidiaries to cause or suffer or permit, the
property of the Borrowers or their subsidiaries to be used for the generation,
production, processing, handling, storage, transporting or disposal of any
Hazardous Material, except for Hazardous Materials used in the ordinary course
of business of the Borrowers and their subsidiaries or in connection with any
investigation or remediation of any property and disclosed to the Agent, in
which case such Hazardous Materials shall be used, stored, generated, treated
and disposed of only in material compliance with applicable Environmental Law.
(b) Supply to the Agent copies of all material submissions by
a Borrower or any subsidiary thereof to any governmental body and of the reports
of all environmental audits and of all other environmental tests, studies or
assessments (including the data derived from any sampling or survey of asbestos,
soil, or subsurface or other materials or conditions) that may be conducted or
performed (by or on behalf of a Borrower or any subsidiary thereof) on or
regarding the properties owned, operated, leased or occupied by a Borrower or
any subsidiary thereof or regarding any conditions that might have been affected
by Hazardous Materials
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on or Released or removed from such properties. The Borrowers shall also permit
and authorize, and shall cause its subsidiaries to permit and authorize, the
consultants, attorneys (subject to any applicable privileges) or other persons
that prepare such submissions or reports or perform such material audits, tests,
studies or assessments to discuss such submissions, reports or audits with the
Agent.
(c) Promptly (and in no event more than five Business Days
after a Borrower has actual knowledge or is otherwise informed of such event)
provide written notice to the Agent upon the happening of any of the following:
(i) a Borrower, any subsidiary of a Borrower, or any
tenant or other occupant of any property of such Borrower or
such subsidiary receives written notice of any claim,
complaint, charge or notice of a violation or potential
violation of any applicable Environmental Law which could have
a Material Adverse Effect;
(ii) there has been a spill or other Release of
Hazardous Materials upon, under or about or affecting any of
the properties owned, operated, leased or occupied by a
Borrower or any subsidiary thereof, in amounts that are
required to be reported under applicable Environmental Law or
Hazardous Materials at levels or in amounts that are required
to be reported, remedied or responded to under applicable
Environmental Law are detected on or in the soil or
groundwater, in each case which could result in a Material
Adverse Effect as to a Borrower or any subsidiary thereof;
(iii) a Borrower or any subsidiary thereof is or may be
liable for any costs of cleaning up or otherwise responding to
a Release of Hazardous Materials which could result in a
Material Adverse Effect;
(iv) any part of the properties owned, operated, leased
or occupied by a Borrower or any subsidiary thereof is or may
be subject to a Lien under any applicable Environmental Law;
or
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(v) a Borrower or any subsidiary thereof undertakes
any material Remedial Work with respect to any Hazardous
Materials.
(d) Without in any way limiting the scope of Section 11.04(c)
and in addition to any obligations thereunder, the Borrowers hereby indemnify
and agree to hold the Agent and the Lenders harmless from and against any
liability, loss, damage, suit, action or proceeding arising out of its business
or the business of its subsidiaries pertaining to Hazardous Materials,
including, but not limited to, claims of any governmental body or any third
person arising under any applicable Environmental Law or under tort, contract or
common law incurred by the Agent, Co-Agent or any Lender with respect to any
matter for which the Borrowers are obligated pursuant to this Section 6.13. To
the extent laws of the United States or any applicable state or local law in
which property owned, operated, leased or occupied by a Borrower or any
subsidiary is located provide that a Lien upon such property of such Borrower or
such subsidiary may be obtained for the removal of Hazardous Materials which
have been or may be Released, no later than sixty days after notice that a
Release has occurred is given by the Agent to such Borrower or such subsidiary,
such Borrower or such subsidiary shall deliver to the Agent a report issued by a
qualified third party engineer assessing the existence and extent of any
Hazardous Materials located upon or beneath the specified property. To the
extent any Hazardous Materials located therein or thereunder either subject the
property to Lien or require removal to safeguard the health of any persons, the
removal thereof shall be an affirmative covenant of the Borrowers hereunder.
(e) In the event that any Remedial Work is required to be
performed by a Borrower or any subsidiary under any applicable Environmental
Law, any judicial order, or by any governmental entity, such Borrower or such
subsidiary shall commence all such Remedial Work at or prior to the time
required therefor under such Environmental Law or applicable judicial orders and
thereafter diligently prosecute to completion all such Remedial Work in
accordance with and within the time allowed under such applicable Environmental
Laws or judicial orders except where the failure to timely complete such
Remedial Work would not have a Material Adverse Effect.
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SECTION 6.14. Pay Obligations to Lenders and Perform Other
Covenants. (a) Make full and timely payment of the Obligations, whether now
existing or hereafter arising, (b) duly comply with all the terms and covenants
contained in this Agreement (including, without limitation, the borrowing
limitations and mandatory prepayments in accordance with Article II hereof) and
in each of the other Loan Documents, all at the times and places and in the
manner set forth therein, and (c) except for the filing of continuation
statements and the making of other filings by the Agent as secured party or
assignee, at all times take all actions reasonably necessary to maintain the
Liens and security interests provided for under or pursuant to this Agreement
and the Security Documents as valid and perfected first Liens on the property
intended to be covered thereby (subject only to Liens expressly permitted
hereunder) and supply all information to the Agent reasonably necessary for such
maintenance.
SECTION 6.15. Maintain Operating Accounts. Maintain operating
accounts and cash management arrangements with the Agent or Co-Agent and, to the
extent maintained with other financial institutions, enter into arrangements in
form and substance reasonably satisfactory to the Agent. Notwithstanding the
foregoing, the Borrowers may maintain operating and other accounts where the
aggregate of deposits does not exceed $500,000 and payroll accounts without
regard to such arrangements.
SECTION 6.16. Interest Rate Protection. Maintain the existing
interest rate cap arrangement (the "Rate Agreement"), which Rate Agreement
covers a notional principal amount of at least $50,000,000 and has a term ending
three (3) years from the Original Closing Date.
SECTION 6.17. Landlord Waivers. For 60 days from the Closing
Date, use its best efforts to obtain landlord waivers in form and substance
reasonably acceptable to the Agent from the owner of each leased property
containing a material portion of the Collateral acquired pursuant to the
Manischewitz Acquisition.
SECTION 6.18. Year 2000. Take all actions necessary to permit
the proper functioning, in and following the year 2000, of (i) the Borrowers'
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which Borrowers' systems
interface and which are within the control of the Borrowers) and the testing of
all such systems and equipment, as so programmed, unless the failure to take
such actions would not have a Material Adverse Effect.
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SECTION 6.19. Lock-Box Accounts. Within 75 days of the Closing
Date, establish lock-box accounts at The Chase Manhattan Bank, another Lender or
another financial institution (subject to a tri-party agreement satisfactory to
the Agent) for the collection of all remittances on Receivables attributable to
Manischewitz. All such remittances shall be applied as set forth in Section
10.01 of this Agreement.
VII. NEGATIVE COVENANTS
Each of the Borrowers covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect or the principal of or
interest on any Note, any amount under any Letter of Credit, or any fee, expense
or other Obligation payable hereunder shall be unpaid, it will not and will not
cause or permit any of its subsidiaries and, in the case of Section 7.13 hereof,
to, either directly or indirectly:
SECTION 7.01. Liens. Incur, create, assume or permit to exist
any Lien on any of its property or assets (including the stock of any direct or
indirect subsidiary), whether owned at the date hereof or hereafter acquired, or
assign or convey any rights to or security interests in any future revenues,
except:
(a) Liens incurred and pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, old-age pensions and other social security benefits (not
including any lien described in Section 412(m) of the Code);
(b) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar liens, incurred
in good faith in the ordinary course of business and securing obligations which
are not overdue for a period of more than 30 days or which are being contested
in good faith by appropriate proceedings as to which the applicable Borrower or
subsidiary, as the case may be, shall, to the extent required by GAAP, have set
aside on its books adequate reserves;
(c) Liens securing the payment of taxes, assessments and
governmental charges or levies, that are not delinquent or are being contested
in good faith in compliance with Section 6.04;
(d) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances
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incurred, created, assumed or permitted to exist and arising by, through or
under a landlord or owner of the leased property, with or without consent of the
lessee) which do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation of its
business;
(e) Liens upon any real or personal property acquired through
the purchase, improvement or lease by a Borrower or any subsidiary thereof which
are created or incurred contemporaneously with such acquisition to secure or
provide for the finance or payment of any part of the purchase price of,
improvement of or lease payments on, such property (but no other amounts and not
in excess of the purchase price or lease payments); provided, however, that any
such Lien shall not apply to any other property of the Borrowers or any of their
subsidiaries and in the case of real property shall be on a non-recourse basis;
and provided, further, that after giving effect to such purchase, improvement or
lease, compliance is maintained with Section 7.07 hereof;
(f) Liens under the Rate Agreements in favor of any Lender;
(g) Liens existing on the date of this Agreement and set forth
in Sched ule 7.01 annexed hereto but not the extension, renewal or refunding of
the Indebtedness secured thereby;
(h) Liens created in favor of the Agent for its own benefit
and for the benefit of the Lenders;
(i) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, surety, customs and appeal bonds and other obligations of like
nature, incurred as an incident to and in the ordinary course of business;
(j) Liens that arise automatically under Environmental Laws,
provided that the Borrowers are in compliance with Section 6.13 and such Lien
would not have a Material Adverse Effect;
(k) Liens on any property or assets of a Borrower or any
subsidiary thereof in connection with consignments, licenses and leases arising
in the ordinary course of business and consistent with past practices; or
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(l) Liens on the Harrison Property to secure Indebtedness used
for the purpose of reducing Revolving Credit Loans not on a permanent basis (but
not in excess of 80% of the then appraised value); provided, however, that any
such Lien shall not apply to any other property of a Borrower or any subsidiary
thereof; and provided, further, that after giving effect to any such Lien no
Default or Event of Default shall have occurred.
SECTION 7.02. Sale and Lease-Back Transactions. Except for a
transaction economically equivalent to that permitted pursuant to Section
7.01(l), and subject to the same restrictions, enter into any arrangement,
directly or indirectly, with any person whereby a Borrower or any subsidiary
thereof shall sell or transfer any property, real or personal, and used or
useful in its business, whether now owned or hereafter acquired, and thereafter
rent or lease such property or other property which such Borrower or such
subsidiary intends to use for substantially the same purpose or purposes as the
property being sold or transferred.
SECTION 7.03. Indebtedness. Incur, create, assume or permit to
exist any Indebtedness other than (i) Indebtedness secured by Liens permitted
under Section 7.01, (ii) Indebtedness (including, without limitation,
Guarantees) existing on the date hereof and listed in Schedule 7.03 annexed
hereto, but not the extension, renewal or refunding thereof, (iii) Indebtedness
incurred hereunder, (iv) Indebtedness to trade creditors incurred in the
ordinary course of business, (v) Guarantees constituting the endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business, (vi) Guarantees of the Obligations, (vii) purchase money Indebtedness
to the extent permitted by Sections 7.01(e) and 7.07 hereof, (viii) Subordinated
Indebtedness, (ix) Indebtedness under the Rate Agreements, (x) unsecured
Guarantees by the Borrowers of the Senior Notes, including the extension,
renewal or refunding thereof, but not the increase thereof and (xi) intercompany
Indebtedness of the Borrowers to Enterprises in the form of Exhibit H hereto,
which Indebtedness is represented by an instrument that is pledged to the Agent
(for the benefit of itself and the Lenders) pursuant to a Security Document and
is subordinated to the prior payment in full of the Obligations and which is
otherwise upon terms and conditions reasonably satisfactory to the Agent.
SECTION 7.04. Dividends, Distributions and Payments. Declare
or pay, directly and indirectly, any cash dividends or make any other
distribution, whether in cash, property, securities or a combination thereof,
with respect to (whether by reduc tion of capital or otherwise) any shares of
its capital stock or directly or indirectly redeem, purchase, retire or
otherwise
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acquire for value (or permit any subsidiary to purchase or acquire) any shares
of any class of its capital stock or set aside any amount for any such purpose
except that (x) Millbrook may make distributions required under the Transitional
Services Agreement as part of the Millbrook Acquisition Documents, (y) the
Borrowers may make distributions or dividends or payments representing interest
on the intercompany Indebtedness permitted pursuant to Section 7.03(xi) hereof
to Enterprises from time to time (i) in an aggregate amount not to exceed the
amount of interest paid or due to be paid to the holders of the Senior Notes as
of such time and (ii) after November 1, 2001, in an aggregate amount not to
exceed the amount of interest paid or due to be paid to the holders of the
Interest Reserve Notes as of such time, provided that no Default or Event of
Default shall have occurred and be continuing at the time of the making of such
distribution or distributions or payments or would result therefrom and (z) make
distributions to Enterprises so that Enterprises can make distributions to
Holdings to (i) pay taxes actually paid by Holdings and attributable to the
taxable income of the Borrowers and their subsidiaries or pursuant to any tax
sharing arrangements approved by the Agent, (ii) pay for reasonable services
rendered by Holdings to the Borrowers at commercially reasonable rates, (iii)
reimburse Holdings for out-of-pocket expenses and other expenses incurred in
connection with services rendered by Holdings to the Borrowers, (iv) repurchase
shares of common stock of Holdings held by members of management of the
Borrowers not to exceed the Buy-Out Amount in any Fiscal Year (provided that
after giving effect to any such payment no Default or Event of Default would
occur and be continuing), (v) pay the reasonable salaries of employees of
Holdings providing reasonable services as referred to in (ii) above to the
Borrowers or any subsidiary and (vi) pay reasonable costs or administrative
expenses attendant to the registration of the Senior Notes and Interest Reserve
Notes with the Securities and Exchange Commission and being a reporting company
under the Securities Exchange Act of 1934. For purposes hereof, the term
"Buy-Out Amount" shall mean an amount equal to 10% of the retained earnings of
Holdings less accumulated and unpaid dividends on Holdings Series A Preferred
Stock.
SECTION 7.05. Consolidations, Mergers and Sales of Assets.
Consolidate with or merge into any other person, or sell, lease, transfer or
assign to any persons or otherwise dispose of (whether in one transaction or a
series of transactions) any material portion of its assets (whether now owned or
hereafter acquired), or sell any of its inventory other than in the normal
course of business, or permit another person to merge into it, or acquire all or
substantially all the capital stock or assets of any other person except for
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(x) sales of wornout or obsolete assets provided that the proceeds realized are
applied in accordance with Section 2.09(d) hereof, (y) if at any time thereof
and immediately after giving effect thereto no Default or Event of Default shall
have occurred and be continuing (i) the merger of any subsidiary into a Borrower
in a transaction in which such Borrower is the surviving person and no person
other than such Borrower or a subsidiary receives any consideration and (ii) the
merger or consolidation of any subsidiary with any other subsidiary in a
transaction in which no other person other than a Borrower or a subsidiary
receives any consideration and (z) if at the time thereof and immediately after
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing (and subject to the provisions of Section 6.12 hereof), the transfer
by the Borrowers to a newly formed or acquired subsidiary of a Borrower of all
or substantially all of the intellectual property owned by the Borrowers.
SECTION 7.06. Investments. Own, purchase or acquire any stock,
obligations, assets (not in the ordinary course of business) or securities of,
or any interest in, or make any capital contribution or loan or advance to, any
other person, or make any other investments, except:
(a) certificates of deposit in dollars of any commercial banks
registered to do business in any state of the United States (i) having capital
and surplus in excess of $1,000,000,000 and (ii) whose long-term debt rating is
at least investment grade as determined by either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.;
(b) readily marketable direct obligations of the United States
government or any agency thereof which are backed by the full faith and credit
of the United States;
(c) investments in money market mutual funds having assets in
excess of $2,500,000,000;
(d) commercial paper at the time of acquisition having the
highest rating obtainable from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.;
(e) federally tax exempt securities rated A or better by
either Standard & Poor's Ratings Group or Moody's Investors Service, Inc.;
(f) rebate advances to Customers in the ordinary course of
business;
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(g) loans or advances by a Borrower or any subsidiary to
employees, including for relocation of employees, in the ordinary course of
business not to exceed $250,000 in an aggregate principal amount at any time
outstanding;
(h) stock issued by customers or third party obligors in
payment of monetary obligations due and payable to a Borrower (subject to the
pledge of such property pursuant to the applicable Security Document);
(i) other investments having an aggregate cost at any time not
in excess of $3,000,000 in the aggregate during the term of this Agreement for
joint ventures in the ordinary course of business; and
(j) other investments owned on the date hereof as set forth on
Schedule 7.06 annexed hereto; and
(k) subject to the provisions of Section 6.12 hereof,
investment in the stock of a subsidiary of a Borrower formed or acquired for the
sole purpose of owning the intellectual property assets now or hereafter owned
by the Borrowers.
provided that, in each case mentioned in (a), (b), (d) and (e) above, such
obligations shall mature not more than one year from the date of acquisition
thereof.
SECTION 7.07. Capital Expenditures. Permit the aggregate
amount of payments made for Capital Expenditures (other than Capital
Expenditures made with proceeds of insurance as permitted pursuant to Section
2.09(f) or sales of assets as permitted pursuant to exception (x) of Section
7.05), including Capitalized Lease Obligations and Indebtedness secured by
Liens permitted under Section 7.01(e) hereof, in each of the periods indicated
below to exceed the following amounts for Millbrook and its Consolidated
subsidiaries with respect to the Fiscal Year ended March 31, 1998 and for the
Borrowers and their subsidiaries for each period thereafter:
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Period Maximum Amount
------ --------------
Fiscal Year ended March 31, 1998 $5,000,000
Fiscal Year ending March 31, 1999 9,000,000
Fiscal Year ending March 31, 2000 8,500,000
Fiscal Year ending March 31, 2001 7,000,000
For each Fiscal Year 7,000,000
thereafter
; provided, however, that amounts not expended in any Fiscal Year that could
have been so spent in accordance with the schedule above may be carried forward
and spent during the immediately subsequent two Fiscal Years.
SECTION 7.08. Debt Service Coverage Ratio. Permit the Debt
Service Coverage Ratio of the Borrowers and their subsidiaries to be less than
(i) 0.65:1.00 at March 31, 1999 (which for Manischewitz shall be a period of
eleven months) and June 30, 1999, (ii) 0.75:1.00 at September 30,1999 and at
December 31, 1999, (iii) 1.00:1.00 at March 31, 2000, June 30, 2000, September
30, 2000 and December 31, 2000 and (iv) 1.05:1.00 at the end of each fiscal
quarter thereafter.
SECTION 7.09. Leverage Ratio; EBITDA; Availability. (a)
Leverage Ratio. Permit the Leverage Ratio of the Borrowers and their
subsidiaries at the end of each fiscal quarter indicated below to be greater
than the ratio indicated below:
Fiscal Quarter Ending Ratio
- --------------------- -----
March 31, 1999, June 30, 1999, September 30, 1999 and
December 31, 1999 5.50:1.00
March 31, 2000 and each fiscal quarter thereafter 4.50:1.00
(b) EBITDA. Permit EBITDA of the Borrowers and their
subsidiaries for the periods set forth below to be less than the respective
amounts set forth below opposite such periods:
Period Minimum EBITDA
------ --------------
One quarter period ending June 30, 1998 $1,500,000
Two quarter period ending September 30, 1998 $3,000,000
Three quarter period ending December 31, 1998 $7,000,000
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For the purposes of this Section 7.09(b), the periods referred
to above shall begin on April 1, 1998 with respect to Millbrook and May 1, 1998
with respect to Manischewitz.
(c) Availability. Until the earlier to occur of (i) the first
fiscal quarter ending on or after June 30, 1999 for which the Debt Service
Coverage Ratio of the Borrowers and their subsidiaries is equal to or greater
than 1.25:1.00 and (ii) the delivery of the financial statements required
pursuant to Section 6.05(a) hereof for the period ending March 31, 2000,
together with the corresponding applicable borrowing base certificate and
compliance certificate required pursuant to Section 6.05(e) hereof, permit
Availability to be less than $10,000,000 at any time. Notwithstanding the
foregoing, if a Default or Event of Default exists at the earlier to occur of
the events described in clauses (i) and (ii) above, then until such Default or
Event of Default is either cured or waived, the Borrowers shall not permit
Availability to be less than $10,000,000.
SECTION 7.10. Business. Alter the nature of its business as
operated on the date of this Agreement in any material respect.
SECTION 7.11. Sales of Receivables. Sell, assign, discount,
transfer, or otherwise dispose of any accounts receivable, promissory notes,
drafts or trade acceptances or other rights to receive payment held by it, with
or without recourse, except (i) for the purpose of collection or settlement in
the ordinary course of business; (ii) the sale of any such accounts to the
Agent, or (iii) so long as no Default or Event of Default has occurred and is
continuing, the sale or disposition of such account receivables, promissory
notes, drafts or trade acceptances which do not constitute Eligible Receivables
at a discount for an amount in cash, provided that the Borrowers shall notify
the Agent in advance of such sale or disposition, such sale or disposition shall
not constitute a sale of all or a substantial part of the assets of the
Borrowers and their subsidiaries, taken as a whole and the proceeds realized are
applied as a prepayment on outstanding Revolving Credit Loans.
SECTION 7.12. Use of Proceeds. Permit the proceeds of any
Credit Event to be used for any purpose which entails a violation of, or is
inconsistent with, Regulation T, U or X of the Board, or for any purpose other
than those set forth in Section 4.14 hereof.
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SECTION 7.13. ERISA. (a) Engage in any transaction in
connection with which a Borrower or any ERISA Affiliate could be subject to
either a material civil penalty assessed pursuant to the provisions of Section
502 of ERISA or a material tax imposed under the provisions of Section 4975 of
the Code.
(b) Terminate any Pension Plan in a "distress termination"
under Sec tion 4041 of ERISA, or take any other action which could result in a
material liability of a Borrower or any ERISA Affiliate to the PBGC.
(c) Fail to make payment when due of amounts which, under the
provisions of any Plan, a Borrower or any ERISA Affiliate is required to pay as
contributions thereto, or, with respect to any Pension Plan, permit to exist any
material "accumulated funding deficiency" (within the meaning of Section 302 of
ERISA and Section 412 of the Code), whether or not waived, with respect thereto.
(d) Adopt an amendment to any Pension Plan requiring the
provision of security under Section 307 of ERISA or Section 401(a)(29) of the
Code.
SECTION 7.14. Accounting Changes. Make any change in their
accounting treatment or financial reporting practices except as required or
permitted by GAAP and with the consent of the Agent which consent will not be
unreasonably withheld or delayed.
SECTION 7.15. Prepayment or Modification of Indebtedness;
Modification of Charter Documents. (a) Directly or indirectly prepay, redeem,
purchase or retire any Indebtedness, including, without limitation, any
Subordinated Indebtedness, other than Indebtedness incurred hereunder.
(b) Modify, amend or otherwise alter the terms and provisions
of any Subordinated Indebtedness.
(c) Modify, amend or otherwise alter the terms and provisions
of any intercompany Indebtedness permitted pursuant to Section 7.03(xi) hereof
in a manner adverse to the Agent or the Lenders.
(d) Modify, amend or alter their certificates or articles of
incorporation in a manner which would have a Material Adverse Effect.
SECTION 7.16. Transactions with Affiliates. Except as
otherwise specifically set forth in this Agreement, directly or indirectly
purchase, acquire or lease any
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property from, or sell, transfer or lease any property to, or enter into any
other transaction with, any stockholder, Affiliate or agent of a Borrower,
except at prices and on terms not less favorable to it than that which would
have been obtained in an arm's-length transaction with a non-affiliated third
party.
SECTION 7.17. Negative Pledges, Etc. Enter into any agreement
(other than this Agreement or any other Loan Document) which (a) prohibits the
creation or assumption of any Lien upon any of the Collateral, including,
without limitation, any hereafter acquired property, or (b) specifically
prohibits the amendment or other modification of this Agreement or any other
Loan Document.
SECTION 7.18. Consulting Fees. Pay any management, consulting
or similar fees of any kind to Holdings, or any Affiliate or subsidiary of
Holdings except $400,000 in any Fiscal Year and so long as that both before and
after giving effect to the payment of any such fees no Default or Event of
Default would exist.
VIII. EVENTS OF DEFAULT.
In case of the happening of any of the following events
(herein called "Events of Default"):
(a) any representation or warranty made in connection with
this Agreement, any of the Security Documents, the Notes or other Loan Documents
or any Credit Events hereunder or made in any report, certificate, financial
statement or other instrument (other than projections delivered pursuant to
Section 6.05(h) in accordance with the terms thereof) furnished pursuant to any
Loan Document, shall prove to have been false or misleading in any material
respect when made;
(b) default shall be made in the payment of any principal of
any Note when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on
any Note, or any fee or any other amount payable hereunder (other than an amount
referred to in paragraph (b) above), or under the Notes, Letters of Credit, or
any other Loan Document or in connection with
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any other Credit Event when and as the same shall become due and payable;
(d) default shall be made in the due observance or performance
of (i) any covenant, condition or agreement to be observed or performed on the
part of any Loan Party pursuant to the terms of Sections 6.01, 6.02, 6.03, 6.05,
6.06(c), 6.08 (with respect to inspection, visitation and audits), 6.09, 6.10,
6.11, 6.12, 6.14 (as to payment of Obligations in accordance with this
Agreement), 6.15 and 6.16 of Article VI or Article VII (other than Section 7.13
(except subparagraph (b) thereof)) hereof, any of the Notes, any of the Security
Documents or any other Loan Document or (ii) any other terms of this Agreement
(other than as specified in (a), (b), (c) or (d)(i) above) and such default with
respect to any such other terms shall continue unremedied for a period of the
earlier of (i) 30 days after a Responsible Officer of the Borrowers, any
subsidiary or Holdings first has actual knowledge thereof and (ii) 30 days after
notice thereof from the Agent to the Borrowers;
(e) a Borrower or any material subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, liquidation or similar law, (ii) consent to the
institution of, or fail to contravene in a timely and appropriate manner, any
such proceeding or the filing of any such petition, (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator or similar
official for a Borrower or any material subsidiary or for a substantial part of
its property and assets, (iv) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in writing
its inability or fail generally to pay its debts as they become due or (vii)
take corporate action for the purpose of effecting any of the foregoing;
(f) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of a Borrower or any material subsidiary, or of a
substantial part of the property and assets of any of a Borrower or any material
subsidiary, under Title 11 of the United States Code or any other Federal state
or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar official
for a Borrower or
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any material subsidiary or for a substantial part of the property and assets of
any of a Borrower or any material subsidiary or (iii) the winding-up or
liquidation of a Borrower or any material subsidiary; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall continue unstayed and in effect for 30
days;
(g) default shall be made with respect to any Indebtedness or
obligations under a Capitalized Lease of a Borrower or any material subsidiary
(excluding Indebtedness outstanding hereunder) which either individually or
taken together with other Indebtedness as to which a default has occurred shall
exceed $1,000,000 if the effect of any such default shall be to accelerate, or
to permit the holder or obligee of any such Indebtedness or obligations under a
Capitalized Lease (or any trustee on behalf of such holder or obligee) at its
option to accelerate, the maturity of such Indebtedness or obligations under a
Capitalized Lease;
(h) (i) a Reportable Event shall have occurred with respect to
a Pension Plan, (ii) the filing by any Loan Party, any ERISA Affiliate, or an
administrator of any Plan of a notice of intent to terminate such a Plan in a
"distress termination" under the provisions of Section 4041 of ERISA, (iii) the
receipt of notice by any Loan Party, any ERISA Affiliate, or an administrator of
a Plan that the PBGC has instituted proceedings to terminate (or appoint a
trustee to administer) such a Pension Plan, (iv) any other event or condition
exists which might, in the reasonable opinion of the Agent, constitute grounds
under the provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Plan by the PBGC, (v) a
Pension Plan shall fail to maintain the minimum funding standard required by
Section 412 of the Code for any plan year or a waiver of such standard is sought
or granted under the provisions of Section 412(d) of the Code, (vi) any Loan
Party or any ERISA Affiliate has incurred, or is likely to incur, a liability
under the provisions of Section 4062, 4063, 4064 or 4201 of ERISA, (vii) any
Loan Party or any ERISA Affiliate fails to pay the full amount of an installment
required under Section 412(m) of the Code, (viii) the occurrence of any other
event or condition with respect to any Plan which would constitute an event of
default under any other agreement entered into by any Loan Party or any ERISA
Affili ate, and in each case in clauses (i) through (viii) of this subsection
(h), such event or condition, together with all other such events or conditions,
if any, could
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subject any Loan Party or any ERISA Affiliate to any taxes, penalties or other
liabilities which, in each case, in the reasonable opinion of the Agent, could
reasonably be expected to have a Material Adverse Effect on the financial
condition of any Loan Party or any ERISA Affiliate;
(i) any Loan Party or any ERISA Affiliate (i) shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred any
material withdrawal liability to such Multiemployer Plan, (ii) does not have
reasonable grounds for contesting such withdrawal liability and is not in fact
contesting such withdrawal liability in a timely and appropriate manner, and
(iii) the amount of such withdrawal liability reasonably could be expected to
result in a Material Adverse Effect;
(j) a judgment (non-reimbursable by insurance policies of a
Borrower or any material subsidiary or any other Affiliate or indemnified by
McKesson Corporation pursuant to the Millbrook Acquisition Agreement or KBMC
Acquisition, L.P. pursuant to the Manischewitz Acquisition Agreement) or decree
for the payment of money, a fine or penalty which when taken together with all
other such judgments, decrees, fines and penalties shall exceed $1,500,000 shall
be rendered by a court or arbitration panel against a Borrower or any material
subsidiary and (i) shall remain undischarged or unbonded for a period of 45
consecutive days during which the execution of such judgment, decree, fine or
penalty shall not have been stayed effectively or (ii) any judgment creditor or
other person shall legally commence actions to collect on or enforce such
judgment, decree, fine or penalty;
(k) this Agreement, any Note, any of the Security Documents,
any Guarantee or other Loan Documents shall for any reason cease to be, or shall
be asserted by any Loan Party not to be, a legal, valid and binding obligation
of any Loan Party, enforceable in accordance with its terms, or the security
interest or Lien purported to be created by any of the Security Documents shall
for any reason cease to be, or be asserted by any Loan Party not to be, a valid,
first priority perfected security interest in any Collateral (except to the
extent otherwise permitted under this Agreement or any of the Security Documents
but not as a result of any actions, or inactions, of any Loan Party);
(l) a Change of Control shall occur; or
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(m) any material damage to, or loss, theft or destruction of,
any material Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or other casualty
which causes, for more than thirty (30) consecutive days beyond the coverage
period of any applicable business interruption insurance, the cessation or
substantial curtailment of revenue producing activities at any facility of a
Loan Party if any such event or circumstance would have a Material Adverse
Effect;
then, and in any such event (other than an event described in paragraph (e) or
(f) above), and at any time thereafter during the continuance of such event, the
Agent may, and upon the written request of the Required Lenders shall, by
written notice (or facsimile notice promptly confirmed in writing) to the
Borrowers, take any or all of the following actions at the same or different
times: (i) terminate forthwith all or any portion of the Total Commitment and
the obligations of the Lenders to issue Letters of Credit hereunder; (ii)
declare the Notes and any amounts then owing to the Lenders on account of
drawings under any Letters of Credit to be forthwith due and payable, and (iii)
require that the Borrowers remit to the Agent cash collateral in an amount equal
to the aggregate undrawn amount of all outstanding Letters of Credit at such
time, such cash collateral to be held by the Agent for its own benefit and the
benefit of the Lenders in a cash collateral account on terms and conditions
satisfactory to the Agent, whereupon the principal of such Notes, together with
accrued interest and fees thereon and any amounts then owing to the Lenders on
account of drawings under any Letters of Credit and other liabilities of the
Borrowers accrued hereunder, shall become forthwith due and payable both as to
principal and interest, without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by the Borrowers, anything
contained herein or in the Notes to the contrary notwithstanding; provided,
however, that with respect to a default described in paragraph (e) or (f) above,
the Total Commitment and the obligation of the Lenders to issue Letters of
Credit shall automatically terminate and the principal of the Notes, together
with accrued interest and fees thereon and any amounts then owing to the Lenders
on account of drawings under any Letters of Credit and any other liabilities of
the Borrowers accrued hereunder shall automatically become due and payable, both
as to principal and interest, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Borrowers,
anything contained herein or in the Notes to the contrary notwithstanding.
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IX. AGENT
In order to expedite the transactions contemplated by this
Agreement, The Chase Manhattan Bank (or NationsBank, N.A. solely with respect to
the Mortgages and the rights and obligations of the mortgagee thereunder) is
hereby appointed to act as Agent on behalf of the Lenders. Each of the Lenders
and each subsequent holder of any Note or issuer of any Letter of Credit by its
acceptance thereof, irrevocably authorizes the Agent to take such action on its
behalf and to exercise such powers hereunder and under the Security Documents
and other Loan Documents as are specifically delegated to or required of the
Agent by the terms hereof and the terms thereof together with such actions and
powers as are reasonably incidental thereto. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable as such for any action
taken or omitted to be taken by it or them hereunder or under any of the
Security Documents and other Loan Documents or in connection herewith or
therewith (a) at the request or with the approval of the Required Lenders (or,
if otherwise specifically required hereunder or thereunder, the consent of all
the Lenders) or (b) in the absence of its or their own gross negligence or
willful misconduct. Nothing in the foregoing sentence shall limit or affect the
Agent's obligations and liability to the Borrowers hereunder.
The Agent is hereby expressly authorized on behalf of the
Lenders, without hereby limiting any implied authority, (a) to receive on behalf
of each of the Lenders any payment of principal of or interest on the Notes
outstanding hereunder and all other amounts accrued hereunder which are paid to
the Agent, and promptly to distribute to each Lender its proper share of all
payments so received, (b) to distribute to each Lender copies of all notices,
agreements and other material as provided for in this Agreement or in the
Security Documents and other Loan Documents as received by such Agent and (c) to
take all actions with respect to this Agreement and the Security Documents and
other Loan Documents as are specifically delegated to the Agent.
In the event that (a) the Borrowers fail to pay when due the
principal of or interest on any Note, any amount payable under any Letter of
Credit, or any fee payable hereunder or (b) the Agent receives written notice of
the occurrence of a Default or an Event of Default (the Agent being deemed not
to have knowledge of any Default or Event of Default unless and until written
notice thereof is given to the Agent by a Borrower or a Lender), the Agent
within a reasonable time shall give written notice thereof to the Lenders, and
shall take such action with respect to such Event of Default or other condition
or event as it shall be directed to take by the Required Lenders; provided,
however, that, unless and until the Agent shall have received such directions,
the Agent may take such action or refrain from taking such action hereunder or
under the Security Documents or other Loan Documents with respect to a Default
or Event of Default as it shall deem advisable in the best interests of the
Lenders.
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The Agent shall not be responsible in any manner to any of the
Lenders for the effectiveness, enforceability, perfection, value, genuineness,
validity or due execution of this Agreement, the Notes or any of the other Loan
Documents or Collateral or any other agreements or certificates, requests,
financial statements, notices or opinions of counsel or for any recitals,
statements, warranties or representations contained herein or in any such
instrument or be under any obligation to ascertain or inquire as to the
performance or observance of any of the terms, provisions, covenants,
conditions, agreements or obligations of this Agreement or any of the other Loan
Documents or any other agreements on the part of the Borrowers and, without
limiting the generality of the foregoing, the Agent shall, in the absence of
knowledge to the contrary, be entitled to accept any certificate furnished
pursuant to this Agreement or any of the other Loan Documents as conclusive
evidence of the facts stated therein and shall be entitled to rely on any note,
notice, consent, certificate, affidavit, letter, telegram, teletype message,
statement, order or other document which it believes in good faith to be genuine
and correct and to have been signed or sent by the proper person or persons. It
is understood and agreed that the Agent may exercise its rights and powers under
other agreements and instruments to which it is or may be a party, and engage in
other transactions with the Borrowers, as though it were not Agent of the
Lenders hereunder.
The Agent shall promptly give notice to the Lenders of the
receipt or sending of any notice, schedule, report, projection, financial
statement or other document or information pursuant to this Agreement or any of
the other Loan Documents and shall promptly forward a copy thereof to each
Lender.
Neither the Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrowers on account of
the failure or delay in performance or breach by any Lender other than the Agent
of any of its obligations hereunder or to any Lender on account of the failure
of or delay in performance or breach by any other Lender or the Borrowers of any
of their respective obligations hereunder or in connection herewith.
The Agent may consult with legal counsel selected by it in
connection with matters arising under this Agreement or any of the other Loan
Documents and any action taken or suffered in good faith by it in accordance
with the opinion of such counsel shall be full justification and protection to
it. The Agent may exercise any of its powers and rights and perform any duty
under this Agreement or any of the other Loan Documents through agents or
attorneys.
The Agent and the Borrowers may deem and treat the payee of
any Note as the holder thereof until written notice of transfer shall have been
delivered as provided herein by such payee to the Agent and the Borrowers.
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With respect to the Loans made hereunder, the Notes issued to
it and any other Credit Event applicable to it, the Agent in its individual
capacity and not as an Agent shall have the same rights, powers and duties
hereunder and under any other agreement executed in connection herewith as any
other Lender and may exercise the same as though it were not the Agent, and the
Agent and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrowers or other affiliate thereof as
if it were not the Agent. Each of the Lenders hereby acknowledges that the Agent
and/or one or more Affiliates of the Agent may at any time and from time to time
be a holder of equity interests in a Loan Party.
Each Lender agrees (i) to reimburse the Agent in the amount of
such Lender's pro rata share (based on its Commitment hereunder) of any expenses
incurred for its own benefit and for the benefit of the Lenders by the Agent,
including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, not reimbursed by the Borrowers and
(ii) to indemnify and hold harmless the Agent and any of its directors,
officers, employees or agents, on demand, in the amount of its pro rata share,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against it in its capacity as the Agent or any of them in any way relating to or
arising out of this Agreement or any of the other Loan Documents or any action
taken or omitted by it or any of them under this Agreement or any of the other
Loan Documents, to the extent not reimbursed by the Borrowers; provided,
however, that no Lender shall be liable to the Agent for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgment, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent or any of its directors, officers, employees or agents.
With respect to the release of Collateral, the Lenders hereby
irrevocably authorize the Agent, at its option and in its discretion, to release
any Lien granted to or held by the Agent upon any property covered by this
Agreement or the other Loan Documents (i) upon termination of the Total
Commitments and payment and satisfaction of all Obligations; (ii) constituting
property being sold or disposed of in compliance with the provisions of this
Agreement (and the Agent may rely in good faith conclusively on any such
certificate, without further inquiry); or (iii) constituting property leased to
a Borrower or any subsidiary under a lease which has expired or been terminated
in a transaction permitted under this Agreement or is about to expire and which
has not been, and is not intended by such Borrower or such subsidiary to be,
renewed or extended; provided, however, that (x) the Agent shall not be required
to execute any release on terms which, in the Agent's opinion, would expose the
Agent to liability or create any obligation or entail any consequence other than
the release of such Liens without recourse or warranty, and (y) such release
shall not in any manner discharge, affect or impair the Obligations or any Liens
upon (or obligations of any
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Loan Party, in respect of), all interests retained by any Loan Party, including
(without limitation) the proceeds of any sale, all of which shall continue to
constitute part of the property covered by this Agreement or the Loan Documents.
With respect to perfecting the Lenders' security interest in
Collateral which, in accordance with Article 9 of the Uniform Commercial Code in
any applicable jurisdiction or other applicable laws, can be perfected only by
possession, each Lender hereby appoints each other Lender for the purpose of
perfecting such interest. Should any Lender (other than the Agent) obtain
possession of any such Collateral, such Lender shall notify the Agent and the
Agent shall notify the Borrowers, and, promptly upon the Agent's request, shall
deliver such Collateral to the Agent or in accordance with the Agent's
instructions. Each Lender agrees that it will not have any right individually to
enforce or seek to enforce this Agreement or any Loan Document or to realize
upon any Collateral for the Loans, it being understood and agreed that such
rights and remedies may be exercised only by the Agent.
In the event that a petition seeking relief under Title 11 of
the United States Code or any other Federal, state or foreign bankruptcy,
insolvency, liquidation or similar law is filed by or against any Loan Party,
the Agent is authorized to file a proof of claim on behalf of itself and the
Lenders in such proceeding for the total amount of Obligations owed by such Loan
Party. With respect to any such proof of claim which the Agent may file, each
Lender acknowledges that without reliance on such proof of claim, such Lender
shall make its own evaluation as to whether an individual proof of claim must be
filed in respect of such Obligations owed to such Lender and, if so, take the
steps necessary to prepare and timely file such individual claim.
Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and any other Loan Document to which such
Lender is party. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document, any related agreement or any document furnished
hereunder.
Subject to the appointment and acceptance of a successor Agent
as provided below, the Agent may resign at any time by notifying the Lenders and
the Borrowers. Upon any such resignation, the Co-Agent shall have the right to
become the Agent and if the Co-Agent shall decline to exercise such right then
the Required Lenders shall have the right to appoint a successor Agent, with the
consent of the Borrowers which shall not be unreasonably withheld or delayed (it
being agreed that
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any Lender at such time which is a commercial bank having a combined capital and
surplus of at least $500,000,000 or an affiliate of such a bank shall be deemed
acceptable to the Borrowers and that the Borrowers' unwillingness to consent to
the appointment of a person who is neither a Lender nor commercial bank at such
time shall not be deemed unreasonable); provided, however, that no consent of
the Borrowers shall be required if a Default or an Event of Default has occurred
and is continuing. If no successor Agent shall have been so appointed and shall
have accepted such appointment within 30 days after the retiring Agent gives
notice of its resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent which shall be a bank with an office (or an
affiliate with an office) in New York, New York, having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor bank, such successor shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from its duties and
obligations hereunder and under each of the other Loan Documents. After any
Agent's resignation hereunder, the provisions of this Article shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent.
The Lenders hereby acknowledge that the Agent shall be under
no duty to take any discretionary action permitted to be taken by the Agent
pursuant to the provisions of this Agreement or any of the other Loan Documents
unless it shall be requested in writing to do so by the Required Lenders. The
Lenders hereby further acknowledge that the Agent is not acting as the fiduciary
of, or the trustee for, any of the Lenders and except as expressly set forth
herein, the Agent shall not have any duty to disclose, and shall not be liable
for the failure to disclose, any information communicated to the Agent by or
relating to the Borrowers or any of their subsidiaries.
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL
SECTION 10.01. Collection of Receivables; Management of
Collateral. (a) Each Borrower will, at its own cost and expense, (i) arrange for
remittances on Receivables to be made directly to lockboxes reasonably approved
by the Agent, and (ii) promptly deposit all payments received by such Borrower
on account of Receivables, whether in the form of cash, checks, notes, drafts,
bills of exchange, money orders or otherwise, in one or more accounts designated
by the Agent in precisely the form received (but with any endorsements of such
Borrower necessary for deposit or collection), subject to withdrawal by the
Agent only, as hereinafter provided, and until such payments are deposited, such
payments shall be deemed to be held in trust by such Borrower for and as the
Lenders' property and shall not
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be commingled with such Borrower's other funds. All remittances and payments
that are deposited in accordance with the foregoing will be applied by the Agent
to immediately reduce the outstanding balance of the Revolving Credit Loans,
subject to final collection in cash of the item deposited and subject to the
assessment of a two day collection charge.
Upon the occurrence and continuance of an Event of Default,
the Agent may send a notice of assignment and/or notice of the Agent's security
interest to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral, and thereafter the Agent shall have the
sole right to collect the Receivables and/or take possession of the Collateral
and the books and records relating thereto. No Borrower shall, without the
Agent's prior written consent, grant any extension of the time of payment of any
Receivable, compromise or settle any Receivable for less than the full amount
thereof, release, in whole or in part, any person or property liable for the
payment thereof, or allow any credit or discount whatsoever thereon except,
prior to the occurrence and continuance of an Event of Default, as permitted by
Section 10.03 hereof.
(b) (i) Each Borrower hereby constitutes the Agent or the
Agent's designee as such Borrower's attorney-in-fact with power to endorse such
Borrower's name upon any notes, acceptances, checks, drafts, money orders or
other evidences of payment or Collateral that may come into its possession; to
sign such Borrower's name on any invoice or bill of lading relating to any
Receivables, drafts against Customers, assignments and verifications of
Receivables and notices to Customers; to send verifications of Receivables; upon
the occurrence and continuance of an Event of Default, to notify the Postal
Service authorities to change the address for delivery of mail addressed to such
Borrower to such address as the Agent may designate; and to do all other acts
and things necessary to carry out this Agreement; provided that the Agent or the
Agent's designee may not act as such Borrower's attorney-in-fact until an Event
of Default has occurred and is continuing. All acts of said attorney or designee
are hereby ratified and approved, except for those constituting gross negligence
or willful misconduct, and said attorney or designee shall not be liable for any
acts of omission or commission, for any error of judgment or for any mistake of
fact or law, provided that the Agent or its designee shall not be relieved of
liability to the extent it is determined by a final judicial decision that its
act, error or mistake constituted gross negligence or willful misconduct. This
power of attorney being coupled with an interest
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is irrevocable until all of the Obligations are paid in full and this Agreement
and the Total Commitment is terminated.
(ii) The Agent, without notice to or consent of the
Borrowers, upon the occurrence and during the continuance of an Event of
Default, (A) may sue upon or otherwise collect, extend the time of payment of,
or compromise or settle for cash, credit or otherwise upon any terms, any of the
Receivables or any securities, instruments or insurance applicable thereto
and/or release the obligor thereon; (B) is authorized and empowered to accept
the return of the goods represented by any of the Receivables; and (C) shall
have the right to receive, endorse, assign and/or deliver in its name or the
name of the applicable Borrower any and all checks, drafts and other instruments
for the payment of money relating to the Receivables, and each Borrower hereby
waives notice of presentment, protest and non-payment of any instrument so
endorsed.
(c) Nothing herein contained shall be construed to constitute
a Borrower as agent of the Agent for any purpose whatsoever, and the Agent shall
not be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof (except to the extent it is determined by a
final judicial decision that the Agent's or a Lender's act or omission
constituted gross negligence or willful misconduct). The Agent and the Lenders
shall not, under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Receivables or any instrument
received in payment thereof or for any damage resulting therefrom (except to the
extent it is determined by a final judicial decision that the Agent's or such
Lender's error, omission or delay constituted gross negligence or willful
misconduct). The Agent and the Lenders do not, by anything herein or in any
assignment or otherwise, assume the Borrowers' obligations under any contract or
agreement assigned to the Agent or the Lenders, and the Agent and the Lenders
shall not be responsible in any way for the performance by the applicable
Borrower of any of the terms and conditions thereof.
(d) If any of the Receivables includes a charge for any tax
payable to any governmental tax authority, the Agent is hereby authorized (but
in no event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the account of the applicable Borrower and to charge the
Borrowers' account therefor. The Borrowers shall notify the Agent if any
Receivables include any tax
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due to any such taxing authority and, in the absence of such notice, the Agent
shall have the right to retain the full proceeds of such Receivables and shall
not be liable for any taxes that may be due from the applicable Borrower by
reason of the sale and delivery creating such Receivables.
SECTION 10.02. Receivables Documentation. The Borrowers will,
in addition to the monthly Receivables aging delivered pursuant to this
Agreement, at such intervals as the Agent may reasonably require, furnish such
further schedules and/or information as the Agent may reasonably require
relating to the Receivables, including, upon the occurrence and during the
continuance of an Event of Default, sales invoices. The items to be provided
under this Section 10.02 are to be in form satisfac tory to the Agent and are to
be executed and delivered to the Agent from time to time solely for its
convenience in maintaining records of the Collateral; the Borrowers' failure to
give any of such items to the Agent shall not affect, terminate, modify or
otherwise limit the Agent's Lien or security interest in the Collateral.
SECTION 10.03. Status of Receivables and Other Collateral.
Each Borrower covenants, represents and warrants that: (a) it shall be the sole
owner, free and clear of all Liens except in favor of the Agent or otherwise
permitted hereunder, of and fully authorized to sell, transfer, pledge and/or
grant a security interest in each and every item of said Collateral owned by it;
(b) it will not seek to qualify, or maintain the qualification of, a Receivable
as an Eligible Receivable unless such Receivable shall be a good and valid
account representing an undisputed bona fide indebtedness incurred or an amount
indisputably owed by the Customer therein named, for a fixed sum as set forth in
the invoice relating thereto with respect to an absolute sale and delivery upon
the specified terms of goods sold by such Borrower, or work, labor and/or
services theretofore rendered by such Borrower; (c) it will not seek to qualify,
or maintain the qualification of, a Receivable as an Eligible Receivable unless
such Receivable which it seeks to so qualify is not subject to any defense,
offset, counterclaim, discount or allowance (as of the time of its creation)
except as may be stated in the invoice relating thereto or discounts and
allowances as may be customary in such Borrower's business; (d) none of the
transactions underlying or giving rise to any Eligible Receivable shall violate
any applicable state or federal laws or regulations, and all documents relating
to any Eligible Receivable shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms; (e)
it will not seek to qualify, or maintain the qualification of, a Receivable as
an Eligible Receivable unless to the best of its knowledge,
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each Customer, guarantor or endorser with respect to such Receivable is solvent
and will continue to be fully able to pay all Eligible Receivables on which it
is obligated in full when due; (f) it will not seek to qualify, or maintain the
qualification of, a Receivable as an Eligible Receivable unless all documents
and agreements relating to such Receivable shall be true and correct and in all
respects what they purport to be; (g) it will not seek to qualify, or maintain
the qualification of, a Receivable as an Eligible Receivable unless to the best
of its knowledge, all signatures and endorsements that appear on all documents
and agreements relating to such Receivable shall be genuine and all signatories
and endorsers with respect thereto shall have full capacity to contract; (h) it
shall maintain books and records pertaining to the Collateral in such detail,
form and scope as the Agent shall require; (i) it will not seek to qualify, or
maintain the qualification of, a Receivable as an Eligible Receivable unless it
shall have immediately notified the Agent as to any accounts arising out of
contracts with the United States or any department, agency or instrumentality
thereof, and shall have executed any instruments and taken any steps required by
the Agent in order that all monies due or to become due under any such contract
shall be assigned to the Agent and notice thereof given to the United States
Government under the Federal Assignment of Claims Act; (j) it will, immediately
upon learning thereof, report to the Agent any material loss or destruction of,
or substantial damage to, any of the Collateral, and any other matters affecting
the value, enforceability or collectability of any of the Collateral; (k) if any
amount payable under or in connection with any Receivable is evidenced by a
promissory note or other instrument, as such terms are defined in the Uniform
Commercial Code, such promissory note or instrument shall be immediately
pledged, endorsed, assigned and delivered to the Agent as additional collateral;
(l) it shall not re-date any invoice or sale or make sales on extended dating
beyond that customary in the industry; (m) it shall conduct a cycle count of its
inventory at such intervals as the Agent may reasonably request and promptly
supply the Agent with a copy of such counts accompanied by a report of the value
(based on the lower of cost (on a FIFO basis) or market value) of such
inventory; and (n) it is not nor shall it be entitled to pledge the Lenders'
credit on any purchases or for any purpose whatsoever.
SECTION 10.04. Monthly Statement of Account. The Agent shall
render to the Borrowers each month a statement of the Borrowers' account or
accounts, as the case may be, which shall constitute an account stated and shall
be deemed to be correct and accepted by and be binding upon the Borrowers unless
the Agent receives a written statement of the Borrowers'
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exceptions within 30 days after such statement was rendered to the Borrowers.
SECTION 10.05. Collateral Custodian. Upon the occurrence and
continuance of an Event of Default, the Agent may at any time and from time to
time employ and maintain in the premises of the Borrowers a custodian selected
by the Agent who shall have full authority to do all acts necessary to protect
the Agent's and Lenders' interests and to report to the Agent thereon. The
Borrowers hereby agree to cooperate with any such custodian and to do whatever
the Agent may reasonably request to preserve the Collateral. All costs and
expenses incurred by the Agent by reason of the employment of the custodian
shall be charged to the Borrowers' account and added to the Obligations.
XI. MISCELLANEOUS
SECTION 11.01. Notices. All notices, demands, consents,
requests, instructions and other communications to be given or delivered or
permitted under or by reason of the provisions of this Agreement will be in
writing and shall be deemed to be delivered and received by the intended
recipient as follows: (a) if personally delivered, on the Business Day of such
delivery (as evidenced by the receipt of the personal delivery service), (b) if
mailed certified or registered mail return receipt requested (with all postage
prepaid), four (4) Business Days after the date set forth on the return receipt,
(c) if delivered by overnight courier (with all charges having been prepaid), on
the Business Day of such delivery (as evidenced by the receipt of the overnight
courier service of recognized standing), or (d) if delivered by facsimile
transmission, on the Business Day of such delivery if sent by 6:00 p.m. in the
time zone of the recipient, or if sent after that time, on the next succeeding
Business Day (as evidenced by the printed confirmation of delivery generated by
the sending party's telecopier machine). If any notice, demand, consent,
request, instruction or other communication cannot be delivered because of a
changed address of which no notice was given (in accordance with this Section
11.01), or the refusal to accept same, the notice shall be deemed received on
the Business Day the notice is sent (as evidenced by the affidavit of the
sender). All such notices, demands, consents, requests, instructions and other
communications will be sent to the following addresses or facsimile numbers as
applicable:
(a) if to the Borrowers, Guarantors, or Grantors, at 444
Madison Avenue, Suite 601, New York, New York 10022, Facsimile No.:
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(212) 888-5025, Attention: Mr. Richard A. Bernstein, Chairman and Chief
Executive Officer, with a copy to Parker Chapin Flattau & Klimpl, LLP, 1211
Avenue of the Americas, New York, New York 10036-8735, Facsimile No.: (212)
704-6288, Attention: Martin Eric Weisberg, Esq. and Morgan, Lewis & Bockius LLP,
101 Park Avenue, New York, New York 10178, Facsimile No.: (212) 309-6273,
Attention: Mitchell N. Baron, Esq.; and
(b) if to the Agent, at The Chase Manhattan Bank, 600 Fifth
Avenue, 4th Floor, New York, New York 10020-2302, Facsimile No.: (212) 332-4298,
Attention: Millbrook Account Executive, with a copy to Kaye, Scholer, LLP, et
al., at 425 Park Avenue, New York, New York 10022, Facsimile No.: (212)
836-8689, Attention: Jeffrey M. Epstein, Esq.; and
(c) if to any Lender, at the address set forth below its name
in Schedule 2.01 annexed hereto.
SECTION 11.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrowers herein and in
the certificates or other instruments prepared or delivered in connection with
this Agreement, any of the Security Documents, any Guarantee or any other Loan
Document, shall be considered to have been relied upon by the Lenders and shall
survive the making by the Lenders of the Loans and the execution and delivery to
the Lenders of the Notes and the occurrence of any other Credit Event and shall
continue in full force and effect as long as the principal of or any accrued
interest on the Notes or any other fee or amount payable under the Notes or this
Agreement or any other Loan Document is outstanding and unpaid and so long as
the Total Commitment has not been terminated.
SECTION 11.03. Successors and Assigns; Participations. (a)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and permitted assigns of
such party; and all covenants, promises and agreements by or on behalf of any
Loan Party, any subsidiary of any thereof, the Agent or the Lenders, that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and permitted assigns. Without limiting the generality of
the foregoing, the Borrowers specifically confirm that any Lender may at any
time and from time to time pledge or otherwise grant a security interest in any
Loan or any Note (or any part thereof) to any Federal Reserve Bank. No Borrower
may assign or transfer any of its rights or obligations hereunder without the
written consent of all the Lenders.
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(b) Each Lender, with the consent of the Borrowers (not to be
unreasonably withheld) and the Agent, may sell participations to one or more
banks or financial institutions in all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Revolving Credit Commitment or Term Loan Commitment) and the
Loans owing to it and undrawn Letters of Credit and the Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Revolving Credit Commitment and Term Loan
Commitment) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the banks or financial institutions buying participations shall be
entitled to the cost protection provisions contained in Sections 2.10, 2.12 and
2.16 hereof, but only to the extent any of such Sections would be available to
the Lender which sold such participation, and (iv) the Borrowers, the Agent, the
Co-Agent, Holdings and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement; provided, further, however, that such Lender
shall retain the sole right and responsibility to enforce the obligations of the
Loan Parties relating to the Loans, including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement, or any of the other Loan Documents, other than amendments,
modifications or waivers with respect to decreasing any fees payable hereunder
or the amount of principal or the rate of interest payable on the Loans, or
extending the dates fixed for any payment of principal of or interest on, the
Loans or increasing or extending the Commitments or the release of all
Collateral.
(c) Each Lender may assign, to any one or more banks or other
financial institutions with the prior written consent of the Borrowers (not to
be unreasonably withheld) and with the prior written consent of the Agent (not
to be unreasonably withheld), all or a portion of its interests, rights and
obligations under this Agreement and the other Loan Documents (including,
without limitation, all or a portion of its Revolving Credit Commitment or Term
Loan Commitment and the same portion of the Loans and undrawn Letters of Credit
at the time owing to it and the Note or Notes held by it), provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of all of the assigning Lender's rights and obligations under this
Agreement, which shall include the
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same percentage interest in the Loans, Letters of Credit and Notes, (ii) the
amount of the Revolving Credit Commitment or Term Loan Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Agent) shall be in a minimum principal amount of $5,000,000 in
the aggregate for the Revolving Credit Commitment and Term Loan Commitment of
such Lender and the amount of the Revolving Credit Commitment and Term Loan
Commitment of such Lender shall not be less than $10,000,000 or shall be zero,
(iii) the Agents shall hold Commitments at least equal to the Commitments held
by any other Lender (but in no event shall either be required to hold more than
$20,000,000) except that upon the occurrence and during the continuance of an
Event of Default, any Lender shall be permitted to assign its Commitments
without restriction, (iv) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register (as
defined below), an Assignment and Acceptance, together with any Note subject to
such assignment and a processing and recordation fee of $3,000 and (v) the
Assignee, if it shall not be a Lender, shall deliver to the Agent an
Administrative Questionnaire in the form provided to such Assignee by the Agent.
Upon such execution, delivery, acceptance and recording and after receipt of the
written consent of the Agent, from and after the effective date specified in
each Assignment and Acceptance, which effective date shall be at least five (5)
Business Days after the execution thereof, (x) the assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder and under the other Loan
Documents and (y) the Lender which is assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance 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 but shall
continue to be entitled to the benefits of Sections 2.10, 2.12, 2.16 and 11.04,
as well as any fees accrued for its account hereunder and not yet paid).
(d) By executing and delivering an Assignment and Acceptance,
the Lender which is assignor thereunder and the assignee thereunder confirm to,
and agree with, each other and the other parties hereto as follows: (i) other
than the representation and warranty that it is
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the legal and beneficial owner of the interest being assigned thereunder free
and clear of any adverse claim, and that its Commitment and the outstanding
balance of its Loans and participations in Letters of Credit, in each case
without giving effect to assignments thereof which have not become effective,
are as set forth in such Assignment and Acceptance, such Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, perfection,
genuineness, sufficiency or value of this Agreement, the other Loan Documents or
any Collateral with respect thereto or any other instrument or document
furnished pursuant hereto or thereto; (ii) such Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of any Loan Party or the performance or observance by any Loan Party
of any of their respective obligations under this Agreement, any Guarantees or
any of the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto; (iii) such assignee represents and warrants that it
is legally authorized to enter into such Assignment and Acceptance and confirms
that it has received a copy of this Agreement, any Guarantees and of the other
Loan Documents, together with copies of financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such Lender or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee appoints and
authorizes the Agent to take such action as the Agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vi) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Lender.
(e) The Agent shall maintain at its address referred to in
Section 11.01 hereof a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders and
the Revolving Credit Commitment or Term Loan
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Commitment, as the case may be, of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrowers, the
Agent and the Lenders may treat each person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee together with any Note or Notes subject
to such assignment, any processing and recordation fee and, if required, an
Administrative Questionnaire and the written consent to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is
precisely in the form of Exhibit F annexed hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Lenders and the Borrowers. Within
five (5) Business Days after receipt of such notice, the Borrowers, at their own
expense, shall execute and deliver to the Agent in exchange for each surrendered
Note or Notes a new Note or Notes to the order of such assignee in an amount
equal to its portion of the Term Loan Commitment and/or Revolving Credit
Commitment, as the case may be, assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained any Term Loan Commitment or
Revolving Credit Commitment hereunder, a new Note or Notes to the order of the
assigning Lender in an amount equal to the Term Loan Commitment and/or Revolving
Credit Commitment, as the case may be, retained by it hereunder. Such new Note
or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, or, with respect to the Term
Notes, the principal amount of the Term Notes outstanding at such time as
evidenced by the Term Note or Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of
Exhibit A or Exhibit B, as the case may be. Notes surrendered to the Borrowers
shall be canceled by the Borrowers.
(g) Notwithstanding any other provision herein, any Lender
may, in connection with any assignment or participation or proposed assignment
or participation pursuant to this Section 11.03, disclose
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to the assignee or participant or proposed assignee or participant, any
information, including, without limitation, any Information, relating to the
Borrowers furnished to such Lender by or on behalf of the Borrowers in
connection with this Agreement; provided, however, that prior to any such
disclosure, each such assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality of any confidential
Information relating to the Borrowers received from such Lender to the extent
set forth in Section 11.11 hereof.
SECTION 11.04. Expenses; Indemnity. (a) The Borrowers agree to
pay all reasonable out-of-pocket expenses incurred by the Agent and Co-Agent in
connection with the preparation of this Agreement and the other Loan Documents,
including, without limitation, the initial field examinations and appraisal (or
other appraisals upon the occurrence and continuance of an Event of Default) and
reasonable field examination fees (as provided in Section 6.08), or with any
amendments, modifications, waivers, extensions, renewals, renegotiations or
"workouts" of the provisions hereof or thereof (whether or not the transactions
hereby contemplated shall be consummated) or, after the occurrence of a Default
or an Event of Default, incurred by the Agent, Co-Agent or any of the Lenders in
connection with the enforcement or protection of its rights in connection with
this Agreement or any of the other Loan Documents or with the Loans made or the
Notes or Letters of Credit issued hereunder, or in connection with any pending
or threatened action, proceeding, or investigation relating to the foregoing,
including, but not limited to, the reasonable fees and disbursements of counsel
for the Agent and Co-Agent and ongoing up to three yearly field examination
expenses and charges, and, in connection with such enforcement or protection,
the reasonable fees and disbursements of counsel for the Lenders. The Borrowers
further indemnify the Lenders from and agrees to hold them harmless against any
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution and delivery of this Agreement or the Notes.
(b) The Borrowers indemnify the Agent and each Lender and
their respective directors, officers, employees and agents against, and agree to
hold the Agent, each Lender and each such person harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees and expenses, incurred by or asserted against the Lender or any
such person arising out of, in any way connected with, or as a result of (i) the
use of any of the proceeds of the Loans, (ii) this Agreement,
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the Guarantees, any of the Security Documents, the Millbrook Acquisition
Documents, the Manischewitz Acquisition Documents or the other documents
contemplated hereby or thereby, (iii) the performance by the parties hereto and
thereto of their respective obligations hereunder and thereunder (including but
not limited to the making of the Total Commitment) and consummation of the
transactions contemplated hereby and thereby, (iv) breach of any representation
or warranty by a Loan Party, or (v) any claim, litigation, investigation or
proceedings relating to any of the foregoing (other than those relating to
matters solely and exclusively between and among the Agent, Co-Agent and the
Lenders), whether or not the Agent, any Lender or any such person is a party
thereto; provided, however, that such indemnity shall not, as to the Agent or
any Lender, apply to any such losses, claims, damages, liabilities or related
expenses to the extent that they result from the gross negligence or willful
misconduct of the Agent or any Lender.
(c) The Borrowers indemnify, and agree to defend and hold
harmless the Agent and the Lenders and their respective officers, directors,
shareholders, agents and employees (collectively, the "Indemnitees") from and
against any loss, cost, damage, liability, lien, deficiency, fine, penalty or
expense (including, without limitation, reasonable attorneys' fees and
reasonable expenses for investigation, removal, cleanup and remedial costs and
modification costs incurred to permit, continue or resume normal operations of
any property or assets or business of a Borrower or any subsidiary thereof)
arising from a violation of, or failure to comply with any Environmental Law by
a Borrower or any subsidiary and to remove any Lien arising therefrom, except to
the extent caused by the gross negligence or willful misconduct of any
Indemnitee, which any of the Indemnitees may incur or which may be claimed or
recorded against any of the Indemnitees by any person.
(d) The provisions of this Section 11.04 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or the Notes, or any investigation made by or on
behalf of the Agent or any Lender. All amounts due under this Section 11.04
shall be payable on written demand therefor.
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<PAGE>
SECTION 11.05. Applicable Law. THIS AGREEMENT AND THE NOTES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF).
SECTION 11.06. Right of Setoff. If an Event of Default shall
have occurred and be continuing, upon the request of the Required Lenders each
Lender shall and is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrowers against any and all of the obligations of the Borrowers
now or hereafter existing under this Agreement and the Notes held by such
Lender, irrespective of whether or not such Lender shall have made any demand
under this Agreement or the Notes and although such obligations may be
unmatured. Each Lender agrees to notify promptly the Agent and the Borrowers
after any such setoff and application made by such Lender, but the failure to
give such notice shall not affect the validity of such setoff and application.
The rights of each Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which may be
available to such Lender.
SECTION 11.07. Payments on Business Days. (a) Should the
principal of or interest on the Notes or any fee or other amount payable
hereunder become due and payable on other than a Business Day, payment in
respect thereof may be made on the next succeeding Business Day (except as
otherwise specified in the definition of "Interest Period"), and such extension
of time shall in such case be included in computing interest, if any, in
connection with such payment.
(b) All payments by the Borrowers hereunder and all Loans made
by the Lenders hereunder shall be made in lawful money of the United States of
America in immediately available funds at the office of the Agent set forth in
Section 11.01 hereof.
SECTION 11.08. Waivers; Amendments. (a) No failure or delay of
any Lender in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power, except as otherwise expressly provided in Section 2.21
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<PAGE>
hereof. The rights and remedies of the Lenders hereunder are cumulative and not
exclusive of any rights or remedies which they may otherwise have. No waiver of
any provision of this Agreement or the Notes nor consent to any departure by the
Borrowers therefrom shall in any event be effective unless the same shall be
authorized as provided in paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on the Borrowers in any case shall entitle them to
any other or further notice or demand in similar or other circumstances. Each
holder of any of the Notes shall be bound by any amendment, modification, waiver
or consent authorized as provided herein, whether or not such Note shall have
been marked to indicate such amendment, modification, waiver or consent.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrowers and the Required Lenders; provided,
however, that no such agreement shall (i) change the principal amount of, or
extend or advance the maturity of or the dates for the payment of principal of
or interest on, any Note or reduce the rate of interest on any Note, or decrease
any fees payable pro rata to the Lenders or postpone the payment thereof, (ii)
change the Revolving Credit Commitment or Term Loan Commitment of any Lender or
increase the aggregate of such Commitments, increase any percentage contained in
the definition of Borrowing Base, make overadvances other than Permitted
Overadvances, or amend or modify the provisions of this Section, Section 2.06,
Section 2.13, Section 4.14 or Section 11.04 hereof or the definition of
"Required Lenders," (iii) release any material portion of Collateral or share or
subordinate any Lien priority or (iv) release any Guarantee of the Obligations,
in each case without the prior written consent of each Lender affected thereby
and provided, further, however, that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Agent under this Agreement or the
other Loan Documents without the written consent of the Agent. Each Lender shall
be bound by any modification or amendment authorized by this Section regardless
of whether its Notes shall be marked to make reference thereto, and any consent
by any Lender pursuant to this Section shall bind any person subsequently
acquiring a Note from it, whether or not such Note shall be so marked.
-119-
<PAGE>
(c) In the event that the Borrowers request, with respect to
this Agreement or any other Loan Document, an amendment, modification or waiver
and such amendment, modification or waiver would require the unanimous consent
of all of the Lenders in accordance with Section 11.08(b) above, and such
amendment, modification or waiver is agreed to in writing by the Borrowers and
the Required Lenders but not by all of the Lenders, then notwithstanding
anything to the contrary in Section 11.08(b) above, with the written consent of
the Borrowers and such Required Lenders, the Borrowers and Required Lenders may,
but shall not be obligated to, amend this Agreement without the consent of the
Lender or Lenders who did not agree to the proposed amendment, modification or
waiver (the "Minority Lenders") solely to provide for (i) the termination of the
Revolving Credit Commitment and Term Loan Commitment of each Minority Lender,
(ii) the assignment in accordance with Section 11.03 hereof to one or more
persons of each Minority Lender's interests, rights and obligations under this
Agreement (including, without limitation, all of such Minority Lender's
Revolving Credit Commitment and Term Loan Commitment as well as its portion of
all outstanding Loans and the Note or Notes held by such Minority Lender) and
the other Loan Documents and/or an increase in the Revolving Credit Commitment
and Term Loan Commitment of one or more Required Lenders, in each case so that
after giving effect thereto the Total Revolving Credit Commitment and Total Term
Loan Commitment shall be in the same amounts as prior to the events described in
this paragraph, (iii) the repayment to the Minority Lenders in full of all Loans
outstanding and accrued interest thereon at the time of the assignment and/or
increase in Commitments described in clause (ii) above with the proceeds of
Loans made by such persons who are to become Lenders by assignment or with the
proceeds of Loans made by Required Lenders who have agreed to increase their
Revolving Credit Commitment and/or Term Loan Commitment, (iv) the payment to the
Minority Lenders by the Borrowers of all fees and other compensation due and
owing such Minority Lenders under the terms of this Agreement and the other Loan
Documents and (v) such other modifications as the Required Lenders and Borrowers
shall deem necessary in order to effect the changes specified in clauses (i)
through (iv) hereof.
SECTION 11.09. Severability. In the event any one or more of
the provisions contained in this Agreement or in the Notes should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of
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<PAGE>
the remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby.
SECTION 11.10. Entire Agreement; Waiver of Jury Trial, etc.
(a) This Agreement, the Notes and the other Loan Documents constitute the entire
contract between the parties hereto relative to the subject matter hereof. Any
previous agreement among the parties hereto with respect to the Transactions is
superseded by this Agreement, the Notes and the other Loan Documents. Except as
expressly provided herein or in the Notes or the Loan Documents (other than this
Agreement), nothing in this Agreement, the Notes or in the other Loan Documents,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, the Notes or the other Loan Documents.
(b) Except as prohibited by law, each party hereto hereby
waives any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in connection with this
Agreement, the Notes, any of the other Loan Documents or the Transactions.
(c) Except as prohibited by law, each party hereto hereby
waives any right it may have to claim or recover in any litigation referred to
in paragraph (b) of this Section 11.10 any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.
(d) Each party hereto (i) certifies that no representative,
agent or attorney of any Lender has represented, expressly or otherwise, that
such Lender would not, in the event of litigation, seek to enforce the foregoing
waivers and (ii) acknowledges that it has been induced to enter into this
Agreement, the Notes or the other Loan Documents, as applicable, by, among other
things, the mutual waivers and certifications herein.
SECTION 11.11. Confidentiality. The Agent and the Lenders
agree to keep confidential (and to cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents furnished to the Agent or any Lender (the
"Information"). Notwithstanding the foregoing, the Agent and each Lender shall
be permitted to disclose Information (i) to such of its officers, directors,
employees, agents and representatives as need to know such Information in
connection with its participation in any of the Transactions or the
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<PAGE>
administration of this Agreement or the other Loan Documents; (ii) to the extent
required by applicable laws and regulations or by any subpoena or similar legal
process, or requested by any governmental agency or authority (in any which case
prompt notice prior to disclosure will be provided to the Borrowers to the
extent not prohibited by law); (iii) to the extent such Information (A) becomes
publicly available other than as a result of a breach of this Agreement, (B)
becomes available to the Agent or such Lender on a non-confidential basis from a
source other than a Loan Party or any of their respective subsidiaries who was
to the actual knowledge of the disclosing party not bound by a confidentiality
arrangement in favor of the Borrowers or (C) was available to the Agent or such
Lender on a non-confidential basis prior to its disclosure to the Agent or such
Lender by a Loan Party or any of their respective subsidiaries; (iv) to the
extent any Loan Party or any of their respective subsidiaries shall have
consented to such disclosure in writing; (v) in connection with the sale of any
Collateral pursuant to the provisions of any of the other Loan Documents; or
(vi) pursuant to Section 11.03(g) hereof.
SECTION 11.12. Submission to Jurisdiction. (a) Any legal
action or proceeding with respect to this Agreement or the Notes or any other
Loan Document may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, each Loan Party hereby accepts for
itself and in respect of its property, generally and unconditionally, the
personal jurisdiction of the aforesaid courts.
(b) Each Borrower and each Loan Party hereby irrevocably
waive, in connection with any such action or proceeding, any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which they may now or hereafter have to the
bringing of any such action or proceeding in such respective jurisdictions.
(c) Each Borrower and each Loan Party hereby irrevocably
consent to the service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to each such person, as the case may be, at its
address set forth in Section 11.01 hereof.
(d) Nothing herein shall affect the right of the Agent or any
Lender to serve process in any other manner permitted by law or to
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<PAGE>
commence legal proceedings or otherwise proceed against any Loan Party in any
other jurisdiction.
SECTION 11.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective
when copies hereof which, when taken together, bear the signatures of each of
the parties hereto shall be delivered to the Agent.
SECTION 11.14. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Agent, Co-Agent and the
Lenders have caused this Agreement to be duly executed by their respective autho
rized officers as of the day and year first above written.
MILLBROOK DISTRIBUTION SERVICES INC.
By:___________________________________________
Name:
Title:
THE B. MANISCHEWITZ COMPANY, LLC
By: Richard A. Bernstein, its managing member
______________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Lender
and as Agent
By:___________________________________________
Name:
Title:
NATIONSBANK, N.A.
as Lender and Co-Agent
By:___________________________________________
Name:
Title:
[Signature Page to Amended and Restated Credit Agreement]
<PAGE>
SANWA BUSINESS CREDIT CORPORATION
By:__________________________________
Name:
Title:
FLEET NATIONAL BANK
By:__________________________________
Name:
Title:
LASALLE BUSINESS CREDIT CORPORATION
By:__________________________________
Name:
Title:
[Signature Page to Amended and Restated Credit Agreement]
<PAGE>
SCHEDULE 2.01(a)
TERM LOAN COMMITMENTS
---------------------
<TABLE>
<CAPTION>
Term Loan Percentage of Total
Lender Commitment Term Loan Commitment
- ------ ---------- --------------------
<S> <C> <C>
The Chase Manhattan Bank $1,862,000 20%
600 Fifth Avenue, 4th Floor
New York, NY 10020-2302
Facsimile No.: (212) 332-4298
Attention: Millbrook Account Officer
NationsBank, N.A. $1,862,000 20%
100 South Charles Street,
4th Floor
Baltimore, MD 21201
Facsimile No.: (410) 385-3700
Attention: Millbrook Account Executive
Sanwa Business Credit Corporation $1,862,000 20%
500 Glenpointe Centre West
Teaneck, NJ 07666-6802
Facsimile No.: (201) 836-4744
Attention: Mr. Oleh Szczupak
Fleet National Bank $1,862,000 20%
370 Main Street
Worcester, MA 01608
Facsimile No.: (508) 831-2430
Attention: Mr. Edward M. Powers
LaSalle Business Credit Corporation $1,862,000 20%
477 Madison Avenue, 20th Floor
New York, NY 10022
Facsimile No.: (212) 371-2966
Attention: Mr. Corey Sclar
</TABLE>
<PAGE>
SCHEDULE 2.01(b)
Revolving Credit Commitments
----------------------------
<TABLE>
<CAPTION>
Revolving Percentage of
Credit Total Revolving
Lender Commitment Credit Commitment
- ------ ---------- -----------------
<S> <C> <C>
The Chase Manhattan Bank $18,040,000 20%
600 Fifth Avenue, 4th Floor
New York, NY 10020-2302
Facsimile No.: (212) 332-4298
Attention: Millbrook Account Officer
NationsBank, N.A. $18,040,000 20%
100 South Charles Street,
4th Floor
Baltimore, MD 21201
Facsimile No.: (410) 385-3700
Attention: Millbrook Account Executive
Sanwa Business Credit Corporation $18,040,000 20%
500 Glenpointe Centre West
Teaneck, NJ 07666-6802
Facsimile No.: (201) 836-4744
Attention: Mr. Oleh Szczupak
Fleet National Bank $18,040,000 20%
370 Main Street
Worcester, MA 01608
Facsimile No.: (508) 831-2430
Attention: Mr. Edward M. Powers
LaSalle Business Credit Corporation $18,040,000 20%
477 Madison Avenue, 20th Floor
New York, NY 10022
Facsimile No.: (212) 371-2966
Attention: Mr. Corey Sclar
</TABLE>
<PAGE>
SCHEDULE 2.02
Domestic Lending Offices
------------------------
Lender Domestic Lending Office
- ------ -----------------------
The Chase Manhattan Bank The Chase Manhattan Bank
600 Fifth Avenue, 4th Floor
New York, NY 10020-2302
Attn: Millbrook Account Officer
NationsBank, N.A. NationsBank, N.A.
100 South Charles Street, 4th Floor
Baltimore, MD 21201
Attention: Millbrook Account Executive
Sanwa Business Credit
Corporation 500 Glenpointe Centre West
Teaneck, NJ 07666-6802
Attention: Mr. Oleh Szczupak
Fleet National Bank 370 Main Street
Worcester, MA 01608
Attention: Mr. Edward M. Powers
LaSalle Business Credit
Corporation 477 Madison Avenue, 20th Floor
New York, NY 10022
Attention: Mr. Corey Sclar
<PAGE>
SCHEDULE 2.03
Eurodollar Lending Offices
--------------------------
Lender Eurodollar Lending Office
- ------ -------------------------
The Chase Manhattan Bank 600 Fifth Avenue, 4th Floor
New York, New York 10020-2302
Attn: Millbrook Account Officer
NationsBank, N.A. NationsBank, N.A.
100 South Charles Street, 4th Floor
Baltimore, MD 21201
Attention: Millbrook Account Executive
Sanwa Business Credit
Corporation 500 Glenpointe Centre West
Teaneck, NJ 07666-6802
Attention: Mr. Oleh Szczupak
Fleet National Bank 370 Main Street
Worcester, MA 01608
Attention: Mr. Edward M. Powers
LaSalle Business Credit
Corporation 477 Madison Avenue, 20th Floor
New York, NY 10022
Attention: Mr. Corey Sclar
<PAGE>
SCHEDULE 6.05(g)
INVENTORY DESIGNATION
---------------------
The Chase Manhattan Bank
600 Fifth Avenue, 4th Floor
New York, New York 10020-2302
Gentlemen:
We certify, represent to you and agree with you as follows:
1) As of , the value of our inventories was as follows:
-------------
(DATE)
<TABLE>
<CAPTION>
- ------------------------
<S> <C> <C> <C> <C>
(a) Raw materials and/or parts |
purchased from others $ | % =
-------- --- --
(b) ______________ $ | % =
-------- --- --
(c) Manufacture and shipping |
supplies $ | % =
-------- --- --
(d) Work in process $ | % =
-------- --- --
(e) Consigned Goods w/ letter $ | % =
-------- --- --
(f) Finished goods held for |
sale to customers $ | % =
-------- --- --
Total $ | % =
-------- --- --
(Loan
| Value)
-------
</TABLE>
and/or as shown on attached schedule(s) or paper(s).
2) Such figures are taken from our inventory records, kept in accordance with
generally accepted accounting principles and used in our business or, if so
indicated, taken from a physical inventory. Such figures are at the lower
of cost or market (unless otherwise indicated), with appropriate allowances
for slow moving, returned or second quality goods. This certificate and
agreement is mailed to you upon the understanding that you will rely upon
it in making or continuing loans to us under the Amended and Restated
Credit Agreement dated as of ____, 199__ (as amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined) among the undersigned, the
Lenders named therein and The Chase Manhattan Bank, as Agent, and/or
advances upon our receivables, or in otherwise extending credit to us.
3) We confirm that the agreements, warranties and representations contained in
such Credit Agreement apply to all such inventories. We hereby pledge and
consign to you, grant you a continuing
<PAGE>
general lien upon and designate as subject to your continuing general lien
and security interest all of said inventories, confirming any lien
statements or security agreements given you in respect to same.
4) Your lien and security interest shall attach to such inventories through
all stages of manufacture to and including the finished product, to all
accounts receivable or other proceeds resulting from the sale thereof, to
any merchandise returned to us, and to all inventories acquired by us from
time to time in the future, whether in substitution for or in addition to
this merchandise.
5) Such inventories are located at the following addresses:
Dated: _____________, 19__ [BORROWER]
By:____________________________
Name:
Title:
-2-
<PAGE>
SCHEDULE 6.05(k)
Separate Certificates will be prepared for Millbrook and Manischewitz. Then a
combined will be prepared. For Credits to be granted Availability on a combined
basis must exceed zero or so long as Section 7.09(c) is in effect, $10,000,000.
BORROWING BASE CERTIFICATE
--------------------------
TO: The Chase Manhattan Bank, Asset Based Operation
Date________________
200 Jericho Quadrangle
Jericho, NY 11753
SUBJECT:
______________________________________________________
Borrowing Base Certificate #_________________
We hereby certify the following information:
I. ACCOUNTS RECEIVABLE:
Accounts Receivable as of the
date of the last submitted certificate $_____________
Add: Sales $_____________
Less: Collections $_____________
Less: Adjustments to A/R $_____________
Accounts Receivable as of / / $_____________
-----
Accounts Receivable Aging as of / /
-----
<TABLE>
<CAPTION>
Total A/R Current 31-60 61-90 Over 90
--------- ------- ----- ----- -------
<S> <C> <C>
Gross Accounts Receivable as of / / $
------ ----------
Less: Ineligibles.
-----------
Past invoice date Receivables 90 Days $ ( )
-----------
Receivables from Subsidiaries/Affiliates $ ( )
-----------
Cross-aged Receivables at 50% $ ( )
-----------
Foreign Receivables not under L/C's $ ( )
-----------
Credits, Chargebacks and Disputes $ ( )
-----------
Pre-bill reserve $ ( )
-----------
Unbilled or Bill and Hold Contras, Offsets, etc. $ ( )
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Rebate Allowances $ ( )
------------
C.O.D. $ ( )
------------
Other $ ( )
Total Ineligibles $( )
-----------
B. Net Accounts Receivables $
-----------
Availability at %(subject to revision) $ $
---- ----------- -----------
II. INVENTORY
Gross Inventory $
Less: Ineligibles $
------------
Foreign Inventory $ ( )
------------
Slow Moving $ ( )
------------
Inactive or Obsolete $ ( )
------------
In-Transit $ ( )
------------
Returned or Damaged $ ( )
------------
Inventory off Premise
(and not under landlord waiver) $ ( )
------------
Sales lag adjustments $ ( )
------------
Discontinued $ ( )
------------
Outlet Store Inventory $ ( )
------------
Other $ ( )
------------
Total Ineligibles $ ( )
------------
Net Inventory $
------------
Lesser of (i) Availability at % or
----
(ii) (the cap amount) $
------------
TOTAL A/R AND INVENTORY AVAILABILITY (1+2) = (A)
$
--------------
Total Loans Outstanding (3)
$
--------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Total Letters of Credit (4) $
------------
Amount Requested for Borrowing or Repayment (5)
$
--------------
Total Revolving Credit Exposure (3+4+/5) + (B)
$
--------------
EXCESS AVAILABILITY (A - B)
$
--------------
</TABLE>
-3-
<PAGE>
Comments or Other Information:
The undersigned hereby represents and warrants that this is a correct statement
regarding the status of accounts receivable and inventory assigned to The Chase
Manhattan Bank, as Agent, and that the figures set forth herein are completely
accurate. The undersigned further warrants and represents that the Borrower is
in complete compliance with all the terms and conditions contained in the
agreements between us. The undersigned further understands that your loans to
the Borrower will be based upon your reliance on the information contained
herein.
[BORROWER]
By:______________________________
Name:
Title:
ATTEST:
- --------------------------- ------------------------------
------
(Title) (Title)
<PAGE>
EXHIBIT A
FORM OF TERM NOTE
$__________ New York, New York
March 31, 1997
as amended and restated May 1, 1998
FOR VALUE RECEIVED, the undersigned, MILLBROOK DISTRIBUTION
SERVICES INC., a Delaware corporation ("Millbrook"), and THE B. MANISCHEWITZ
COMPANY, LLC, a Delaware limited liability company ("Manischewitz" and
collectively with Millbrook, the "Makers"), jointly and severally, hereby
promise to pay to the order of ____________ (the "Lender"), at the office of THE
CHASE MANHATTAN BANK (the "Agent"), at 600 Fifth Avenue, New York, New York, in
installments and as otherwise provided in Section 2.04 of the Amended and
Restated Credit Agreement dated as of May 1, 1998, by and among the Makers, the
Lenders named therein, the Agent and NationsBank, N.A., as Co-Agent (as the same
may be amended, modified or supplemented from time to time in accordance with
its terms, the "Amended Credit Agreement") the principal sum of
___________________ DOLLARS ($__________), in lawful money of the United States
of America in immediately available funds, and to pay interest from the date
thereof on the principal amount hereof from time to time outstanding, in like
funds, at said office, at a rate or rates per annum and, in each case, payable
on such dates as determined pursuant to the terms of the Amended Credit
Agreement.
The Makers promise to pay interest, on demand, on any overdue
principal and fees and, to the extent permitted by law, overdue interest from
their due dates at a rate or rates determined pursuant to the terms of the
Amended Credit Agreement.
The Makers hereby waive diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the holder of any
of its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Term Note and all payments
and prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be endorsed by the holder hereof on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded by such holder in
its internal records; provided, however, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not in any manner
affect the obligations of the Makers to make payments of principal and interest
in accordance with the terms of this Term Note and the Amended Credit Agreement.
<PAGE>
This Term Note is the Term Note referred to in the Amended
Credit Agreement (and is secured by the Collateral referred to therein) which,
among other things, contains provisions for the acceleration of the maturity
hereof upon the happening of certain events, for optional and mandatory
prepayment of the principal hereof prior to the maturity hereof and for the
amendment or waiver of certain provisions of the Amended Credit Agreement, all
upon the terms and conditions therein specified. This Term Note replaces the
"Term Note" issued to the Lender pursuant to the Credit Agreement, dated as of
March 31, 1997, by and among Millbrook, the Lenders named therein, the Agent and
the Co-Agent (as amended by Amendment to Credit Agreement, dated as of May 16,
1997, by and among Millbrook, the Lenders named therein, the Agent and the
Co-Agent). The Makers agree to pay interest on the "Term Note" that this Term
Note replaces which was accrued and outstanding on such replaced Note on the
next Interest Payment Date. Such accrued and outstanding interest shall be
payable in accordance with the terms and conditions of the Amended Credit
Agreement. THIS TERM NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW DOCTRINE, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
MILLBROOK DISTRIBUTION SERVICES INC.
By: _____________________________________
Name:
Title:
THE B. MANISCHEWITZ COMPANY, LLC
By:______________________________________
Richard A. Bernstein, its Managing Member
2
<PAGE>
Loans and Payment
-----------------
<TABLE>
<CAPTION>
Unpaid
Name of Payment Principal
Amount and ------- Balance of Person Making
Date Type of Loan Principal Interest Note Notation
- ---- ------------ --------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
</TABLE>
3
<PAGE>
EXHIBIT B
FORM OF REVOLVING CREDIT NOTE
$_____________ New York, New York
March 31, 1997
as amended and restated May 1, 1998
FOR VALUE RECEIVED, the undersigned, MILLBROOK DISTRIBUTION
SERVICES INC., a Delaware corporation ("Millbrook"), and THE B. MANISCHEWITZ
COMPANY, LLC, a Delaware limited liability company ("Manischewitz" and
collectively with Millbrook, the "Makers"), jointly and severally, hereby
promise to pay to the order of _____________ (the "Lender"), at the office of
THE CHASE MANHATTAN BANK (the "Agent"), at 600 Fifth Avenue, New York, New York
on the Revolving Credit Termination Date, (as defined in the Amended and
Restated Credit Agreement, dated as of May 1, 1998, by and among the Makers, the
Lenders named therein, the Agent and NationsBank, N.A., as Co-Agent (as the same
may be amended, modified or supplemented from time to time in accordance with
its terms, the "Amended Credit Agreement")) or earlier as provided for in the
Credit Agreement, the lesser of the principal sum of [insert amount of Lender's
Revolving Credit Commitment] ($______________) and the aggregate unpaid
principal amount of all Revolving Credit Loans to the Makers from the Lender
pursuant to the terms of the Amended Credit Agreement, in lawful money of the
United States of America in immediately available funds, and to pay interest
from the date thereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at a rate or rates per annum and, in
each case, payable on such dates as determined pursuant to the terms of the
Amended Credit Agreement.
The Makers promise to pay interest, on demand, on any overdue
principal and fees and, to the extent permitted by applicable law, overdue
interest from their due dates at a rate or rates determined pursuant to the
terms of the Amended Credit Agreement.
The Makers hereby waive diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the holder of any
of its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Revolving Credit Note and all
payments and prepayments of the principal hereof and interest hereon and the
respective dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof, or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of the holder
hereof to make such a notation or any error in such a notation shall not in any
manner affect the obligation of the Makers to make payments of principal and
interest in accordance with the terms of this Revolving Credit Note and the
Amended Credit Agreement.
<PAGE>
This Revolving Credit Note is the Revolving Credit Note
referred to in the Amended Credit Agreement (and is secured by the Collateral
referred to therein), which, among other things, contains provisions for the
acceleration of the maturity hereof upon the happening of certain events, for
optional and mandatory prepayment of the principal hereof prior to the maturity
hereof and for the amendment or waiver of certain provisions of the Amended
Credit Agreement, all upon the terms and conditions therein specified. This
Revolving Note replaces the "Revolving Note" issued to the Lender pursuant to
the Credit Agreement, dated as of March 31, 1997, by and among Millbrook, the
Lenders named therein, the Agent and the Co-Agent (as amended by Amendment to
Credit Agreement, dated as of May 16, 1997, by and among Millbrook, the Lenders
named therein, the Agent and the Co-Agent). The Makers agree to pay interest on
the "Revolving Note" that this Revolving Note replaces which was accrued and
outstanding on such replaced Note on the next Interest Payment Date. Such
accrued and outstanding interest shall be payable in accordance with the terms
and conditions of the Amended Credit Agreement. THIS REVOLVING CREDIT NOTE SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CHOICE OF LAW DOCTRINE, AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
MILLBROOK DISTRIBUTION SERVICES INC.
By: _____________________________________
Name:
Title:
THE B. MANISCHEWITZ COMPANY, LLC
By: _____________________________________
Richard A. Bernstein, its Managing Member
2
<PAGE>
Loans and Payment
-----------------
<TABLE>
<CAPTION>
Unpaid Name of
Amount Principal Person
and Type Payments Balance Making
Date of Loan Principal Interest of Note Notation
---- -------- ------------------ --------- --------
<S> <C> <C> <C> <C>
</TABLE>
3
<PAGE>
Exhibit C
[Parker Chapin Flattau & Klimpl, LLP Letterhead]
May 1, 1998
To each of the Lenders listed
on Schedule 1 attached hereto
Re: Millbrook Distribution Services Inc./The B. Manischewitz Company, LLC
---------------------------------------------------------------------
Dear Sirs:
We have acted as counsel to (i) Millbrook Distribution Services Inc., a
Delaware corporation ("Millbrook") and The B. Manischewitz Company, LLC, a
Delaware limited liability company ("Manischewitz" and, together with Millbrook,
the "Borrower"), in connection with the negotiation, execution and delivery of
the Amended and Restated Credit Agreement dated as of May 1, 1998 (the "Credit
Agreement"), by and among the Borrower, the lenders named therein (the
"Lenders"), The Chase Manhattan Bank, as Agent (the "Agent"), and NationsBank,
N.A., as Co-Agent, and (ii) R.A.B. Enterprises, Inc., a Delaware corporation
("Enterprises"), in connection with the negotiation, execution and delivery of
the Amended and Restated Non-Recourse Pledge Agreement and Irrevocable Proxy
dated as of May 1, 1998 (the "Pledge Agreement"), by and between Enterprises and
the Agent, for the benefit of the Lenders.
This opinion is provided to the Lenders as required pursuant to Section
5.02(a) of the Credit Agreement. This opinion is rendered solely for the
information of the addressees and no one else is entitled to rely upon it.
Capitalized terms used herein and not defined herein shall have the
meanings assigned to them in the Credit Agreement.
We have examined originals or copies of the Credit Agreement, the
Notes, the Pledge Agreement, the Security Agreement (Millbrook), the Security
Agreement (Manischewitz), the Security Agreement - Patents and Trademarks and
the Security Agreement - Patents and Trademarks (Manischewitz) (collectively,
the "Loan Documents"). We also have examined certificates respecting the good
standing of each of Millbrook, Manischewitz and Enterprises from the Secretary
of State of the State of Delaware dated May 1, 1998, April 7, 1998 and April 30,
1998, respectively, the certificates of incorporation of each of Millbrook and
Enterprises and certificate of formation of
<PAGE>
Manischewitz and all amendments thereto filed through the date hereof, with the
Secretary of State of the State of Delaware, the by-laws of each of Millbrook
and Enterprises and the operating agreement of Manischewitz, each as amended to
date, records of proceedings of the Board of Directors of each of Millbrook and
Enterprises and of the Board of Managers of Manischewitz during or by which
resolutions were adopted relating to matters covered by this opinion, and
certificates as to certain factual matters of officers of Millbrook,
Manischewitz and Enterprises. In conducting our examination, we have assumed the
genuineness of all signatures other than those of the officers of Millbrook,
Manischewitz and Enterprises at the closing, the legal capacity of all
individual signatories, the accuracy of all documents submitted to us as
originals and the conformity to originals of all documents submitted to us as
certified or reproduced copies. In addition, we have assumed the accuracy of,
and without independent investigation have relied upon, the representations,
warranties and other information contained in the items we examined.
Where reference is made in this opinion to matters within our
knowledge, or to facts and circumstances known to us, such reference means the
actual knowledge of those attorneys within the firm who have given substantive
attention to the Loan Documents, or who otherwise regularly provide services to
Millbrook, Manischewitz and Enterprises, in each case without, however,
independent investigation of any matter except as otherwise expressly noted
herein. Please be advised that Millbrook, Manischewitz and Enterprises are also
represented by other attorneys, and that we do not represent Millbrook,
Manischewitz or Enterprises with respect to all matters.
We express no opinion respecting the Loan Documents and the Special
Power of Attorney, or any right, power, privilege, remedy or interest intended
to be created thereunder, insofar as: (a) any of the rights, powers, privileges,
remedies and interests of a party thereunder may be limited (i) by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or other laws
affecting any rights, powers, privileges, remedies and interests of creditors
generally, (ii) by rules or principles of equity affecting the enforcement of
obligations generally, whether at law, in equity or otherwise, or (iii) by the
exercise of the discretionary powers of any court or other authority before
which may be brought any proceeding seeking equitable or other remedies,
including, without limitation, specific performance, injunctive relief and
indemnification; (b) the rights, powers, privileges, remedies and interests of
any party under any Loan Document or applicable law may be exercised or
otherwise enforced in bad faith or a commercially unreasonable manner; and (c)
any term or provision of the Loan Documents which purportedly permits a party to
exercise or otherwise enforce powers and privileges and pursue rights and
remedies in a manner impermissible under or otherwise inconsistent with
applicable laws or public policy from time to time in effect, including, without
limitation, exculpations and indemnifications, waivers, powers of attorney and
collateral disposition, and non-judicial remedies.
We have not examined title to any asset or property or the books,
records and files of the Borrowers, which may include invoices, bills of sale
and other documents that may evidence the purchase, ownership or disposition of
any Collateral, nor have we examined any item of inventory, equipment or other
tangible assets constituting part of any of the Collateral. We have assumed that
any Collateral (i) exists, (ii) is owned and possessed by Millbrook,
Manischewitz or Enterprises, as
-2-
<PAGE>
applicable, (iii) is located where represented and conforms to the descriptions
in the Loan Documents, and (iv) to the extent consisting of accounts receivable,
contractual rights and other intangibles, is collectible and enforceable in
accordance with its terms and is assignable. We express no opinion whatsoever as
to matters pertaining to title, zoning, land use regulations or environmental
laws.
Searches respecting Uniform Commercial Code financing statements, tax
liens and judgments (to the extent filed with the listed officials) filed
against Manischewitz were made with the officials in the jurisdictions listed in
Schedule 2 hereto through the indicated search dates, each by an independent
firm not under our control or supervision (collectively, the "Searches"). Our
opinions respecting priorities (but only insofar as a security in the Collateral
of Manischewitz may be perfected by filing a financing statement in an office
listed in Schedule 3) and the existence or absence of judgments, security
interests and other liens and encumbrances are based solely upon the Searches,
certificates of officers of Manischewitz, and the representations and warranties
of Manischewitz as to factual matters in the Loan Documents. Please note that
the Searches reveal Uniform Commercial Code financing statements on Form UCC-1
indicating existing and competing security interests in the assets and
properties of Manischewitz, which financing statements are listed on Schedule 4
hereto.
Our opinions respecting the validity or enforceability of any Loan
Document to the extent it pertains to, or respecting, the creation, perfection
and priority of, security interests in the personal assets and properties
described in the Credit Agreement and other Loan Documents are limited to assets
and properties in which security interests are governed by and perfectible under
the NYUCC by the filing of financing statements or possession (collectively, the
"Collateral"). To the extent the Collateral consists of instruments and
certificated investment securities, we have assumed their due endorsement and
delivery to the Agent and its possession of them on the date of this opinion,
and that neither the Agent nor any Lender has any notice or knowledge of any
adverse claim with respect thereto. To the extent the Collateral may be
perfected under the NYUCC by the filing of financing statements, we have assumed
that the financing statements have been duly and timely filed in all relevant
jurisdictions as of the date of this opinion. To the extent the Collateral
consists of payments, distributions or other monies received or to be received
from or in respect of other Collateral perfected as described above, we express
no opinion to the extent that (i) such payments, distributions and monies do not
constitute identifiable proceeds under Section 9-306 of the NYUCC, (ii) cash
proceeds have been either commingled or deposited, or (iii) the Agent has not
permanently perfected its security interests in such Collateral by possession or
filing (as described above) within the applicable period of temporary perfection
of such proceeds. Please note, however, that various recent decisions have
determined that dividends, interest and similar payments may not be "proceeds"
under the NYUCC. Please note that we have assumed the NYUCC and other applicable
laws of New York are the same as those of Florida, New Jersey and Pennsylvania.
Furthermore, we have relied solely on the Searches and the representations of
Manischewitz in the Loan Documents as to the existence of competing security
interests, and we have assumed that the Searches would disclose no further
security interests if updated through the date of this opinion. Our opinion
respecting the "first priority" of such security interests means that as of the
date of this opinion (i) the filings or deliveries perfecting those interests
appear to be first in time and (ii) those interests therefor are entitled to the
corresponding benefits of Section 9-312(5), (6) or (7) of the NYUCC, as
applicable.
-3-
<PAGE>
This opinion letter is limited to the date hereof and we do not in any
event undertake to advise you of any facts or circumstances occurring or coming
to our attention subsequent to the date hereof. Whenever any opinion of ours
refers to or includes the performance of any obligation or the issuance of any
instrument or certificate after the date hereof, it is based on our assumption
that all relevant facts and circumstances will be the same at such future time
as we believe them to be on the date hereof and no changes will have occurred in
any of the Loan Documents, other relevant documents or applicable law.
We call to your attention to the fact that we are counsel admitted to
practice in the State of New York, and we do not express any opinion with
respect to the applicable laws, or the effect or applicability of the laws, of
any jurisdiction other than those of the State of New York, the United States of
America and the General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of Millbrook, Manischewitz and Enterprises (a) is a duly
organized and validly existing corporation or limited liability company (in the
case of Manischewitz), in good standing under the laws of the jurisdiction of
its organization, (b) has the power and authority to own its properties and to
transact the business in which it is engaged or currently proposes to be
engaged, and (c) based solely on representations of Millbrook, Manischewitz and
Enterprises, is qualified to do business (as known to us to be currently
conducted or presently contemplated) in each jurisdiction where the nature of
its business or its ownership or use of its property requires such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect.
2. Each of Millbrook, Manischewitz and Enterprises has the power to
execute, deliver and carry out the terms and provisions of each of the Loan
Documents to which it is a party and has taken or caused to be taken all
necessary action to authorize the execution, delivery and performance of each of
the Loan Documents to which it is a party.
3. Neither the execution and delivery by each of Millbrook,
Manischewitz and Enterprises of the Loan Documents to which each is a party, nor
compliance with any of the provisions thereof, will violate any law or
regulation, including, without limitation, Regulations T, U and X of the Board
of Governors of the Federal Reserve System, or any order or decree of any court
or governmental instrumentality, of which we have knowledge, or will conflict
with, or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, agreement or other instrument, of which we have
knowledge, to which Millbrook, Manischewitz or Enterprises is signatory or by
which any of them might be bound, or result in the creation or imposition of any
Lien upon any of the properties or assets of Millbrook, Manischewitz or
Enterprises, except in favor of the Agent, or violate any provision of any of
the organizational documents of Millbrook, Manischewitz or Enterprises.
4. To our knowledge and except as set forth in Schedule 4.06(a) to the
Credit Agreement, there are no actions, suits or proceedings pending or
threatened against or affecting Millbrook,
-4-
<PAGE>
Manischewitz or Enterprises before any court, arbitrator or governmental or
administrative body or agency which would have a Material Adverse Effect.
5. No action of, or filing with, any governmental or public body or
authority, except for the filings referred to in paragraphs 10 and 11 hereof, is
required to authorize, or is otherwise required in connection with, the
execution, delivery and performance by each of Millbrook, Manischewitz or
Enterprises of the Loan Documents to which each is a party.
6. Each of the Loan Documents to which Millbrook, Manischewitz or
Enterprises is a party has been duly executed and delivered by Millbrook,
Manischewitz and Enterprises, as the case may be.
7. Each of the Loan Documents constitutes the legal, valid and binding
obligations of each of Millbrook, Manischewitz and Enterprises, as the case may
be, to the extent each is a party thereto, enforceable against each of them in
accordance with its terms.
8. Neither Millbrook, Manischewitz or Enterprises is (a) a "holding
company," an "affiliate" of a "holding company" or a "subsidiary company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended, or
(b) an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
9. Assuming, in the case of the Pledged Stock and the Pledged Debt (as
defined in the Pledge Agreement), that the Agent, the Co-Agent and the Lenders
were without notice of any adverse claim, the Agent has possession of the
certificate representing the Pledged Stock and the promissory notes evidencing
the Pledged Debt and such certificate and each of the promissory notes are
indorsed to the Agent or in blank, the Pledge Agreement creates a valid
perfected first priority security interest in favor of the Agent in the Pledged
Stock and the Pledged Debt.
10. The Security Agreement (Manischewitz) creates a valid security
interest in the Collateral (as such term is defined in the Security Agreement
(Manischewitz)) covered thereby in favor of the Agent, and when the financing
statements covering such Collateral have been duly filed pursuant to the Uniform
Commercial Code in the jurisdictions listed on Schedule 3 hereto, such security
interest will be perfected.
11. The Security Agreement - Patents and Trademarks (Manischewitz) (the
"IP Security Agreement") creates in favor of the Agent a valid security interest
in all of the right, title and interest of Manischewitz in the Trademarks listed
and described in Schedule A to the IP Security Agreement (the "Trademarks"), and
when the financing statements covering such Collateral have been duly filed
pursuant to the Uniform Commercial Code in the jurisdictions listed on Schedule
3 hereto, and the Assignment of Trademarks (as each such term is defined in the
IP Security Agreement) has been duly filed in the United States Patent and
Trademark Office, such security interest in the Trademarks
-5-
<PAGE>
will be perfected. The Special Power of Attorney granted by the Borrower to the
Agent is enforceable according to its terms.
Very truly yours,
PARKER CHAPIN FLATTAU & KLIMPL, LLP
-6-
<PAGE>
Schedule 1
----------
LENDERS
-------
The Chase Manhattan Bank, as Agent and Lender
600 Fifth Avenue, 4th Floor
New York, NY 10020-2302
Attention: Millbrook Account Officer
NationsBank, N.A.
100 South Charles Street
4th Floor
Baltimore, MD 21201
Attention: Millbrook Account Executive
Sanwa Business Credit Corporation
500 Glenpointe Centre West
Teaneck, NJ 07666-6802
Attention: Mr. Oleh Szczupak
Fleet National Bank
370 Main Street
Worcester, MA 01608
Attention: Mr. Edward M. Powers
LaSalle Business Credit Corporation
477 Madison Avenue, 20th Floor
New York, NY 10022
Attention: Mr. Corey Sclar
<PAGE>
Schedule 2
----------
FINANCING STATEMENTS, TAX LIENS AND JUDGMENT SEARCH
---------------------------------------------------
ILLINOIS
Secretary of State: No Financing Statements as of 2/6/98.
Cook County: Two Financing Statements as of 2/3/98.
NEW JERSEY
Secretary of State: Six Financing Statements as of 12/18/97
Hudson County: Three Financing Statements as of 2/19/98.
Cumberland County: Three Financing Statements as of 2/9/98
<PAGE>
Schedule 3
----------
UCC-1 Filing Jurisdictions
--------------------------
1. Secretary of State, Florida
2. Secretary of State, New Jersey
3. Secretary of State, New York
4. Kings County, New York
5. Queens County, New York
6. Suffolk County, New York
7. Secretary of the Commonwealth, Pennsylvania
8. York County Prothonotary, Pennsylvania
<PAGE>
Schedule 4
----------
EXISTING LIENS
--------------
UCC SEARCH
THE B. MANISCHEWITZ COMPANY, LLC
<TABLE>
<CAPTION>
JUDGMENTS
SUITS TAX TYPE DATE
JURISDICTION DEBTOR SECURED PARTY ASSIGNEE LIENS OF UCC FILED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cook County The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
- -Illinois Company, LLC New York Branch
- ------------------------------------------------------------------------------------------------------------------------------
Cook County The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
- -Illinois Company, LLC New York Branch
- ------------------------------------------------------------------------------------------------------------------------------
Secretary of State The B. Manischewitz AT&T Credit UCC-1 7-8-94
- -New Jersey Company Corporation
- ------------------------------------------------------------------------------------------------------------------------------
Secretary of State The B. Manischewitz Crown Credit Co. UCC-1 6-6-96
- -New Jersey Company
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JURISDICTION FILE NO. DESCRIPTION
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Cook County 96U06839* General Security
- -Illinois
- -------------------------------------------------------------------------------------------------
Cook County 96U06840* Intellectual Property
- -Illinois
- -------------------------------------------------------------------------------------------------
Secretary of State 1580525 System 25 Integrated leased under Lease No. E405957,
- -New Jersey and all attachments, accessories, additions,
substitutions, products, replacements and rentals
and proceeds therefrom (including insurance
proceeds).
- -------------------------------------------------------------------------------------------------
Secretary of State 1702543 (1) Reconditioned Crown Lift Truck Model 45RRTT-240
- -New Jersey Serial #H-13425
(1) new Deka Battery Modal 18-125-13 Serial #3672CF
(1) Used Exide Charger Model 3TN18-865 Serial
#HR25396 2-2
- -------------------------------------------------------------------------------------------------
</TABLE>
*To be released at Closing
<PAGE>
Schedule 4
----------
EXISTING LIENS
--------------
UCC SEARCH
<TABLE>
<CAPTION>
JUDGMENTS
SUITS TAX TYPE DATE
JURISDICTION DEBTOR SECURED PARTY ASSIGNEE LIENS OF UCC FILED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Secretary of State The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
- -New Jersey Company, LLC New York Branch
- ------------------------------------------------------------------------------------------------------------------------------
Secretary of State The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
- -New Jersey Company, LLC New York Branch
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JURISDICTION FILE NO. DESCRIPTION
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Secretary of State 1702377* Each and every receivable; all inventory; all books,
- -New Jersey records, ledgers, print-outs, file materials; all
equipment; all intangibles; all insurance policies;
all pension plan reversions; any and all property of
every name and nature; all documents; all proceeds
- --------------------------------------------------------------------------------------------------
Secretary of State 1702380* Patents; Trademarks; Copyrights; License agreements &
- -New Jersey covenants not to sue with any other party with
respect to any Patent; the entire good will of
Debtor's business other general intangibles; All
proceeds.
- --------------------------------------------------------------------------------------------------
</TABLE>
*To be released at Closing
<PAGE>
Schedule 4
----------
EXISTING LIENS
--------------
UCC SEARCH
<TABLE>
<CAPTION>
JUDGMENTS
SUITS TAX TYPE DATE
JURISDICTION DEBTOR SECURED PARTY ASSIGNEE LIENS OF UCC FILED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Secretary of State The B. Manischewitz Banque Indosuez, UCC-1 6-6-96
- -New Jersey Company, LLC New York Branch
- ------------------------------------------------------------------------------------------------------------------------------
Secretary of State The B. Manischewitz Banque Indosuez, UCC-1 6-6-96
- -New Jersey Company, LLC New York Branch
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JURISDICTION FILE NO. DESCRIPTION
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Secretary of State 1702825* Any & all present estates or interest of Debtor in
- -New Jersey the land;
Any & all permits, certificates, approvals &
authorizations; any and all interest of Debtor in all
machinery; apparatus, equipment, fittings, fixtures,
improvements & articles of personal property of every
kind & nature, etc.
- --------------------------------------------------------------------------------------------
Secretary of State 1702828* Any & all present estates or interest of Debtor in
-New Jersey the land; The tenant's interest & estate in the
Mortgaged Lease; Any & all estates or interests of
Debtor in the buildings; Any & all permits,
certificates, approvals & authorizations; Any & all
interest of Debtor in all machinery, apparatus,
equipment, fittings, fixtures; All debtor's right,
title & interest as landlord; All general intangibles
& Contract rights; etc.
- --------------------------------------------------------------------------------------------
</TABLE>
*To be released at Closing
<PAGE>
Schedule 4
----------
EXISTING LIENS
--------------
UCC SEARCH
<TABLE>
<CAPTION>
JUDGMENTS
SUITS TAX TYPE DATE
JURISDICTION DEBTOR SECURED PARTY ASSIGNEE LIENS OF UCC FILED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumberland The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
County Company, LLC New York Branch
- -New Jersey
- ------------------------------------------------------------------------------------------------------------------------------
Cumberland The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
County Company, LLC New York Branch
- -New Jersey
- ------------------------------------------------------------------------------------------------------------------------------
Cumberland The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
County Company, LLC New York Branch
- -New Jersey
- ------------------------------------------------------------------------------------------------------------------------------
Hudson County The B. Manischewitz Banque Indosuez, UCC-1 6-18-96
- -New Jersey Company, LLC New York Branch
- ------------------------------------------------------------------------------------------------------------------------------
Hudson County The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
- -New Jersey Company, LLC New York
- ------------------------------------------------------------------------------------------------------------------------------
Hudson County The B. Manischewitz Banque Indosuez, UCC-1 6-5-96
- -New Jersey Company, LLC New York
</TABLE>
<TABLE>
<CAPTION>
JURISDICTION FILE NO. DESCRIPTION
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Cumberland 31157* Fee Mortgage
County
- -New Jersey
- --------------------------------------------------------------------------------------------
Cumberland 31146* General Security
County
- -New Jersey
- --------------------------------------------------------------------------------------------
Cumberland 31145* Intellectual Property
County
- -New Jersey
- --------------------------------------------------------------------------------------------
Hudson County 976* Fee/Leasehold Mortgage
- -New Jersey
- --------------------------------------------------------------------------------------------
Hudson County 881* General Security
New Jersey
- --------------------------------------------------------------------------------------------
Hudson County 880* Intellectual Property
- -New Jersey
- --------------------------------------------------------------------------------------------
</TABLE>
*To be released at Closing
<PAGE>
Schedule 4
----------
EXISTING LIENS
--------------
UCC SEARCH
Prepared by: __________________
Reviewed by: Christopher S. Auguste __________________
Signed by: Martin Eric Weisberg __________________
<PAGE>
EXHIBIT D
AMENDED AND RESTATED
NON-RECOURSE PLEDGE AGREEMENT
AND IRREVOCABLE PROXY
AMENDED AND RESTATED PLEDGE AGREEMENT dated as of May 1, 1998
(this "Agreement"), by and between R.A.B. ENTERPRISES, INC., a Delaware
corporation (the "Grantor") and The Chase Manhattan Bank, a New York banking
corporation, as agent (the "Agent") for the benefit of (i) the lenders (the
"Lenders") named in Schedules 2.01(a) and 2.01(b) of the Amended and Restated
Credit Agreement dated as of the date hereof, by and among Millbrook
Distribution Services Inc., a Delaware corporation ("Millbrook"), The B.
Manischewitz Company, LLC, a Delaware limited liability company ("Manischewitz",
each of Millbrook and Manischewitz a "Borrower" and, collectively, the
"Borrowers"), the Lenders, the Agent and NationsBank, N.A., as Co-Agent (the
"Co-Agent") (as amended, modified or supplemented from time to time in
accordance with its terms, the "Amended Credit Agreement") and (ii) for itself
as issuer of the Letters of Credit.
A. The Agent, the Co-Agent and the Lenders have agreed to
extend Loans and certain other financial accommodations including, without
limitation, the issuance of Letters of Credit to the Borrowers pursuant to, and
subject to the terms and conditions of, the Amended Credit Agreement. The
obligation of the Lenders to extend such Loans and of the Agent to issue Letters
of Credit under the Amended Credit Agreement is conditioned on the execution and
delivery by the Grantor of a pledge agreement in the form hereof to secure on a
nonrecourse basis the following (collectively, the "Secured Obligations"): all
Obligations (such Obligations to include, without limitation, the due and
punctual payment and performance of (a) the principal of and interest on the
Loans (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a), and interest that, but for the filing of a petition in
bankruptcy with respect to the Borrowers, would accrue on such obligations,
whether or not a claim is allowed against the Borrowers for such interest in the
related bankruptcy proceeding), pursuant to the irrevocable proxy granted
herein, when and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise, (b) Indebtedness at any time and from
time to time under the Letters of Credit, (c) all obligations of the Grantor at
any time and from time to time under this Pledge Agreement and (d) all other
obligations of the Borrowers at any time and from time to time under the Amended
Credit Agreement and the other Loan Documents).
B. Capitalized terms used herein and not defined herein shall
have the respective meanings assigned to such terms in the Amended Credit
Agreement.
Accordingly, the Grantor and the Agent hereby agree as
follows:
<PAGE>
1. Pledge. (a) As security for the payment in full of the
Secured Obligations, the Grantor hereby transfers, grants, bargains, sells,
conveys, hypothecates, pledges, sets over, endorses over, and delivers unto the
Agent, and grants, on a non-recourse basis, to the Agent, for its own benefit
and for the benefit of the Lenders, a security interest in (a) the shares of
capital stock of Millbrook listed in Schedule I annexed hereto next to the
Grantor's name (the "Initial Pledged Stock") and any additional shares of common
stock of Millbrook obtained in the future by the Grantor (collectively, the
Initial Pledged Stock together with all such additional shares pledged in the
future, the "Pledged Stock"), (b) all instruments of indebtedness (whether now
existing or hereinafter arising) by Millbrook or Manischewitz which name the
Grantor as payee thereunder (the "Pledged Debt") and (c) subject to Section 5
below, all proceeds of the Pledged Stock and Pledged Debt, including, without
limitation, all cash, securities or other property at any time and from time to
time receivable or otherwise distributed in respect of or in exchange for any of
or all such Pledged Stock (the items referred to in clauses (a) through (c)
being collectively called the "Collateral"). Upon delivery to the Agent, any
securities, other than debt securities, now or hereafter included in the
Collateral including, without limitation, the Pledged Stock (the "Pledged
Securities") shall be accompanied by undated stock powers duly executed in blank
or other instruments of transfer reasonably satisfactory to the Agent and by
such other instruments and documents as the Agent may reasonably request. Each
delivery of Pledged Securities shall be accompanied by a schedule showing a
description of the securities theretofore and then being pledged hereunder,
which schedule shall be attached hereto as Schedule I and made a part hereof.
Each schedule so delivered shall supersede any prior schedules so delivered.
(b) It is understood and agreed that it is the intention of
the foregoing that this Agreement is a non-recourse obligation and that the
Agent's rights to recover against the Grantor with respect to the Secured
Obligations (including, without limitation the Agent's reasonable fees and
out-of-pocket expenses pursuant to Section 14 hereof) shall be strictly limited
to the Collateral only, and the Agent and the Co-Agent shall have no rights or
remedies against, or recourse to, the Grantor with respect to any of the Secured
Obligations.
2. Delivery of Collateral. The Grantor agrees to deliver
promptly or cause to be delivered to the Agent any and all Pledged Securities,
and any and all certi ficates or other instruments or documents representing any
of the Collateral (together with any necessary endorsement).
3. Representations, Warranties and Covenants. The Grantor
hereby represents, warrants and covenants to and with the Agent that:
(a) the Grantor (i) is and will at all times continue to be
the direct owner, beneficially and of record, of the Pledged Stock and the payee
of the Pledged Debt that it is pledging hereunder except for the delivery and
endorsement over of the Collateral to the Agent as contemplated hereunder, (ii)
holds the Collateral that it is
2
<PAGE>
pledging hereunder free and clear of all Liens of every kind and nature, except
for the Lien in favor of the Agent granted pursuant to this Agreement, and the
Pledged Stock is subject to no options to purchase or any similar or other
rights of any person, (iii) except as permitted under the Amended Credit
Agreement, will make no assignment, pledge, hypothecation or transfer of, or
create any security interest in, the Collateral including, without limitation,
by virtue of becoming bound by any agreement which restricts in any manner the
rights of any present or future holder of any Pledged Stock with respect
thereto, and (iv) subject to Section 5 below, will cause any and all Collateral,
whether for value paid by the Grantor or otherwise, to be forthwith deposited
with the Agent and pledged or assigned hereunder;
(b) the Grantor (i) has the authority to pledge the Collateral
it is pledging hereunder in the manner hereby done or contemplated, and (ii)
will defend its title or interest thereto or therein against any and all
attachments, Liens, claims or other impediments of any nature, however arising,
of all persons whomsoever;
(c) no consent or approval of any governmental body or
regulatory authority or any securities exchange is necessary to the validity of
the pledge effected hereby;
(d) by virtue of the execution and delivery by the Grantor of
this Agreement, when the certificates, instruments or other documents
representing or evidencing the Collateral are delivered to the Agent in
accordance with this Agreement, the Agent will obtain a valid and perfected
first Lien upon and security interest in such Collateral as security for the
repayment of the Secured Obligations, prior to all other Liens thereon or
therein;
(e) the pledge effected hereby is effective to vest in the
Agent the rights of the Agent in the Collateral as set forth herein; and
(f) all of the Initial Pledged Stock has been duly authorized
and validly issued and as at the date hereof, the Initial Pledged Stock
constitutes all of the issued and outstanding shares of capital stock of
Millbrook listed on Schedule I annexed hereto.
All representations, warranties and covenants of the Grantor contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement until the termination of this Agreement pursuant to Section 15 hereof.
4. Registration in Nominee Name; Denominations. Upon the
occurrence and during the continuance of an Event of Default, the Agent shall
(i) have the right (in its sole and absolute discretion with prior notice to the
Grantor) to transfer to or to register the Pledged Stock in its own name or the
name of its nominee, and (ii) at all times have the right to exchange the
certificates representing Pledged Stock for
3
<PAGE>
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.
5. Voting Rights; Dividends; etc. (a) Unless and until an
Event of Default shall have occurred and be continuing:
(i) The Grantor shall be entitled to exercise any and all
voting and/or consensual rights and powers accruing to an owner of Pledged
Securities or any part thereof for any purpose not inconsistent with the terms
of this Agreement and the Amended Credit Agreement provided that such action
would not adversely affect the rights inuring to the Agent or the Lenders under
this Agreement or the Amended Credit Agreement or adversely affect the rights
and remedies of the Agent or the Lenders under this Agreement or the Amended
Credit Agreement or the ability of the Agent or the Lenders to exercise the
same.
(ii) The Agent shall execute and deliver to the Grantor, or
cause to be executed and delivered to the Grantor, all such proxies, powers of
attorney, and other instruments as the Grantor may reasonably request for the
purpose of enabling the Grantor to exercise the voting and/or consensual rights
and powers which they are entitled to exercise pursuant to subparagraph (i)
above.
(iii) The Grantor shall be entitled to receive and retain
any and all cash dividends paid on the Pledged Stock only to the extent that
such cash dividends are permitted by, and otherwise paid in accordance with the
terms and conditions of, the Amended Credit Agreement and applicable laws. Any
and all
a. noncash dividends,
b. stock or dividends paid or payable in cash or otherwise
in connection with a partial or total liquidation or dissolution, and
c. instruments, securities, other distributions in
property, return of capital, capital surplus or paid-in surplus or other
distributions made on or in respect of Pledged Stock (other than dividends
permitted by this Section 5(a)(iii)), whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination or reclassification
of the outstanding capital stock of the Borrowers of any Pledged Stock or
received in exchange for Pledged Stock or any part thereof, or in redemption
thereof, as a result of any merger, consolidation, acquisition or other exchange
of assets to which the Borrowers is or may be a party or otherwise shall be and
become part of the Collateral, and, if received by the Grantor, shall not be
commingled by the Grantor with any of its other funds or property but shall be
held separate and apart therefrom, shall be held in trust for the benefit of the
Agent and the Lenders and shall be forthwith delivered to the Agent in the same
form as so received (with any necessary endorsement).
4
<PAGE>
(b) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Grantor to receive any dividends, stock,
instruments, securities and other distributions which the Grantor is authorized
to receive pursuant to paragraph (a)(iii) of this Section 5 shall cease, and all
such rights shall thereupon become vested in the Agent, which shall have the
sole and exclusive right and authority to receive and retain such dividends. All
dividends which are received by the Grantor contrary to the provisions of this
Section 5(b) shall be received in trust for the benefit of the Agent, shall be
segregated from other property or funds of the Grantor and shall be forthwith
delivered to the Agent as Collateral in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over to or
received by the Agent pursuant to the provisions of this Section 5(b) shall be
retained by the Agent in an account to be established by the Agent upon receipt
of such money or other property and shall be applied in accordance with the
provisions of Section 9 hereof.
(c) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Grantor to exercise the voting and consensual
rights and powers which it is entitled to exercise pursuant to Section 5(a)(i)
shall cease pursuant to the irrevocable proxy granted herein, and all such
rights shall thereupon become vested in the Agent, which shall have the sole and
exclusive right and authority to exercise such voting and consensual rights and
powers.
(d) As long as the Amended Credit Agreement remains in effect
and until all of the Secured Obligations have been paid fully and indefeasibly,
any payments made in respect of the Pledged Debt (other than interest, so long
as no Default or Event of Default has occurred and is continuing) shall be and
become part of the Collateral, and, if received by the Grantor, shall not be
commingled by the Grantor with any of its other funds or property but shall be
held separate and apart therefrom, shall be held in trust for the benefit of the
Agent and the Lenders and shall be forthwith delivered to the Agent in the same
form as so received to be held as part of the Collateral hereunder.
(e) In order to permit the Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
5(c) and to receive all dividends and other distributions which it may be
entitled to receive under Section 5(a)(iii) or Section 5(b), the Grantor shall
promptly execute and deliver (or cause to be executed and delivered) to the
Agent all such proxies, dividend payment orders and other instruments as the
Agent may from time to time reasonably request.
Without limiting the effect of the foregoing, the Grantor does
hereby constitute and appoint the Agent as its proxy, effective upon the
occurrence and during the continuance of an Event of Default, to exercise all
rights, benefits, privileges and powers accruing to the Grantor, as owner of the
Pledged Securities, including, without limitation, giving or withholding
consent, calling and attending shareholders' meetings to be held from time to
time with full power to vote and act for and in the name, place and
5
<PAGE>
stead of the Grantor and in the same manner, to the same extent, and with the
same effect that the Grantor would if personally present at such meetings,
giving to the Agent full power of substitution and revocation, which proxy shall
be effective, automatically and without the necessity of any action (including
any transfer of any Pledged Stock on the record books of the issuer thereof) by
any person (including the issuer of the Pledged Stock or any officer or agent
thereof).
THIS PROXY IS IRREVOCABLE
Any proxy or proxies heretofore given by the Grantor to any
person or persons whatsoever are hereby revoked. This proxy shall continue in
full force and effect until such time as all Secured Obligations are paid and
satisfied in full in accordance with the terms of the Amended Credit Agreement.
6. Issuance of Additional Stock. The Grantor agrees that it
will cause Millbrook not to issue any common stock or other securities
convertible into common stock, whether in addition to, by stock dividend or
other distribution upon, or in substitution for, the Pledged Securities.
7. Intentionally Omitted.
8. Remedies upon Event of Default. If an Event of Default
shall have occurred and be continuing, the Agent may sell or otherwise dispose
of all or any part of the Collateral, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Agent shall deem appropriate. Any such sale or
disposition shall be conducted and shall conform to the standards of commercial
reasonableness as provided in Section 9-504(3) of the Uniform Commercial Code as
in effect in the State of New York to the extent applicable to such sale or
disposition. Each such purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of the Grantor, and the
Grantor hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and appraisal which the Grantor now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted.
The Agent shall give the Grantor 10 days' written notice
(which the Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in New York) of the Agent's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Agent may fix and state in the notice (if
any) of such sale. At any such sale, the Collateral, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the Agent
may (in its sole and
6
<PAGE>
absolute discretion) determine. The Agent shall not be obligated to make any
sale of any Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Collateral shall have been given. The Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. At any public sale made pursuant to this Section 8, the
Agent may bid for or purchase, free (to the extent permitted by applicable law)
from any right of redemption, stay or appraisal on the part of the Grantor (all
said rights being also hereby waived and released to the extent permitted by
applicable law), with respect to the Collateral or any part thereof offered for
sale and the Agent may make payment on account thereof by using any claim then
due and payable to the Agent or any Lender from the Grantor as a credit against
the purchase price, and the Agent may, upon compliance with the terms of sale,
hold, retain and dispose of such property without further accountability to the
Grantor therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the Agent
shall be free to carry out such sale and purchase pursuant to such agreement,
and the Grantor shall not be entitled to the return of the Collateral or any
portion thereof subject thereto, notwithstanding the fact that after the Agent
shall have entered into such an agreement all Events of Default shall have been
remedied and the Secured Obligations paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
9. Application of Proceeds of Sale. The proceeds of any sale
of Collateral, as well as any Collateral consisting of cash, shall be applied by
the Agent as follows:
FIRST, to the payment of all reasonable costs and
out-of-pocket expenses incurred by the Agent in connection with such collection
or sale or otherwise in connection with this Agreement or any of the Secured
Obligations, including, but not limited to, all court costs and the reasonable
fees and expenses of its agents and legal counsel, the repayment of all advances
made by the Agent hereunder on behalf of the Grantor or to protect and preserve
the Collateral and any other reasonable out-of-pocket costs or expenses incurred
in connection with the exercise of any right or remedy hereunder;
7
<PAGE>
SECOND, to the Agent to reimburse the Agent for that portion
of the payments, if any, made by it with respect to Letters of Credit for which
a Lender, as a participant in such Letter of Credit pursuant to Section 2.18 of
the Amended Credit Agreement, failed to pay its pro rata share thereof as
required pursuant to such Section 2.18;
THIRD, to the Agent to be held as cash collateral to the
extent of undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lenders in accordance
with the amounts of the Loans made by them pursuant to the Amended Credit
Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantor, its successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
10. Agent Appointed Attorney-in-Fact. The Grantor hereby
appoints the Agent its attorney-in-fact, effective upon the occurrence and
continuance of an Event of Default, for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which the Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest. Without
limiting the generality of the foregoing, the Agent shall have the right, upon
the occurrence and during the continuance of an Event of Default, with full
power of substitution either in the Agent's name or in the name of the Grantor,
to ask for, demand, sue for, collect, receive receipt and give acquittance for
any and all moneys due or to become due and under and by virtue of any
Collateral, to endorse checks, drafts, orders and other instruments for the
payment of money payable to the Grantor representing any interest or dividend,
or other distribution payable in respect of the Collateral or any part thereof
or on account thereof and to give full discharge for the same, to settle,
compromise, prosecute or defend any action, claim or proceeding with respect
thereto, and to sell, assign, endorse, pledge, transfer and make any agreement
respecting, or otherwise deal with, the same; provided, however, that nothing
herein contained shall be construed as requiring or obligating the Agent to make
any commitment or to make any inquiry as to the nature or sufficiency of any
payment received by the Agent. The Agent may present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken by the Agent or omitted to be taken with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of the Grantor or to any claim or action against the Agent or
the Lenders in the absence of the gross negligence or wilful misconduct of the
Agent or the Lenders.
8
<PAGE>
11. No Waiver. No failure on the part of the Agent to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy by the Agent preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The Agent and the Lenders shall not be deemed to have waived any rights
hereunder or under any other agreement or instrument unless such waiver shall be
in writing and signed by such parties.
12. Intentionally Omitted.
13. Security Interest Absolute. All rights of the Agent
hereunder, the grant of a security interest in the Collateral and all
obligations of the Grantor hereunder, shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of the Amended Credit
Agreement, any agreement with respect to any of the Secured Obligations or any
other agreement or instrument relating to any of the foregoing (other than as
resulting from the Agent's gross negligence or willful misconduct), (ii) any
change in time, manner or place of payment of, or in any other term of, all or
any of the Secured Obligations, or any other amendment or waiver of or any
consent to any departure from the Amended Credit Agreement or any other
agreement or instrument, (iii) any exchange, release or nonperfection of any
other collateral, or any release or amendment or waiver of or consent to or
departure from any guarantee, for all or any of the Secured Obligations or (iv)
any other circumstance which might otherwise constitute a defense available to,
or a discharge of, the Grantor in respect of the Secured Obligations or in
respect of this Agreement.
14. Agent's Fees and Expenses. The Grantor shall be obligated
to, upon demand, pay to the Agent the amount of any and all reasonable
out-of-pocket expenses, including the reasonable fees and expenses of its
counsel and of any experts or agents which the Agent may incur in connection
with (i) the custody or preservation of (after the occurrence and continuance of
an Event of Default), or the sale of, collection from, or other realization
upon, any of the Collateral in accordance herewith, (ii) the exercise or
enforcement of any of the rights of the Agent hereunder in accordance herewith
or (iii) the failure by the Grantor to perform or observe any of the provisions
hereof. In addition, the Grantor indemnifies, and holds the Agent and the
Lenders harmless from and against any and all liability incurred by the Agent or
the Lenders hereunder or in connection herewith, unless such liability shall be
due to the gross negligence or wilful misconduct of the Agent or the Lenders, as
the case may be. Any such amounts payable as provided hereunder or thereunder
shall be additional Secured Obligations secured hereby and by the other Security
Documents.
15. Termination. This Agreement shall terminate upon the
earlier to occur of (a) the date when the Grantor shall make (x) a capital
contribution to the Borrowers in the form of paid-in-capital or for capital
stock or other equity of the Borrowers on terms reasonably satisfactory to the
Agent, or (y) an advance or loan to
9
<PAGE>
the Borrowers on a subordinated basis to the extent permitted by the Amended
Credit Agreement (or any combination of the foregoing), in an aggregate amount
of not less than $10,000,000; and (b) the date when (w) all the Secured
Obligations have been fully and indefeasibly paid in cash, (x) the Lenders have
no further commitment to make any Loans under the Amended Credit Agreement, (y)
the Agent shall have no further obligation to issue any Letters of Credit, and
(z) the Lenders have no further obligation to extend financial accommodations
under the Rate Agreements, if applicable, at which time the Agent shall reassign
and deliver to the Grantor, or to such person or persons as the Grantor shall
designate, against receipt, such of the Collateral (if any) as shall not have
been sold or otherwise still be held by it hereunder, together with appropriate
instruments of reassignment and release; provided, however, that all indemnities
of the Grantor contained in this Agreement shall survive, and remain operative
and in full force and effect regardless of, the termination of this Agreement.
Any such reassignment shall be without recourse to or warranty by the Agent and
at the expense of the Grantor.
16. Notices. All communications and notices hereunder shall be
in writing and given as provided in the Amended Credit Agreement.
17. Further Assurances. The Grantor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Agent may at any time reasonably
request in connection with the administration and enforcement of this Agreement
or with respect to the Collateral or any part thereof or in order better to
assure and confirm unto the Agent its rights and remedies hereunder.
18. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Grantor shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge,
encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Agent as Collateral under this
Agreement, and except that the Agent may not assign its rights hereunder, except
in connection with a resignation of the Agent and the appointment of a
substitute Agent in the manner permitted by the Amended Credit Agreement.
19. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (EXCEPT
CONFLICTS OF LAWS PRINCIPLES THEREOF), EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
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<PAGE>
20. Amended Credit Agreement. In the event of any
inconsistency or conflict between the terms and provisions of the Amended Credit
Agreement and the terms and provisions of this Agreement, or with respect to any
payment provisions which could be construed as requiring duplicative payments,
the terms and provisions of the Amended Credit Agreement shall control. Nothing
herein shall require the Grantor to make a duplicate payment if the payment is
otherwise provided for in any other Loan Document.
21. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
22. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Agreement shall
be effective when a counterpart which bears the signature of the Grantor shall
have been delivered to the Agent.
23. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or be taken into
consideration in interpreting, this Agreement.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Pledge Agreement as of the day and year first above written.
R.A.B. ENTERPRISES, INC.
By:_________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent
By:_________________________________
Name:
Title:
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<PAGE>
SCHEDULE I
to Pledge Agreement
GRANTOR: R.A.B. ENTERPRISES, INC.
<TABLE>
<CAPTION>
Percentage
Stock of
Certificate Number Outstanding
Stock Issuer Class of Stock No(s). Par Value of Shares Shares
- ------------ -------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Millbrook Distribution Common 2 $0.01 1,000 100%
Services Inc.
</TABLE>
Description of Pledged Debt
<TABLE>
<CAPTION>
Original
Description of Maturity Principal
Obligation Issuer Obligation Date Amount
- ----------------- ---------- ---- ------
<S> <C> <C> <C>
Millbrook Distribution Subordinated November 1, 2005 $21,300,000
Services Inc. Promissory Note
The B. Manischewitz Subordinated November 1, 2005 $38,800,000
Company, LLC Promissory Note
</TABLE>
13
<PAGE>
EXHIBIT E
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of March 31, 1997 (this
"Agreement"), by and among MILLBROOK DISTRIBUTION SERVICES INC., an Indiana
corporation (the "Grantor"), and The Chase Manhattan Bank, a New York banking
corporation, as agent ("Agent") for the benefit of (i) the lenders (the
"Lenders") named in Schedules 2.01(a) and 2.01(b) of the Credit Agreement dated
as of the date hereof, among the Grantor, the Agent, NationsBank, N.A., as
co-agent (the "Co-Agent"), and the Lenders (as amended, modified or supplemented
from time to time in accordance with its terms, the "Credit Agreement"), and
(ii) itself as issuer of the Letters of Credit and party to the Rate Agreements,
if applicable.
The Agent, the Co-Agent and the Lenders have agreed to extend
Loans and certain other financial accommodations, including, without limitation,
the issuance of Letters of Credit to the Grantor pursuant to, and subject to the
terms and conditions of, the Credit Agreement. The obligation of the Lenders to
extend such Loans and of the Agent to issue the Letters of Credit under the
Credit Agreement and of any Lender to extend financial accommodations under the
Rate Agreements, if applicable, is conditioned on the execution and delivery by
the Grantor of a security agreement in the form hereof to secure the following
(collectively, the "Secured Obligations"): all Obligations (such Obligations to
include, without limitation, the due and punctual payment and performance of (a)
all obligations to a Lender, if any, at any time and from time to time under the
Rate Agreements, (b) the principal of and interest on the Loans (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a), and
interest that, but for the filing of a petition in bankruptcy with respect to
the Grantor, would accrue on such obligations, whether or not a claim is allowed
against the Grantor for such interest in the related bankruptcy proceeding),
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (c) Indebtedness at any time and from time to
time under the Letters of Credit, (d) all obligations of the Grantor at any time
and from time to time under this Agreement and (e) all other obligations of the
Grantor at any time and from time to time under the Credit Agreement and the
other Loan Documents).
Accordingly, the Grantor and the Agent hereby agree as
follows:
1. Definitions of Terms Used Herein. All capitalized terms
used herein and not defined herein shall have the respective meanings assigned
to such terms in the Credit Agreement. As used herein, the following terms shall
have the following meanings:
(a) "Accounts Receivable" shall mean (i) all of the
Grantor's present and future accounts, general intangibles, chattel paper and
instruments, as
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such terms are defined in the Uniform Commercial Code as in effect in the State
of New York ("NYUCC"), (ii) all moneys, securities and other property and the
proceeds thereof, now or hereafter held or received by, or in transit to, the
Agent from or for the Grantor, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of the deposits (general or
special) of the Grantor, balances, sums and credits with, and all of the
Grantor's claims against the Agent at any time existing; (iii) all of the
Grantor's right, title and interest, and all of the Grantor's rights, remedies,
security and Liens, in, to and in respect of any accounts receivable, including,
without limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to accounts
receivable, deposits or other security for the obligation of any account debtor,
and credit and other insurance, (iv) all of the Grantor's right, title and
interest in, to and in respect of all goods relating to, or which by sale have
resulted in, accounts receivable, including, without limitation, all goods
described in invoices or other documents or instruments with respect to, or
otherwise representing or evidencing, any account receivable, and all returned,
reclaimed or repossessed goods.
(b) "Collateral" shall mean all (i) Accounts Receivable,
(ii) Documents, (iii) Equipment, (iv) General Intangibles, (v) Inventory and
(vi) Proceeds.
(c) "Documents" shall mean all instruments, files, records,
ledger sheets and documents covering or relating to any of the Collateral.
(d) "Equipment" shall mean all of the Grantor's right,
title and interest in and to machinery, equipment, furniture and fixtures and
all attachments, accessories and equipment now or hereafter owned or acquired in
the Grantor's business or used therein, and all substitutions and replacements
thereof, wherever located, whether now owned or hereafter acquired by the
Grantor.
(e) "General Intangibles" shall mean all of the Grantor's
right, title and interest in and to present and future general intangibles of
every kind and description, including, without limitation, patents, patent
applications, trade names and trademarks and the goodwill of the business, if
any, symbolized thereby, and Federal, State and local tax refund claims of all
kinds.
(f) "Inventory" shall mean all of the Grantor's right,
title and interest in and to raw materials, work in process, finished goods,
merchandise and all other inventory (as such term is defined in the NYUCC),
excluding inventory held on consignment, whether now owned or hereafter
acquired, and all wrapping, packaging, advertising and shipping materials, any
documents relating thereto and all returned, reclaimed or repossessed goods.
(g) "Proceeds" shall mean any consideration received from
the sale, exchange, lease or other disposition of any asset or property which
constitutes Collateral, any other value received as a consequence of the
possession of any
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Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft or other involuntary conversion of
whatever nature of any asset or property that constitutes Collateral, and shall
include, without limitation, all cash and negotiable instruments received or
held by any of the Lenders pursuant to any lockbox or similar arrangement in
favor of the Agent or the Co-Agent relating to the payment of Accounts
Receivable.
2. Security Interests. As security for the payment or
performance, as the case may be, of the Secured Obligations, the Grantor hereby
grants to the Agent, its successors and its assigns, for its own benefit and for
the pro rata benefit of the Lenders, their successors and their assigns, a
security interest in the Collateral (the "Security Interest").
3. Further Assurances. The Grantor agrees, at its expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Agent may from time
to time reasonably request for the assuring and preserving of the Security
Interest and the rights and remedies created hereby. If any amount payable under
or in connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be promptly
pledged and delivered to the Agent, duly endorsed in a manner reasonably
satisfactory to the Agent. The Grantor agrees promptly to notify promptly the
Agent of any change in its corporate name or in the location of its chief
executive office, its chief place of business or the office where it keeps its
records relating to the Accounts Receivable owned by it and the location of any
Collateral. The Grantor agrees promptly to notify the Agent if any material
portion of the Collateral is damaged or destroyed.
4. Taxes; Encumbrances. At its option, the Agent may discharge
past due taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral and not permitted under the Credit Agreement
unless it is being contested by the Grantor to the extent permitted by the
Credit Agreement, and may pay for the maintenance and preservation of the
Collateral to the extent the Grantor fails to do so as required by the Credit
Agreement. The Grantor agrees to reimburse the Agent on written demand for any
payment made or any expense incurred by it pursuant to the foregoing
authorization; provided, however, that nothing in this Section 5 shall be
interpreted as excusing the Grantor from the performance of any covenants or
other promises with respect to taxes, liens, security interests or other
encumbrances and maintenance as set forth herein or in the Credit Agreement.
5. Assignment of Security Interest. If at any time the Grantor
shall take and perfect a security interest in any property of an account debtor
or any other person to secure payment and performance of an Account Receivable,
the Grantor shall promptly assign such security interest to the Agent as part of
the Collateral hereunder. Such assignment need not be filed of public record
unless necessary to continue the perfected status of the security interest
against creditors of and transferees from the account debtor or other person
granting the security interest.
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6. Representations and Warranties. The Grantor represents and
warrants to the Agent that:
(a) Title and Authority. It has (i) rights in and good and
valid title to the Collateral in which it is granting the Security Interest and
(ii) the requisite power and authority to grant to the Agent the Security
Interest in the Grantor's interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained.
(b) Filing. Fully executed Uniform Commercial Code
financing statements containing a description of the Collateral shall have been,
or shall be delivered to the Agent in a form such that they can be, filed of
record in every govern mental, municipal or other office in every jurisdiction
in which any portion of the Collateral is located necessary to publish notice of
and protect the validity of and to establish a valid, legal and perfected
security interest in favor of the Agent in respect of the Collateral, excluding
goods in transit and other goods temporarily not in the possession of the
Grantor (such as goods in transfer depots), in which a security interest may be
perfected by filing under the Uniform Commercial Code in the United States and
its territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of Uniform Commercial Code continuation statements.
(c) Validity of Security Interest. The Security Interest
constitutes a valid and legal security interest in all of the Collateral for
payment and performance of the Secured Obligations, except as otherwise
permitted under the Credit Agreement and, upon filing of the Uniform Commercial
Code financing statements, will constitute a perfected security interest with
respect to that portion of the Collateral for which perfection may be
accomplished by filing a financing statement under the Uniform Commercial Code.
(d) Information Regarding Names. It has disclosed in
writing to the Agent any trade names used to identify it in its business or in
the ownership of its properties.
(e) Absence of Other Liens. The Collateral is owned by it
free and clear of any Lien of any nature whatsoever, except as granted pursuant
to this Agreement and as permitted by the Credit Agreement, and, except as
provided by paragraph (b) of this Section 7, no financing statement has been
filed, under the Uni form Commercial Code as in effect in any state or
otherwise, covering any Collateral except as indicated on Schedule 7.01 to the
Credit Agreement.
(f) Survival of Representations and Warranties. All
representations and warranties of the Grantor contained in this Agreement shall
survive
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the execution, delivery and performance of this Agreement until the termination
of this Agreement pursuant to Section 28.
7. Records of Collateral. The Grantor agrees at all times to
keep or cause to be kept in all material respects accurate and complete
accounting records with respect to the Collateral, including, but not limited
to, a record of all payments and proceeds received. In addition, the Grantor
will provide the Agent with such further schedules and/or information respecting
the Collateral as the Agent may reasonably request in writing.
8. Intentionally Omitted.
9. Protection of Security. The Grantor shall, at its own cost
and expense, take any and all actions reasonably necessary to defend title to
the Collateral against all persons and to defend the Security Interest of the
Agent in such Collateral, and the priority thereof (subject to limitations on
priority which resulted from the Agent's gross negligence or willful
misconduct), against any adverse Lien of any nature whatsoever except for Liens
permitted pursuant to Section 7.01 of the Credit Agreement, and except that
Grantor shall have no obligation to perfect a lien on vehicles unless and until
a Default shall have occurred.
10. Continuing Obligations of the Grantor. The Grantor shall
remain liable to observe and perform in all material respects all the conditions
and obligations to be observed and performed by it under each contract,
agreement, interest or obligation relating to the Collateral, all in accordance
with the terms and conditions thereof, and shall indemnify and hold harmless the
Agent and the Lenders from any and all such liabilities.
11. Use and Disposition of Collateral. Except as permitted by
the Credit Agreement, the Grantor shall not make or permit to be made any
assignment, pledge or hypothecation of the Collateral, or grant any security
interest in the Collateral except for the Security Interest. The Grantor shall
not make or permit to be made any transfer of any Collateral, except Inventory
in the ordinary course of business and disposition of vehicles in the ordinary
course of business and as otherwise permitted by the Credit Agreement, and the
Grantor shall remain at all times in possession of the Collateral other than
transfers to the Agent pursuant to the provisions hereof and as otherwise
provided in this Agreement or the Credit Agreement.
12. Limitation on Modifications of Accounts Receivable. Except
as permitted by Section 7.11 of the Credit Agreement, the Grantor will not,
without the Agent's prior written consent (which consent (prior to the
occurrence and continuance of an Event of Default) will not be unreasonably
withheld or delayed), grant any extension of the time of payment of any of its
Accounts Receivable, compromise, compound or settle the same for less than the
full amount thereof, release, in whole or in part, any person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business.
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13. Collections. The Agent shall have the right, as the true
and lawful agent of the Grantor, with power of substitution for the Grantors and
in the Grantor's name, the Agent's name or otherwise, for the use and benefit of
the Agent and the Lenders, (i) to endorse the Grantor's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral that may come into its possession for deposit or collection in
Grantor's accounts with the Agent; (ii) to sign the name of the Grantor on any
invoice or bill of lading relating to any of the Collateral, drafts against
Customers, assignments and verifications of Accounts Receivable and notices to
Customers that may come into its possession; (iii) to send verifications based
on a form acceptable to both Grantor and Secured Party of Accounts Receivable to
any Customer; and (iv) upon the occurrence and during the continuance of an
Event of Default, (A) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences or
instruments of payment relating to the Collateral or any part thereof, and the
Grantor hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed, (B) to demand, collect, receive payment of, give receipt
for, extend the time of payment of and give discharges and releases of all or
any of the Collateral and/or release the Obligor thereon, (C) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral, (D) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to or pertaining to all or any of the Collateral, (E) to notify, or to
require the Grantor to notify, the account debtors obligated on any or all of
the Accounts Receivable to make payment thereof directly to the Agent, (F) to
notify the Postal Service authorities to change the address for delivery of mail
addressed to the Grantor to such address as the Agent may designate, (G) to
accept the return of goods represented by any of the Accounts Receivable, and
(H) to use, sell, assign, transfer, pledge, make any agreement with respect to
or otherwise deal with all or any of the Collateral, and to do all other acts
and things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Agent were the absolute owner of the Collateral for all
purposes; provided, however, that nothing herein contained shall be construed as
requiring or obligating the Agent or any Lender to make any commitment or to
make any inquiry as to the nature or sufficiency of any payment received by the
Agent or such Lender or to present or file any claim or notice, or to take any
action with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby, and no action
taken by the Agent or any Lender or omitted to be taken with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of the Grantor or to any claim or action against the Agent or
any Lender in the absence of the gross negligence or willful misconduct of the
Agent or such Lender. It is understood and agreed that the appointment of the
Agent as the agent of the Grantor for the purposes set forth above in this
Section 14 is coupled with an interest and is irrevocable. The provisions of
this Section 14 shall in no event relieve the Grantor of any of its obligations
hereunder or under the Credit Agreement with respect to the Collateral or any
part thereof or impose any obligation on the Agent or any Lender to proceed in
any particular manner with respect to the Collateral or any part thereof, or in
any way limit the exercise by the Agent or any Lender of any other or
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further right which it may have on the date of this Agreement or hereafter,
whether hereunder or by law or otherwise.
14. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, the Grantor agrees to deliver each item of
Collateral to the Agent on demand, and it is agreed that the Agent shall have
the right to take any or all of the following actions at the same or different
times: with or without legal process and with or without previous notice or
demand for performance, to take possession of the Collateral and without
liability for trespass (except for actual damage caused by the Agent's gross
negligence or willful misconduct) to enter any premises where the Collateral may
be located for the purpose of taking possession of or removing the Collateral
and, generally, to exercise any and all rights afforded to a secured party
under, and subject to its obligations contained in, the Uniform Commercial Code
as in effect in any state or other applicable law. Without limiting the
generality of the foregoing, the Grantor agrees that the Agent shall have the
right, subject to applicable law, to sell or otherwise dispose of all or any
part of the Collateral, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery as the
Agent shall deem appropriate. Each such purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of the
Grantor, and the Grantor hereby waives (to the extent permitted by applicable
law) all rights of redemption, stay and appraisal which the Grantor now has or
may at any time in the future have under any rule of law or statute now existing
or hereafter enacted.
The Agent shall give the Grantor 10 days' written notice
(which the Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the NYUCC) of the Agent's intention to make any sale of Collateral.
Such notice, in the case of a public sale, shall state the time and place for
such sale. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Agent may fix and
state in the notice (if any) of such sale. Any such sale shall be conducted and
conform to the standards of commercial reasonableness as provided in Section
9-504(3) of the NYUCC to the extent such section is applicable to such sale. At
any such sale, the Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Agent may (in its sole and
absolute discretion) determine. The Agent shall not be obligated to make any
sale of any Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Collateral shall have been given. The Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. At any public sale made pursuant to this Section 15, the
Agent may bid for or purchase,
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free (to the extent permitted by applicable law) from any right of redemption,
stay or appraisal on the part of the Grantor (all said rights being also hereby
waived and released to the extent permitted by law), with respect to the
Collateral or any part thereof offered for sale and the Agent may make payment
on account thereof by using any claim then due and payable to the Agent or any
Lender from the Grantor as a credit against the purchase price, and the Agent
may, upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to the Grantor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Agent shall be free to carry out such
sale and purchase pursuant to such agreement, and the Grantor shall not be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwith standing the fact that after the Agent shall have entered into such an
agreement all Events of Default shall have been remedied and the Secured
Obligations paid in full and/or the Total Commitment shall have been terminated.
To the extent permitted by applicable law, the Grantor shall remain liable for
any deficiency. As an alternative to exercising the power of sale herein
conferred upon it, the Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
15. Application of Proceeds. The proceeds of any collection or
sale of Collateral, as well as any Collateral consisting of cash, shall be
applied by the Agent as follows:
FIRST, to the payment of all reasonable costs and
out-of-pocket expenses incurred by the Agent in connection with such collection
or sale or otherwise in connection with this Agreement or any of the Secured
Obligations, including, but not limited to, all court costs and the reasonable
fees and expenses of its agents and legal counsel, the repayment of all advances
made by the Agent hereunder on behalf of the Grantor and any other reasonable
out-of-pocket costs or expenses incurred in connection with the exercise of any
right or remedy hereunder;
SECOND, to the Agent to reimburse the Agent for that
portion of the payments, if any, made by it with respect to Letters of Credit
for which a Lender, as a participant in such Letter of Credit pursuant to
Section 2.18 of the Credit Agreement, failed to pay its pro rata share thereof
as required pursuant to such Section 2.18;
THIRD, to the Agent to be held as cash collateral to the
extent of the undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, pro rata to the payment in full of (i) principal
and interest in respect of any Loans outstanding (pro rata as among the Lenders
in accordance with the amounts of the Loans made by them pursuant to the Credit
Agreement) and (ii) all unpaid monetary obligations of the Grantor to any Lender
under the Rate Agreements, if applicable;
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FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantor, its successors and assigns, or as a
court of competent jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Agent (including, without limitation,
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Agent or such officer or be
answerable in any way for the misapplication thereof.
16. Locations of Collateral; Place of Business. (a) The
Grantor hereby represents and warrants that all the Collateral is located at the
locations listed on Schedule I hereto and that its federal employer
identification number is as set forth on said Schedule. The Grantor agrees not
to establish, or permit to be established, any other location for Collateral
unless all filings under the Uniform Commercial Code as in effect in any state
or otherwise which are required by this Agreement or the Credit Agreement to be
made with respect to the Collateral have been made and the Agent has a valid,
legal and perfected first priority security interest in the Collateral.
(b) The Grantor confirms that its chief executive office is
located as indicated on Schedule I hereto. The Grantor agrees not to change, or
permit to be changed, the location of its chief executive office unless all
filings under the Uniform Commercial Code or otherwise which are required by
this Agreement or the Credit Agreement to be made have been made and the Agent
has a valid, legal and perfected first priority security interest.
17. Security Interest Absolute. All rights of the Agent
hereunder, the Security Interest, and all obligations of the Grantor hereunder,
shall be absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document or any other
agreement with respect to any of the Secured Obligations (other than as
resulting from the Agent's gross negligence or willful misconduct), (ii) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Secured Obligations, or any other amendment or waiver of or
consent to any departure from the Credit Agreement or any other Loan Document,
(iii) any exchange, release or nonperfection of any other Collateral, or any
release or amendment or waiver of or consent to or departure from any guarantee,
for all or any of the Secured Obligations, or (iv) any other circumstance which
might otherwise constitute a defense available to, or discharge of, the Grantor,
any of the Guarantors or any other obligor in respect of the Secured Obligations
or in respect of this Agreement.
18. No Waiver. No failure on the part of the Agent to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver
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thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Agent preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Agent and the Lenders shall not be deemed to have waived any rights hereunder or
under any other agreement or instrument unless such waiver shall be in writing
and signed by such parties.
19. Agent Appointed Attorney-in-Fact. The Grantor hereby
appoints the Agent the attorney-in-fact of the Grantor, which appointment shall
be effective upon the occurrence and continuance of an Event of Default, solely
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Agent may deem reasonably
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest.
20. Agent's Fees and Expenses. The Grantor shall be obligated
to, upon demand, pay to the Agent the amount of any and all reasonable
out-of-pocket expenses, including the reasonable fees and expenses of its
counsel and of any experts or agents which the Agent may incur in connection
with (i) the custody or preservation of (in each case upon the occurrence and
during the continuance of an Event of Default), or the sale of, collection from,
or other realization upon, any of the Collateral in accordance herewith or (ii)
the exercise or enforcement of any of the rights of the Agent hereunder in
accordance herewith. In addition, the Grantor indemnifies and holds the Agent
and the Lenders harmless from and against any and all liability incurred by the
Agent or the Lenders hereunder or in connection herewith, unless such liability
shall be due to the gross negligence or willful misconduct of the Agent or the
Lenders, as the case may be. Any such amounts payable as provided hereunder or
thereunder shall be additional Secured Obligations secured hereby and by the
other Security Documents.
21. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Grantor shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or any cash or
property held by the Agent as Collateral under this Agreement, except as
contemplated by this Agreement or the Credit Agreement, and except that the
Agent may not assign its rights hereunder except in connection with a
resignation of the Agent and appointment of a substitute Agent in the manner
permitted by the Credit Agreement.
22. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
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23. Notices. All communications and notices hereunder shall be
in writing and given as provided in the Credit Agreement.
24. Credit Agreement. In the event of any inconsistency or
conflict between the terms and provisions of the Credit Agreement and the terms
and provisions of this Agreement, or with respect to any payment provisions
which could be construed as requiring duplicative payments, the terms and
provisions of the Credit Agreement shall control. Nothing herein shall require
the Grantor to make a duplicate payment if the payment is otherwise provided for
in any other Loan Document.
25. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable the
remaining provisions contained herein shall not in any way be affected or
impaired.
26. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
27. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Agreement shall
be effective when a counterpart which bears the signature of the Grantor shall
have been delivered to the Agent.
28. Termination. This Agreement and the Security Interest
shall terminate when (a) all the Secured Obligations have been fully and
indefeasibly paid in cash, (b) the Lenders have no further commitment to make
any Loans under the Credit Agreement, (c) the Agent shall have no further
obligation to issue any Letters of Credit, and (d) the Lenders (or any of them)
have no further obligation to extend financial accommodations under the Rate
Agreements, if applicable, at which time the Agent shall (i) return to the
Grantor any Collateral in the Agent's possession free and clear of any Liens
created in favor of the Agent and (ii) execute and deliver to the Grantor all
Uniform Commercial Code termination statements and similar documents (in form
and substance reasonably satisfactory to the Grantor) which the Grantor shall
reasonably request in order to evidence and effect such termination; provided,
however, that all indemnities of the Grantor contained in this Agreement shall
survive, and remain operative and in full force and effect regardless of, the
termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Security Agreement as of the day and year first above written.
MILLBROOK DISTRIBUTION SERVICES INC.
By: _____________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent
By: _____________________________________
Name:
Title:
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SCHEDULE I to the
Security Agreement
Locations of Collateral
-----------------------
1060 Millbury Street
Worcester, Massachusetts 10609
1511 Main Street
Worcester, Massachusetts 10609
408 Roy Parker Road
Ozark, Alabama 36630
305 Industrial Boulevard
Greenville, North Carolina 27834
Sunset Bluff subdivision
Harrison, Arkansas
Contiguous to Arkansas State Highway 43
Harrison, Arkansas
Cottonwood Road
Harrison, Arkansas
444 Madison Avenue, Suite 601
New York, New York 10022
Chief Executive Office of the Grantor
-------------------------------------
P.O. Box 35 - Route 56
Huntoon Memorial Highway
Leicester, Massachusetts 01524
Trade names of the Grantor
--------------------------
Federal Employer Identification Number of the Grantor
-----------------------------------------------------
41-075-4020
<PAGE>
EXHIBIT E-1
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of May 1, 1998 (this "Agreement"),
by and among THE B. MANISCHEWITZ COMPANY, LLC, a Delaware limited liability
company (the "Grantor"), and The Chase Manhattan Bank, a New York banking
corporation, as agent ("Agent") for the benefit of (i) the lenders (the
"Lenders") named in Schedules 2.01(a) and 2.01(b) of the Amended and Restated
Credit Agreement dated as of the date hereof, by and among the Grantor,
Millbrook Distribution Services Inc., the Agent, NationsBank, N.A., as co-agent
(the "Co-Agent"), and the Lenders (as amended, modified or supplemented from
time to time in accordance with its terms, the "Credit Agreement"), and (ii)
itself as issuer of the Letters of Credit.
The Agent, the Co-Agent and the Lenders have agreed to extend
Loans and certain other financial accommodations, including, without limitation,
the issuance of Letters of Credit to the Grantor pursuant to, and subject to the
terms and conditions of, the Credit Agreement. The obligation of the Lenders to
extend such Loans and of the Agent to issue the Letters of Credit under the
Credit Agreement is conditioned on the execution and delivery by the Grantor of
a security agreement in the form hereof to secure the following (collectively,
the "Secured Obligations"): all Obligations (such Obligations to include,
without limitation, the due and punctual payment and performance of (a) the
principal of and interest on the Loans (including the payment of amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a), and interest that, but for
the filing of a petition in bankruptcy with respect to the Grantor, would accrue
on such obligations, whether or not a claim is allowed against the Grantor for
such interest in the related bankruptcy proceeding), when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (b) Indebtedness at any time and from time to time under the Letters
of Credit, (c) all obligations of the Grantor at any time and from time to time
under this Agreement and (d) all other obligations of the Grantor at any time
and from time to time under the Credit Agreement and the other Loan Documents).
Accordingly, the Grantor and the Agent hereby agree as
follows:
1. Definitions of Terms Used Herein. All capitalized terms
used herein and not defined herein shall have the respective meanings assigned
to such terms in the Credit Agreement. As used herein, the following terms shall
have the following meanings:
(a) "Accounts Receivable" shall mean (i) all of the
Grantor's present and future accounts, general intangibles, chattel paper and
instruments, as such terms are defined in the Uniform Commercial Code as in
effect in the State of New York ("NYUCC"), (ii) all moneys, securities and other
property and the proceeds thereof, now or hereafter held or received by, or in
transit to, the Agent from or for the
<PAGE>
Grantor, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of the deposits (general or special) of the Grantor,
balances, sums and credits with, and all of the Grantor's claims against the
Agent at any time existing; (iii) all of the Grantor's right, title and
interest, and all of the Grantor's rights, remedies, security and Liens, in, to
and in respect of any accounts receivable, including, without limitation, rights
of stoppage in transit, replevin, repossession and reclamation and other rights
and remedies of an unpaid vendor, lienor or secured party, guaranties or other
contracts of suretyship with respect to accounts receivable, deposits or other
security for the obligation of any account debtor, and credit and other
insurance, (iv) all of the Grantor's right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in, accounts
receivable, including, without limitation, all goods described in invoices or
other documents or instruments with respect to, or otherwise representing or
evidencing, any account receivable, and all returned, reclaimed or repossessed
goods.
(b) "Collateral" shall mean all (i) Accounts Receivable,
(ii) Documents, (iii) General Intangibles, (iv) Inventory and (v) Proceeds.
(c) "Documents" shall mean all instruments, files, records,
ledger sheets and documents covering or relating to any of the Collateral.
(d) "General Intangibles" shall mean all of the Grantor's
right, title and interest in and to present and future general intangibles of
every kind and description, including, without limitation, patents, patent
applications, trade names and trademarks and the goodwill of the business, if
any, symbolized thereby, and Federal, State and local tax refund claims of all
kinds.
(e) "Inventory" shall mean all of the Grantor's right,
title and interest in and to raw materials, work in process, finished goods,
merchandise and all other inventory (as such term is defined in the NYUCC),
excluding inventory held on consignment, whether now owned or hereafter
acquired, and all wrapping, packaging, advertising and shipping materials, any
documents relating thereto and all returned, reclaimed or repossessed goods.
(f) "Proceeds" shall mean any consideration received from
the sale, exchange or other disposition of any asset or property which
constitutes Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft or other
involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, and shall include, without limitation, all cash and
negotiable instruments received or held by any of the Lenders pursuant to any
lockbox or similar arrangement in favor of the Agent or the Co-Agent relating to
the payment of Accounts Receivable.
2. Security Interests. As security for the payment or
performance, as the case may be, of the Secured Obligations, the Grantor hereby
grants to the Agent,
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its successors and its assigns, for its own benefit and for the pro rata benefit
of the Lenders, their successors and their assigns, a security interest in the
Collateral (the "Security Interest").
3. Further Assurances. The Grantor agrees, at its expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Agent may from time
to time reasonably request for the assuring and preserving of the Security
Interest and the rights and remedies created hereby. If any amount payable under
or in connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be promptly
pledged and delivered to the Agent, duly endorsed in a manner reasonably
satisfactory to the Agent. The Grantor agrees promptly to notify promptly the
Agent of any change in its corporate name or in the location of its chief
executive office, its chief place of business or the office where it keeps its
records relating to the Accounts Receivable owned by it and the location of any
Collateral. The Grantor agrees promptly to notify the Agent if any material
portion of the Collateral is damaged or destroyed.
4. Taxes; Encumbrances. At its option, the Agent may discharge
past due taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral and not permitted under the Credit Agreement
unless it is being contested by the Grantor to the extent permitted by the
Credit Agreement, and may pay for the maintenance and preservation of the
Collateral to the extent the Grantor fails to do so as required by the Credit
Agreement. The Grantor agrees to reimburse the Agent on written demand for any
payment made or any expense incurred by it pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4 shall be
interpreted as excusing the Grantor from the performance of any covenants or
other promises with respect to taxes, liens, security interests or other
encumbrances and maintenance as set forth herein or in the Credit Agreement.
5. Assignment of Security Interest. If at any time the Grantor
shall take and perfect a security interest in any property of an account debtor
or any other person to secure payment and performance of an Account Receivable,
the Grantor shall promptly assign such security interest to the Agent as part of
the Collateral hereunder. Such assignment need not be filed of public record
unless necessary to continue the perfected status of the security interest
against creditors of and transferees from the account debtor or other person
granting the security interest.
6. Representations and Warranties. The Grantor represents and
warrants to the Agent that:
(a) Title and Authority. It has (i) rights in and good and
valid title to the Collateral in which it is granting the Security Interest and
(ii) the requisite power and authority to grant to the Agent the Security
Interest in the Grantor's interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in
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<PAGE>
accordance with the terms of this Agreement, without the consent or approval of
any other person other than any consent or approval which has been obtained.
(b) Filing. Fully executed Uniform Commercial Code
financing statements containing a description of the Collateral shall have been,
or shall be delivered to the Agent in a form such that they can be, filed of
record in every govern mental, municipal or other office in every jurisdiction
in which any portion of the Collateral is located necessary to publish notice of
and protect the validity of and to establish a valid, legal and perfected
security interest in favor of the Agent in respect of the Collateral, excluding
goods in transit and other goods temporarily not in the possession of the
Grantor (such as goods in transfer depots), in which a security interest may be
perfected by filing under the Uniform Commercial Code in the United States and
its territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of Uniform Commercial Code continuation statements.
(c) Validity of Security Interest. The Security Interest
constitutes a valid and legal security interest in all of the Collateral for
payment and performance of the Secured Obligations, except as otherwise
permitted under the Credit Agreement and, upon filing of the Uniform Commercial
Code financing statements, will constitute a perfected security interest with
respect to that portion of the Collateral for which perfection may be
accomplished by filing a financing statement under the Uniform Commercial Code.
(d) Information Regarding Names. It has disclosed in
writing to the Agent any trade names used to identify it in its business or in
the ownership of its properties.
(e) Absence of Other Liens. The Collateral is owned by it
free and clear of any Lien of any nature whatsoever, except as granted pursuant
to this Agreement and as permitted by the Credit Agreement, and, except as
provided by paragraph (b) of this Section 6, no financing statement has been
filed, under the Uni form Commercial Code as in effect in any state or
otherwise, covering any Collateral except as indicated on Schedule 7.01 to the
Credit Agreement.
(f) Survival of Representations and Warranties. All
representations and warranties of the Grantor contained in this Agreement shall
survive the execution, delivery and performance of this Agreement until the
termination of this Agreement pursuant to Section 28.
7. Records of Collateral. The Grantor agrees at all times to
keep or cause to be kept in all material respects accurate and complete
accounting records with respect to the Collateral, including, but not limited
to, a record of all payments and proceeds received. In addition, the Grantor
will provide the Agent with such further
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<PAGE>
schedules and/or information respecting the Collateral as the Agent may
reasonably request in writing.
8. Intentionally Omitted.
9. Protection of Security. The Grantor shall, at its own cost
and expense, take any and all actions reasonably necessary to defend title to
the Collateral against all persons and to defend the Security Interest of the
Agent in such Collateral, and the priority thereof (subject to limitations on
priority which resulted from the Agent's gross negligence or willful
misconduct), against any adverse Lien of any nature whatsoever except for Liens
permitted pursuant to Section 7.01 of the Credit Agreement, and except that
Grantor shall have no obligation to perfect a lien on vehicles unless and until
a Default shall have occurred.
10. Continuing Obligations of the Grantor. The Grantor shall
remain liable to observe and perform in all material respects all the conditions
and obligations to be observed and performed by it under each contract,
agreement, interest or obligation relating to the Collateral, all in accordance
with the terms and conditions thereof, and shall indemnify and hold harmless the
Agent and the Lenders from any and all such liabilities.
11. Use and Disposition of Collateral. Except as permitted by
the Credit Agreement, the Grantor shall not make or permit to be made any
assignment, pledge or hypothecation of the Collateral, or grant any security
interest in the Collateral except for the Security Interest. The Grantor shall
not make or permit to be made any transfer of any Collateral, except Inventory
in the ordinary course of business and disposition of vehicles in the ordinary
course of business and as otherwise permitted by the Credit Agreement, and the
Grantor shall remain at all times in possession of the Collateral other than
transfers to the Agent pursuant to the provisions hereof and as otherwise
provided in this Agreement or the Credit Agreement.
12. Limitation on Modifications of Accounts Receivable. Except
as permitted by Section 7.11 of the Credit Agreement, the Grantor will not,
without the Agent's prior written consent (which consent (prior to the
occurrence and continuance of an Event of Default) will not be unreasonably
withheld or delayed), grant any extension of the time of payment of any of its
Accounts Receivable, compromise, compound or settle the same for less than the
full amount thereof, release, in whole or in part, any person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business.
13. Collections. The Agent shall have the right, as the true
and lawful agent of the Grantor, with power of substitution for the Grantors and
in the Grantor's name, the Agent's name or otherwise, for the use and benefit of
the Agent and the Lenders, (i) to endorse the Grantor's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral that may come into its
5
<PAGE>
possession for deposit or collection in Grantor's accounts with the Agent; (ii)
to sign the name of the Grantor on any invoice or bill of lading relating to any
of the Collateral, drafts against Customers, assignments and verifications of
Accounts Receivable and notices to Customers that may come into its possession;
(iii) to send verifications based on a form acceptable to both Grantor and Agent
of Accounts Receivable to any Customer; and (iv) upon the occurrence and during
the continuance of an Event of Default, (A) to receive, endorse, assign and/or
deliver any and all notes, acceptances, checks, drafts, money orders or other
evidences or instruments of payment relating to the Collateral or any part
thereof, and the Grantor hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed, (B) to demand, collect, receive
payment of, give receipt for, extend the time of payment of and give discharges
and releases of all or any of the Collateral and/or release the Obligor thereon,
(C) to commence and prosecute any and all suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect or otherwise
realize on all or any of the Collateral or to enforce any rights in respect of
any Collateral, (D) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to or pertaining to all or any of the
Collateral, (E) to notify, or to require the Grantor to notify, the account
debtors obligated on any or all of the Accounts Receivable to make payment
thereof directly to the Agent, (F) to notify the Postal Service authorities to
change the address for delivery of mail addressed to the Grantor to such address
as the Agent may designate, (G) to accept the return of goods represented by any
of the Accounts Receivable, and (H) to use, sell, assign, transfer, pledge, make
any agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Agent were the
absolute owner of the Collateral for all purposes; provided, however, that
nothing herein contained shall be construed as requiring or obligating the Agent
or any Lender to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Agent or such Lender or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken by the Agent or any Lender or
omitted to be taken with respect to the Collateral or any part thereof shall
give rise to any defense, counterclaim or offset in favor of the Grantor or to
any claim or action against the Agent or any Lender in the absence of the gross
negligence or willful misconduct of the Agent or such Lender. It is understood
and agreed that the appointment of the Agent as the agent of the Grantor for the
purposes set forth above in this Section 13 is coupled with an interest and is
irrevocable. The provisions of this Section 13 shall in no event relieve the
Grantor of any of its obligations hereunder or under the Credit Agreement with
respect to the Collateral or any part thereof or impose any obligation on the
Agent or any Lender to proceed in any particular manner with respect to the
Collateral or any part thereof, or in any way limit the exercise by the Agent or
any Lender of any other or further right which it may have on the date of this
Agreement or hereafter, whether hereunder or by law or otherwise.
14. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, the Grantor agrees to deliver each item of
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Collateral to the Agent on demand, and it is agreed that the Agent shall have
the right to take any or all of the following actions at the same or different
times: with or without legal process and with or without previous notice or
demand for performance, to take possession of the Collateral and without
liability for trespass (except for actual damage caused by the Agent's gross
negligence or willful misconduct) to enter any premises where the Collateral may
be located for the purpose of taking possession of or removing the Collateral
and, generally, to exercise any and all rights afforded to a secured party
under, and subject to its obligations contained in, the Uniform Commercial Code
as in effect in any state or other applicable law. Without limiting the
generality of the foregoing, the Grantor agrees that the Agent shall have the
right, subject to applicable law, to sell or otherwise dispose of all or any
part of the Collateral, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery as the
Agent shall deem appropriate. Each such purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of the
Grantor, and the Grantor hereby waives (to the extent permitted by applicable
law) all rights of redemption, stay and appraisal which the Grantor now has or
may at any time in the future have under any rule of law or statute now existing
or hereafter enacted.
The Agent shall give the Grantor 10 days' written notice
(which the Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the NYUCC) of the Agent's intention to make any sale of Collateral.
Such notice, in the case of a public sale, shall state the time and place for
such sale. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Agent may fix and
state in the notice (if any) of such sale. Any such sale shall be conducted and
conform to the standards of commercial reasonableness as provided in Section
9-504(3) of the NYUCC to the extent such section is applicable to such sale. At
any such sale, the Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Agent may (in its sole and
absolute discretion) determine. The Agent shall not be obligated to make any
sale of any Collateral if it shall determine not to do so, regardless of the
fact that notice of sale of such Collateral shall have been given. The Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. At any public sale made pursuant to this Section 14, the
Agent may bid for or purchase, free (to the extent permitted by applicable law)
from any right of redemption, stay or appraisal on the part of the Grantor (all
said rights being also hereby waived and released to the extent permitted by
law), with respect to the Collateral or any part thereof offered for sale and
the Agent may make payment on account thereof by using any claim then due and
payable to the Agent or any Lender from the Grantor as a credit
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against the purchase price, and the Agent may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to the Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Agent shall be free to carry out such sale and purchase pursuant to such
agreement, and the Grantor shall not be entitled to the return of the Collateral
or any portion thereof subject thereto, notwith standing the fact that after the
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Secured Obligations paid in full and/or the Total
Commitment shall have been terminated. To the extent permitted by applicable
law, the Grantor shall remain liable for any deficiency. As an alternative to
exercising the power of sale herein conferred upon it, the Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
15. Application of Proceeds. The proceeds of any collection or
sale of Collateral, as well as any Collateral consisting of cash, shall be
applied by the Agent as follows:
FIRST, to the payment of all reasonable costs and
out-of-pocket expenses incurred by the Agent in connection with such collection
or sale or otherwise in connection with this Agreement or any of the Secured
Obligations, including, but not limited to, all court costs and the reasonable
fees and expenses of its agents and legal counsel, the repayment of all advances
made by the Agent hereunder on behalf of the Grantor and any other reasonable
out-of-pocket costs or expenses incurred in connection with the exercise of any
right or remedy hereunder;
SECOND, to the Agent to reimburse the Agent for that
portion of the payments, if any, made by it with respect to Letters of Credit
for which a Lender, as a participant in such Letter of Credit pursuant to
Section 2.18 of the Credit Agreement, failed to pay its pro rata share thereof
as required pursuant to such Section 2.18;
THIRD, to the Agent to be held as cash collateral to the
extent of the undrawn amounts, if any, of outstanding Letters of Credit;
FOURTH, to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lenders in accordance
with the amounts of the Loans made by them pursuant to the Credit Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Grantor, its successors and assigns, or as a
court of competent jurisdiction may otherwise direct.
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Upon any sale of the Collateral by the Agent (including, without limitation,
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Agent or such officer or be
answerable in any way for the misapplication thereof.
16. Locations of Collateral; Place of Business. The Grantor
hereby represents and warrants that all the Collateral is located at the
locations listed on Schedule I hereto and that its federal employer
identification number is as set forth on said Schedule. The Grantor agrees not
to establish, or permit to be established, any other location for Collateral
unless all filings under the Uniform Commercial Code as in effect in any state
or otherwise which are required by this Agreement or the Credit Agreement to be
made with respect to the Collateral have been made and the Agent has a valid,
legal and perfected first priority security interest in the Collateral.
(a) The Grantor confirms that its chief executive office is
located as indicated on Schedule I hereto. The Grantor agrees not to change, or
permit to be changed, the location of its chief executive office unless all
filings under the Uniform Commercial Code or otherwise which are required by
this Agreement or the Credit Agreement to be made have been made and the Agent
has a valid, legal and perfected first priority security interest.
17. Security Interest Absolute. All rights of the Agent
hereunder, the Security Interest, and all obligations of the Grantor hereunder,
shall be absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document or any other
agreement with respect to any of the Secured Obligations (other than as
resulting from the Agent's gross negligence or willful misconduct), (ii) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Secured Obligations, or any other amendment or waiver of or
consent to any departure from the Credit Agreement or any other Loan Document,
(iii) any exchange, release or nonperfection of any other Collateral, or any
release or amendment or waiver of or consent to or departure from any guarantee,
for all or any of the Secured Obligations, or (iv) any other circumstance which
might otherwise constitute a defense available to, or discharge of, the Grantor,
any of the Guarantors or any other obligor in respect of the Secured Obligations
or in respect of this Agreement.
18. No Waiver. No failure on the part of the Agent to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy by the Agent preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The Agent and the Lenders shall not be deemed to have waived any rights
hereunder or under any other agreement or instrument unless such waiver shall be
in writing and signed by such parties.
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19. Agent Appointed Attorney-in-Fact. The Grantor hereby
appoints the Agent the attorney-in-fact of the Grantor, which appointment shall
be effective upon the occurrence and continuance of an Event of Default, solely
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Agent may deem reasonably
necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest.
20. Agent's Fees and Expenses. The Grantor shall be obligated
to, upon demand, pay to the Agent the amount of any and all reasonable
out-of-pocket expenses, including the reasonable fees and expenses of its
counsel and of any experts or agents which the Agent may incur in connection
with (i) the custody or preservation of (in each case upon the occurrence and
during the continuance of an Event of Default), or the sale of, collection from,
or other realization upon, any of the Collateral in accordance herewith or (ii)
the exercise or enforcement of any of the rights of the Agent hereunder in
accordance herewith. In addition, the Grantor indemnifies and holds the Agent
and the Lenders harmless from and against any and all liability incurred by the
Agent or the Lenders hereunder or in connection herewith, unless such liability
shall be due to the gross negligence or willful misconduct of the Agent or the
Lenders, as the case may be. Any such amounts payable as provided hereunder or
thereunder shall be additional Secured Obligations secured hereby and by the
other Security Documents.
21. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Grantor shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or any cash or
property held by the Agent as Collateral under this Agreement, except as
contemplated by this Agreement or the Credit Agreement, and except that the
Agent may not assign its rights hereunder except in connection with a
resignation of the Agent and appointment of a substitute Agent in the manner
permitted by the Credit Agreement.
22. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
23. Notices. All communications and notices hereunder shall be
in writing and given as provided in the Credit Agreement.
24. Credit Agreement. In the event of any inconsistency or
conflict between the terms and provisions of the Credit Agreement and the terms
and provisions of this Agreement, or with respect to any payment provisions
which could be
10
<PAGE>
construed as requiring duplicative payments, the terms and provisions of the
Credit Agreement shall control. Nothing herein shall require the Grantor to make
a duplicate payment if the payment is otherwise provided for in any other Loan
Document.
25. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable the
remaining provisions contained herein shall not in any way be affected or
impaired.
26. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
27. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Agreement shall
be effective when a counterpart which bears the signature of the Grantor shall
have been delivered to the Agent.
28. Termination. This Agreement and the Security Interest
shall terminate when (a) all the Secured Obligations have been fully and
indefeasibly paid in cash, (b) the Lenders have no further commitment to make
any Loans under the Credit Agreement and (c) the Agent shall have no further
obligation to issue any Letters of Credit, at which time the Agent shall (i)
return to the Grantor any Collateral in the Agent's possession free and clear of
any Liens created in favor of the Agent and (ii) execute and deliver to the
Grantor all Uniform Commercial Code termination statements and similar documents
(in form and substance reasonably satisfactory to the Grantor) which the Grantor
shall reasonably request in order to evidence and effect such termination;
provided, however, that all indemnities of the Grantor contained in this
Agreement shall survive, and remain operative and in full force and effect
regardless of, the termination of this Agreement.
[Remainder of Page Intentionally Left Blank]
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Security Agreement as of the day and year first above written.
THE B. MANISCHEWITZ COMPANY, LLC
By: _________________________________________
Richard A. Bernstein, its Managing Member
THE CHASE MANHATTAN BANK, as Agent
By: _________________________________________
Name:
Title:
[Signature Page to Security Agreement]
<PAGE>
SCHEDULE I to the
Security Agreement
Federal Employer Identification Number of the Grantor
-----------------------------------------------------
51-0374244
Chief Executive Office of the Grantor
-------------------------------------
One Manischewitz Plaza
Jersey City, NJ 07302
Trade names of the Grantor
--------------------------
Horowitz Margareten
Goodman
Manischewitz
<PAGE>
Locations of Collateral
-----------------------
<TABLE>
<CAPTION>
Average
Monthly
Warehouse Address County Inv. $ Value
--------- ------- ------ ------------
<S> <C> <C> <C>
Harris Storage P.O. Box 729 Millville, NJ Cumberland $3,000,000
U.S. Cold Storage 6983 NW 37th Street, Miami, FL Dade $25,000
Seaboard Warehouse Terminals 3455 NW 54th Street, Miami, FL Dade $55,000
T & T Freezer Northwest Blvd., Vineland, NJ Cumberland $275,000
Accern Warehouse 63-69 Hook Road, Bayonne, NJ Hudson $450,000
National Distribution - Kearny 1200 Harrison Ave., Kearny, NJ Hudson $500,000
National Distribution - Vineland 71 West Park Ave., Vineland, NJ Cumberland $375,000
Safeway Freezer Storage 97 North Mill Road, Vineland, NJ Cumberland $150,000
Dependable Egg 593 McDonald Ave., Brooklyn, NY 11218 Kings $53,850
Joyce Foods Products Boumar Place, Elmwood Park, NJ 07407 Bergen $205,000
Stauffer Biscuit Belmont & 6th Ave., York, PA 17405 Berks $38,500
Field Container 2300 Goddard Pkwy, Salisbury, MD 21801 Wicomico $65,000
Carousel Foods 535 Smith St., Farmingdale, NY 11735 Suffolk $5,000
Standard Folding Cartons 85th St. & 24th Ave., Jackson Heights, NY Queens $47,000
11370
Zerega & Sons Inc. 20-01 Broadway, P.O. Box 241, Fair Lawn, Bergen $40,000
NJ 07410
Christian Salvesen 1 Enterprise Ave., Secaucus, NJ 07094 Hudson $3,000
</TABLE>
14
<PAGE>
EXHIBIT F
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Amended and Restated Credit
Agreement, dated as of May 1, 1998 (as amended, modified or supplemented from
time to time, the "Amended Credit Agreement"), by and among Millbrook
Distribution Services Inc., a Delaware corporation ("Millbrook"), The B.
Manischewitz Company, LLC ("Manischewitz" and, collectively with Millbrook, the
"Borrowers"), the lenders named therein (collectively, the "Lenders"), The Chase
Manhattan Bank, as agent for the Lenders (in such capacity, the "Agent"), and
NationsBank, N.A., as co-agent for the Lenders. Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned to such terms
in the Amended Credit Agreement.
1. The Assignor hereby sells and assigns, without recourse, to
the Assignee, and the Assignee hereby purchases and assumes, without recourse,
from the Assignor, effective as of the Effective Date as set forth on the second
page hereof, the interests set forth on the second page hereof (the "Assigned
Interests") in the Assignor's rights and obligations under the Amended Credit
Agreement, including, without limitation, the interests set forth on the second
page hereof in the Revolving Credit Commitment and/or Term Loan Commitment of
the Assignor on the Effective Date (as hereinafter defined) and/or the interests
set forth on the second page hereof in the Revolving Credit Loans, Letters of
Credit and/or Term Loan owing to the Assignor outstanding on the Effective Date,
together with unpaid interest accrued on the assigned Loans to the Effective
Date and the amount, if any, set forth on the second page hereof of the fees
accrued to the Effective Date for the account of the Assignor. Each of the
Assignor and the Assignee hereby makes and agrees to be bound by all the
representations, warranties and agreements set forth in Section 11.03(d) of the
Amended Credit Agreement, a copy of which has been received by each such party.
From and after the Effective Date, (i) the Assignee shall be a party to and be
bound by the provisions of the Amended Credit Agreement and, to the extent of
the interests assigned by this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and under the other Loan Documents and (ii)
the Assignor shall, to the extent of the interests assigned by this Assignment
and Acceptance, relinquish its rights and be released from its obligations under
the Amended Credit Agreement.
2. This Assignment and Acceptance is being delivered to the
Agent together with (i) the Notes evidencing the Loans included in the Assigned
Interests, (ii) if the Assignee is organized under the laws of a jurisdiction
outside the United States, the forms specified in Section 2.16(f) of the Amended
Credit Agreement, duly completed and executed by such Assignee, (iii) if the
Assignee is not already a Lender under the Amended Credit Agreement, an
Administrative Questionnaire in the form annexed hereto and (iv) a processing
and recordation fee of $3,000.
3. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Date of Assignment:
Legal Name of Assignor:
<PAGE>
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
(may not be fewer than five Business
Days after the Date of Assignment):
<TABLE>
<CAPTION>
Percentage Assigned of
Facility/Commitment (set
forth, to at least four
decimals, as a percentage of
the Facility and the aggregate
Commitments of all Lenders
Facility Principal Amount Assigned thereunder)
- -------- ------------------------- -------------------------------
<S> <C> <C>
Term Loan Commitment
Assigned: $ %
Revolving Credit
Commitment Assigned: $ %
Term Loan:
Revolving Credit Loans:
Participation in Letters
of Credit:
Fees Assigned (if any):
</TABLE>
The terms set forth above are hereby Accepted:
agreed to:
____________________, as Assignor THE CHASE MANHATTAN BANK
By:____________________________ By:____________________________
Name: Name:
Title: Title:
____________________, as Assignee MILLBROOK DISTRIBUTION SERVICES
INC.
By:____________________________
Name:
Title:
2
<PAGE>
THE B. MANISCHEWITZ COMPANY, LLC
By:___________________________________
Richard A. Bernstein, its Managing Member
<PAGE>
Administrative Questionnaire
Millbrook Distribution Services Inc.
The B. Manischewitz Company, LLC
$99,510,000 Term Loan and Revolving Credit Agreement
NOTE TO PARTICIPANTS: PLEASE FORWARD THIS COMPLETED FORM AS
SOON AS POSSIBLE TO THE CHASE MANHATTAN
BANK, VIA TELECOPIER TO (212) ________.
PLEASE TYPE ALL INFORMATION.
AGENT: The Chase Manhattan Bank
600 Fifth Avenue
New York, New York 10020
<TABLE>
<CAPTION>
<S> <C> <C>
CONTACTS: (212) ________ Syndications
- --------
(212) ________ Structured
Finance
OPERATIONAL CONTACT: (212) ________
- -------------------
TELECOPIER: (212) ________
- ----------
Full Legal Name of Your
Institution: ________________________________________________
Exact Name of Signing Officer: ________________________________________________
Title of Signing Officer: ________________________________________________
Business Address for Delivery of
Execution Copies of Credit
Agreement. (Please do not use
P.O. box address; hand deliveries
cannot be made.): ________________________________________________
________________________________________________
Signing Officer's Phone No.: ________________________________________________
Alternate Officer Contact: ________________________________________________
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Alternate Officer's Phone No.: ________________________________________________
</TABLE>
PRIMARY CONTACT INFORMATION
These contacts are for critical notification (drawdowns, repayments, rate
setting, etc.)
Institution's Name: ________________________________________________
Address: ________________________________________________
Primary Contact: ________________________________________________
Title and Department: ________________________________________________
Phone Number: ________________________________________________
Primary Telecopier: ________________________________________________
Alternate Telecopier: ________________________________________________
ALTERNATE CONTACT INFORMATION
Alternate Contact: ________________________________________________
Title and Department: ________________________________________________
Phone Number: ________________________________________________
Primary Telecopier: ________________________________________________
Alternate Telecopier: ________________________________________________
GENERAL OPERATIONAL INFORMATION
Wire Instructions to Your Bank Name: ____________________________________
Institution: Dept.: ____________________________________
ABA #: ____________________________________
A/C #: ____________________________________
Attn: ____________________________________
Ref: ____________________________________
3
<PAGE>
Telex Information: Contact Name: _________________________________
Number: _________________________________
Answerback: _________________________________
If any changes are made to the above information, please notify by telecopier to
_______________ at (212) ________.
Movement of Funds: To us: Wire Fed Funds to:
The Chase Manhattan Bank
______________________
______________________
New York, New York
Attn: _______________
Reference: Millbrook Distribution Services Inc.
The B. Manischewitz Company, LLC
4
<PAGE>
EXHIBIT G
SECURITY AGREEMENT AND MORTGAGE -
PATENTS AND TRADEMARKS
AGREEMENT made this 31st day of March, 1997 (this "Agreement")
by and between MILLBROOK DISTRIBUTION SERVICES INC., an Indiana corporation
("Debtor") having an office at P.O. Box 35 - Route 56, Huntoon Memorial Highway,
Leicester, Massachusetts 01524, and THE CHASE MANHATTAN BANK, a New York banking
corporation having an office at 633 Third Avenue, New York, New York 10017, as
agent (referred to herein as the "Secured Party") for the benefit of (i) the
lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of the Credit
Agreement dated as of the date hereof, among the Debtor, the Lenders, the
Secured Party and NationsBank, N.A., as co-agent (the "Co-Agent") (as amended,
modified or supplemented from time to time in accordance with its terms, the
"Credit Agreement") and (ii) for itself as issuer of the Letters of Credit and
party to the Rate Agreements, if applicable.
A. Debtor has adopted the terms and designs described in
Schedule A annexed hereto and made a part hereof.
B. Debtor is the owner and holder of the patents listed on
Schedule B hereto.
C. The Secured Party, the Co-Agent and the Lenders have agreed
to extend Loans and certain other financial accommodations including, without
limitation, the issuance of Letters of Credit to the Debtor pursuant to, and
subject to the terms and conditions of, the Credit Agreement. The obligation of
the Lenders to extend such Loans and of the Secured Party to issue Letters of
Credit under the Credit Agreement and of any Lender to extend financial
accommodations under the Rate Agreements, if applicable, is conditioned on the
execution and delivery by the Debtor of a security agreement in the form hereof
to secure the following (the "Secured Obligations"): all Obligations (such
Obligations to include, without limitation, the due and punctual payment and
performance of (a) all obligations to a Lender, if any, at any time and from
time to time under the Rate Agreements, (b) the principal of and interest on the
Loans (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a), and interest that, but for the filing of a petition in
bankruptcy with respect to the Debtor, would accrue on such obligations, whether
or not a claim is allowed against the Debtor for such interest in the related
bankruptcy proceeding), when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, (c) Indebtedness at any
time and from time to time under the Letters of Credit, (d) all obligations of
the Debtor at any time and from time to time under this security agreement and
(e) all other obligations of the Debtor at any time and from time to time under
the Credit Agreement and the other Loan Documents).
<PAGE>
NOW, THEREFORE, IT IS AGREED that, as security for the full
and prompt payment and performance of the Secured Obligations, Debtor does
hereby mortgage to and pledge with the Secured Party for its own benefit and the
benefit of the Lenders, and grant to the Secured Party a security interest in,
all of its right, title and interest in and to (i) each of the Trademarks (as
hereinafter defined), and the goodwill of the business symbolized by each of the
Trademarks, and each of the registrations described in Schedule A; (ii) each of
the Patents (as hereinafter defined) and each of the registrations listed on
Schedule B hereto; (iii) the right (but not the obligation) to register claims
under any state or federal law or regulation or any law or regulation of any
foreign country and to apply for, renew and extend the Trademarks or Patents;
(iv) the right (but not the obligation) to sue or bring opposition or
cancellation proceedings in the name of the Debtor or in the name of the Secured
Party or otherwise for past, present and future infringements of the Trademarks
or Patents and all rights (but not obligations) corresponding thereto in the
United States and any foreign country; and (v) any and all proceeds of the
foregoing (collectively, the "Collateral").
1. Terms defined in the Credit Agreement and not otherwise
defined herein, shall have the meaning set forth in the Credit Agreement. As
used in this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United
States or any other country, all right, title and interest therein and thereto,
and all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or
divisionals thereof and all licenses thereof.
"Trademarks" shall mean (i) all trademarks, trade names,
trade styles, service marks, prints and labels on which said trademarks, trade
names, trade styles and service marks have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof, or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule A annexed hereto and made a part hereof, and
(ii) all reissues, extensions or renewals thereof and all licenses thereof.
2
<PAGE>
2. Debtor hereby represents, warrants, covenants and agrees as
follows:
(a) Debtor has the sole, full and clear title to the
registered U.S. Trademarks set forth on Schedule A annexed hereto and such
registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, substantially in the
forms of Exhibits 1 and 2 hereof, respectively, reasonably requested by the
Secured Party at any time to evidence, perfect, maintain, record and enforce the
Secured Party's security interest in the Collateral and Debtor hereby authorizes
the Secured Party to execute and file one or more financing statements (and
similar documents) or copies thereof or of this Security Agreement with respect
to the Collateral signed only by the Secured Party.
(c) Debtor (either itself or through licensees) will maintain
the Trademarks in full force free from any claim of abandonment for nonuse and
Debtor will not (and will not permit any licensee thereof to) do any act or
knowingly omit to do any act whereby any Trademark may become invalidated.
(d) Debtor is the sole registered owner of each of the Patents
shown on Schedule B hereto and the registrations thereof are valid and in full
force and effect. None of the Patents has been abandoned or dedicated, and,
except to the extent that the Secured Party, upon prior written notice by
Debtor, shall consent, Debtor will not do any act, or omit to do any act,
whereby the Patents may become abandoned or dedicated unless such abandonment or
declaration would not have a Material Adverse Affect and in any event shall
notify the Secured Party immediately if it knows of any reason or has reason to
know that any application or registration may become abandoned or dedicated.
(e) The Debtor shall be obligated to, upon demand, pay to the
Secured Party the amount of any and all reasonable out-of-pocket expenses,
including the reasonable fees and expenses of its counsel and of any experts or
agents which the Secured Party may incur in connection with (i) the custody or
preservation of (after the occurrence and continuance of an Event of Default),
or the sale of, collection from, or other realization upon, any of the
Collateral in accordance herewith, or (ii) the exercise or enforcement of any of
the rights of the Secured Party hereunder in accordance herewith. In addition,
the Debtor indemnifies and holds the Secured Party and the Lenders harmless from
and against any and all liability incurred by the Secured Party or the Lenders
hereunder or in connection herewith, unless such liability shall be due to the
gross negligence or willful misconduct of the Secured Party or the Lenders, as
the case may be. Any such amounts payable as provided hereunder or thereunder
shall be additional Secured Obligations secured hereby and by the other Security
Documents.
3
<PAGE>
(f) In no event shall Debtor, either itself or through any
agent, employee, licensee or designee, (i) file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency of the United States, any State
thereof, any other country or any political subdivision thereof or (ii) file any
assignment of any patent or trademark, which Debtor may acquire from a third
party, with the United States Patent and Trademark Office or any similar office
or agency of the United States, any State thereof, any other country or any
political subdivision thereof, unless Debtor shall, on or prior to the date of
such filing, notify the Secured Party thereof, and, upon the written request of
the Secured Party, execute and deliver any and all assignments, agreements,
instruments, documents and papers as the Secured Party may reasonably request to
evidence the Secured Party's interest in such Patent or Trademark and the
goodwill and general intangibles of Debtor relating thereto or represented
thereby, and Debtor hereby appoints the Secured Party its attorney-in-fact,
which appointment shall be effective upon the occurrence and continuance of an
Event of Default, to execute and file all such writings for the foregoing
purposes, all reasonable acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Secured Obligations are paid in full.
(g) Debtor has the right and power to make the assignment and
to grant the security interest herein granted; and the Collateral is not now,
and at all times hereafter will not be, subject to any liens, mortgages,
assignments, security interests or encumbrances of any nature whatsoever, except
in favor of the Secured Party and as permitted in the Credit Agreement, and to
the best knowledge of Debtor none of the Collateral is subject to any claim.
(h) Except to the extent that Secured Party, upon prior
written notice from Debtor, shall consent, and except as set forth in the Credit
Agreement, Debtor will not assign, sell, mortgage, lease, transfer, pledge,
hypothecate, grant a security interest in or lien upon, encumber, grant an
exclusive or non-exclusive license, or otherwise dispose of any of the
Collateral, and nothing in this Agreement shall be deemed a consent by the
Secured Party to any such action except as expressly permitted herein or in the
Credit Agreement.
(i) As of the date hereof neither Debtor nor any subsidiary
thereof owns any Patents or Trademarks or has any Patents or Trademarks
registered in, or the subject of pending applications in, the United States
Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency of the United States, any State thereof, any other country or any
political subdivision thereof, to maintain each application and registration of
the Trademarks and Patents, including, without limitation, filing of renewals,
affidavits of use, affidavits of incontestability and
4
<PAGE>
opposition, interference and cancellation proceedings (except to the extent that
dedication, abandonment or invalidation is permitted under paragraphs 2(c) and
2(d) hereof).
(k) Debtor assumes all responsibility and liability arising
from the use of the Trademarks, and Debtor hereby indemnifies and holds Secured
Party harmless from and against any claim, suit, loss, damage or expense
(including reasonable attorneys' fees) arising out of any alleged defect in any
product promoted, distributed or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Subject to Debtor's right to contest as provided in the
Credit Agreement, Secured Party may, in its sole discretion, pay any amount or
do any act required of Debtor hereunder or requested by Secured Party to
preserve, defend, protect, maintain, record or enforce Debtor's obligations
contained herein, the Secured Obligations, the Collateral, or the right, title
and interest granted Secured Party herein. In the event Secured Party makes a
payment pursuant to this subparagraph, such payment shall be deemed an advance
by Secured Party to Debtor and shall be payable on demand , and if not paid,
shall constitute an Alternate Base Rate Loan.
(m) Debtor agrees that if it, or any affiliate or subsidiary
thereof, learns of any use by any person of any term or design likely to cause
confusion with any Trademark, it shall promptly notify Secured Party of such use
and, if requested by Secured Party, shall join with Secured Party, at its
expense, in such action as Secured Party, in its reasonable discretion may deem
advisable for the protection of Secured Party's interest in and to such
Trademarks (except to the extent abandonment of such Trademark may be permitted
under Paragraph 2(c) and 2(d)).
(n) All licenses of its Trademarks and Patents which Debtor
has granted to third parties are set forth in Schedule C hereto.
(o) This Agreement assigns and, when this Agreement has been
filed and recorded with the United States Patent and Trademark Office and
financing statements describing the Collateral have been filed with the filing
offices set forth on Schedule D hereto, this Agreement will create a valid and
perfected first priority security interest in the Collateral, securing the
payment of the Secured Obligations.
(p) If Debtor shall obtain rights to any new Trademarks or
Patents, the provisions of this Agreement shall automatically apply thereto.
Debtor shall promptly
5
<PAGE>
notify Secured Party in writing of any rights to any new Trademarks or Patents
acquired by Debtor after the date hereof and of any registrations issued or
applications for registration made after the date hereof. Concurrently with the
filing of an application for registration for any Trademarks or Patents, Debtor
shall execute, deliver and record in all places where this Agreement is recorded
an appropriate agreement, substantially in the form hereof, with appropriate
insertions, or an amendment to this Agreement, in form and substance reasonably
satisfactory to the Secured Party, pursuant to which Debtor shall assign and
grant a security interest to the extent of its interest in such registration as
provided herein to the Secured Party.
3. Upon the occurrence and during the continuance of an Event
of Default, in addition to all other rights and remedies of the Secured Party,
whether under law, the Credit Agreement or otherwise, all such rights and
remedies being cumulative, not exclusive and enforceable alternatively,
successively or concurrently, without (except as provided herein) notice to, or
consent by, Debtor, the Secured Party shall have the following rights and
remedies: (a) subject to any existing license of the Trademarks and Patents
which Debtor has granted to third parties and which is set forth in Schedule C
hereto, the Secured Party may, at any time and from time to time, upon 10 days'
prior notice to Debtor, license, whether general, special or otherwise, and
whether on an exclusive or nonexclusive basis, any of the Patents or Trademarks,
throughout the world for such term or terms, on such conditions, and in such
manner, as the Secured Party shall in its sole discretion determine; (b) the
Secured Party may (without assuming any obligations or liability thereunder),
at any time, enforce (and shall have the exclusive right to enforce) against any
licensee or sublicensee all rights and remedies of Debtor in, to and under any
one or more license agreements with respect to the Collateral, and take or
refrain from taking any action under any thereof, and Debtor hereby releases the
Secured Party from, and agrees to hold the Secured Party free and harmless from
and against any claims arising out of, any action taken or omitted to be taken
with respect to any such license agreement, except for damages caused by Secured
Party's gross negligence or willful misconduct; (c) the Secured Party may, at
any time and from time to time, upon 10 days' prior written notice to Debtor,
assign, sell, or otherwise dispose of, the Collateral or any of it, either with
or without special or other conditions or stipulations, with power to buy the
Collateral or any part of it, and with power also to execute assurances, and do
all other acts and things for completing the assignment, sale or disposition
which the Secured Party shall, in its sole discretion, deem reasonably
appropriate or proper, and provided that such assignment, sale or disposition
conforms to the standards of commercial reasonableness as provided in the
Uniform Commercial Code to the extent applicable thereto; (d) with respect to
any Patents or Trademarks that are the subject of any action taken pursuant to
this Section 3, Debtor shall not make any further use of such Patents or
Trademarks or any mark similar thereto for any purpose; and (e) in addition to
the foregoing, in order to implement the assignment, sale or other disposal of
any of the Collateral pursuant to subparagraph 3(c) hereof, the Secured Party
may, at any time, pursuant to the authority granted in the Powers of Attorney
described in paragraph 4 hereof (such authority becoming effective on the
occurrence or continuation as hereinabove provided of an Event of Default),
execute and deliver on behalf of Debtor, one or more instruments of
6
<PAGE>
assignment of the Patents or Trademarks (or any application or registration
thereof), in form suitable for filing, recording or registration in any country.
Debtor agrees to pay when due all reasonable costs incurred in any such transfer
of the Patents or Trademarks, including any taxes, fees and reasonable
attorneys' fees, and all such costs shall be added to the Secured Obligations.
The Secured Party may apply the proceeds actually received from any such
license, assignment, sale or other disposition to the reasonable costs and
out-of-pocket expenses thereof, including, without limitation, reasonable
attorneys' fees and all other expenses which may be reasonably incurred by the
Secured Party, and then to the Secured Obligations, in such order as to
principal or interest as the Secured Party may desire; and Debtor shall remain
liable and will pay the Secured Party on demand any deficiency remaining,
together with interest thereon at a rate equal to the highest rate then payable
on the Secured Obligations and the balance of any expenses unpaid. Nothing
herein contained shall be construed as requiring the Secured Party to take any
such action at any time.
The proceeds of any sale of Collateral, as well as any
Collateral consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the payment of all reasonable costs and
out-of-pocket expenses incurred by the Secured Party in connection with such
sale or otherwise in connection with this Agreement or any of the Secured
Obligations, including, but not limited to, all court costs and the reasonable
fees and expenses of its agents and legal counsel, the repayment of all advances
made by the Secured Party hereunder on behalf of the Debtor and any other
reasonable out-of-pocket costs or expenses incurred in connection with the
exercise of any right or remedy hereunder;
SECOND, to the Secured Party to reimburse the Secured Party
for that portion of the payments, if any, made by it with respect to Letters of
Credit for which a Lender, as a participant in such Letter of Credit pursuant to
Section 2.18 of the Credit Agreement, failed to pay its pro rata share thereof
as required pursuant to such Section 2.18;
THIRD, to the Secured Party to be held as cash collateral to
the extent of the undrawn amount, if any, or outstanding Letters of Credit;
FOURTH, pro rata to the payment in full of (i) principal and
interest in respect of any Loans outstanding (pro rata as among the Lenders in
accordance with the amounts of the Loans made by them pursuant to the Credit
Agreement) and (ii) all unpaid monetary obligations of the Debtor to any Lender
under a Rate Agreement, if applicable;
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
7
<PAGE>
SIXTH, to the Debtor, its successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor
is executing and delivering to the Secured Party, in the form of Exhibit 3
hereto, five originals of a Power of Attorney for the implementation of the
assignment, sale or other disposal of the Trademarks and Patents pursuant to
paragraphs 3(d) and (e) hereof and Debtor hereby releases the Secured Party from
any claims, causes of action and demands at any time arising out of or with
respect to any actions taken or omitted to be taken by the Secured Party under
the powers of attorney granted herein, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of the Secured Party.
5. All rights of the Secured Party hereunder, the security
interest granted to the Secured Party hereunder, and all obligations of the
Debtor hereunder, shall be absolute and unconditional irrespective of (i) any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document or any other agreement with respect to any of the Secured Obligations
other than as resulting from the Agent's gross negligence or willful misconduct,
(ii) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Secured Obligations, or any other amendment or waiver of
or consent to any departure from the Credit Agreement or any other Loan
Document, (iii) any exchange, release or nonperfection of any other Collateral,
or any release or amendment or waiver of or consent to or departure from any
guarantee, for all or any of the Secured Obligations, or (iv) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, the Debtor, any of the Guarantors or any other obligor in respect
of the Secured Obligations or in respect of this Agreement.
6. No failure on the part of the Secured Party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Secured Party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The Secured Party and the Lenders shall not be deemed to have waived any
rights hereunder or under any other agreement or instrument unless such waiver
shall be in writing and signed by such parties.
7. This Agreement, and the terms, covenants and conditions
hereof, shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that the Debtor shall not be
permitted to assign this Agreement or any interest herein or in the Collateral,
or any part thereof, or any cash or property held by the Secured Party as
Collateral under this Agreement, except as contemplated by this Agreement or the
Credit Agreement. The Agent may not assign its rights hereunder, except in
connection with a resignation of the Agent and the appointment of a substitute
Agent in the manner permitted by the Credit Agreement.
8
<PAGE>
8. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
9. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement.
10. In the event of any inconsistency or conflict between the
terms and provisions of the Credit Agreement and the terms and provisions of
this Agreement, or with respect to any payment provisions which could be
construed as requiring duplicative payments, the terms and provisions of the
Credit Agreement shall control. Nothing herein shall require the Debtor to make
a duplicate payment if the payment is otherwise provided for in any other Loan
Document.
11. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable the remaining
provisions contained herein shall not in any way be affected or impaired.
12. Section headings used herein are for convenience only and
are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
13. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when a counterpart which bears the signature of the Debtor shall have
been delivered to the Secured Party.
14. This Agreement and the security interest granted hereunder
shall terminate when (a) all the Secured Obligations have been fully and
indefeasibly paid in cash, (b) the Lenders have no further commitment to make
any Loans under the Credit Agreement, (c) the Secured Party shall have no
further obligation to issue any Letters of Credit, and (d) the Lenders (or any
of them) have no further obligation to extend financial accommodations under the
Rate Agreements, if applicable, at which time the Secured Party shall execute
and deliver to the Debtor all Uniform Commercial Code termination statements,
terminations of assignment and similar documents (in form and substance
reasonably satisfactory to the Debtor) which the Debtor shall reasonably request
to evidence such termination and release the security interest granted hereunder
free and clear of any Liens created in favor of the Agent; provided, however,
that all indemnities of the Debtor contained in this Agreement shall survive,
and remain operative and in full force and effect regardless of, the termination
of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, Debtor and the Secured Party have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
MILLBROOK DISTRIBUTION SERVICES INC.
By: ________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Agent
By: ________________________________
Name:
Title:
<PAGE>
Schedule A to Security Agreement
--------------------------------
TRADEMARKS
----------
APPLICATIONS
------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Trademark Filing Date Serial Number
- --------- ----------- -------------
<S> <C> <C>
MILLBROOK RETAIL SOLUTIONS October 7, 1996 75/177,885
& Design
- ---------------------------------------------------------------------------------------------
</TABLE>
FEDERAL TRADEMARKS
------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Trademark Registration Date Registration Number
- --------- ----------------- -------------------
<S> <C> <C>
CARRIAGE TRADE November 26, 1963 760,818
HAND HANDLER January 27, 1987 1,426,619
CANINE FAIR April 7, 1987 1,435,562
FELINE FAIR April 7, 1987 1,435,563
VALU STAR July 4, 1989 1,546,008
EDUCATOR May 8,1990 1,595,624
BRIGHT IDEA September 3, 1991 1,655,219
EDUCATOR & Des December 17, 1991 1,668,703
BEER CHASERS September 15,1992 1,716,233
SPACE SMART September 7, 1993 1,791,801
MILLBROOK MERCHANDISING December 24, 1996 2,025,274
FOR EXCELLENCE & Design
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STATE REGISTRATIONS
-------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Trademark State Registration Date Registration Number
- --------- ----- ----------------- -------------------
<S> <C> <C> <C>
EDUCATOR Massachusetts October 15, 1975 26,516/51,790
BEER CHASERS Massachusetts October 15, 1975 26,515/51,791
DUFFY'S DISCOUNT Massachusetts January 2, 1996 52,097
- -----------------------------------------------------------------------------------------------------------
</TABLE>
UNREGISTERED TRADEMARKS
-----------------------
COMMON LAW
------------
Trademark
---------
RIGHTSOURCE
HI-Z
------------
TRADENAMES
----------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Type Name Place
- ---- ---- -----
<S> <C> <C>
Assumed Name DUFFY'S CLOSE OUT Johnson County, Arkansas
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B to Security Agreement
--------------------------------
PATENTS
-------
<TABLE>
<CAPTION>
Title Date Issued Patent No.
----- ----------- ----------
<S> <C> <C>
</TABLE>
<PAGE>
Schedule C to Security Agreement
--------------------------------
LICENSES
--------
<PAGE>
Schedule D to Security Agreement
--------------------------------
FILING OFFICES
--------------
<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
-----------------------
(PATENTS)
---------
WHEREAS, Millbrook Distribution Services Inc., an Indiana
corporation (herein referred to as "Assignor"), owns the letters patent, and/or
applications for letters patent, of the United States, more particularly
described on Schedule 1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to The Chase Manhattan Bank, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for the benefit of (i) the lenders (the "Lenders") named in Schedules 2.01(a)
and 2.01(b) of the Credit Agreement dated as of the date hereof, among the
Assignor, the Lenders, the Assignee and NationsBank, N.A., as co-agent (as
amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters of
Credit and party to the Rate Agreements, if applicable, and Assignor has entered
into a Security Agreement and Mortgage-Patents and Trademarks dated the date
hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in all right, title and
interest of Assignor in and to the Patents, together with any reissue,
continuation, con tinuation-in-part or extension thereof (the "Collateral"), to
secure the prompt payment, performance and observance of the Secured
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in the Collateral to secure
the prompt payment, performance and observance of the Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 633 Third Avenue, New York, New York
10017.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the ____ day of
March, 1997.
<PAGE>
MILLBROOK DISTRIBUTION SERVICES INC.
By: ________________________________
Name: _________________________
Title: _________________________
2
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
---------------------------------------
PATENTS
-------
<TABLE>
<CAPTION>
Title Date Issued Patent No.
----- ----------- ----------
<S> <C> <C>
</TABLE>
3
<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
-----------------------
(TRADEMARKS)
------------
WHEREAS, Millbrook Distribution Services Inc., an Indiana
corporation (herein referred to as "Assignor"), has adopted, used and is using
the trademarks listed on the annexed Schedule 2-A, which trademarks are
registered in the United States Patent and Trademark Office (the "Trademarks");
WHEREAS, Assignor is obligated to The Chase Manhattan Bank, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for the benefit of (i) the lenders (the "Lenders") named in Schedules 2.01(a)
and 2.01(b) of the Credit Agreement dated as of the date hereof, among the
Assignor, the Lender, the Assignee and NationsBank, N.A., as Co-Agent (as
amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters of
Credit and party to the Rate Agreements, if applicable, and Assignor has entered
into a Security Agreement and Mortgage-Patents and Trademarks dated the date
hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee and granted to Assignee a security interest in all right, title and
interest of Assignor in and to the Trademarks, together with the goodwill of the
business symbolized by the Trademarks and the applications and registrations
thereof, and all proceeds thereof (the "Collateral"), to secure the payment,
performance and observance of the Secured Obligations, as defined in the
Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in, and mortgage on, the
Collateral to secure the prompt payment, performance and observance of the
Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in the Collat eral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 633 Third Avenue, New York, New York
10017.
<PAGE>
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the ____ day of
March, 1997.
MILLBROOK DISTRIBUTION SERVICES INC.
By: ________________________________
Name: _________________________
Title: _________________________
2
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
---------------------------------------
TRADEMARKS
----------
APPLICATIONS
------------
<TABLE>
<CAPTION>
Trademark Filing Date Serial No.
--------- ----------- ----------
<S> <C> <C>
MILLWOOD RETAIL October 7, 1996 75/177,885
SOLUTIONS & design
</TABLE>
FEDERAL TRADEMARKS
------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Trademark Registration Date Registration Number
- --------- ----------------- -------------------
<S> <C> <C>
CARRIAGE TRADE November 26, 1963 760,818
HAND HANDLER January 27, 1987 1,426,619
CANINE FAIR April 7, 1987 1,435,562
FELINE FAIR April 7, 1987 1,435,563
VALU STAR July 4, 1989 1,546,008
EDUCATOR May 8, 1990 1,595,624
BRIGHT IDEA September 3, 1991 1,655,219
EDUCATOR & Des December 17, 1991 1,668,703
BEER CHASERS September 15, 1992 1,716,233
SPACE SMART September 7, 1993 1,791,801
MILLBROOK MERCHANDISING December 24, 1996 2,025,274
FOR EXCELLENCE & Design
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
-------------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Millbrook Distribution
Services Inc., an Indiana corporation with its principal office at P.O. Box 35,
Route 56, Huntoon Memorial Highway, Leicester, Massachusetts 01524 (hereinafter
called "Assignor") hereby appoints and constitutes The Chase Manhattan Bank, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for the benefit of (i) the lenders (the "Lenders") named in Schedules 2.01(a)
and 2.01(b) of the Credit Agreement dated as of the date hereof, among the
Assignor, the Lenders, the Assignee and NationsBank, N.A., as Co-Agent (as
amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement") and (ii) for itself as issuer of the Letters of
Credit and party to the Rate Agreements, if applicable, its true and lawful
attorney, with full power of substitution, and with full power and authority to
perform the following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing
or otherwise disposing of all right, title and interest of
Assignor in and to any letters patent of the United States or
any other country or political subdivision thereof, and all
registrations, recordings, reissues, continuations,
continuations-in-part and extensions thereof, and all pending
applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of
assignment or other papers necessary or reasonably advisable
to effect such purpose;
2. For the purpose of assigning, selling, licensing
or otherwise disposing of all right, title and interest of
Assignor in and to any trademarks, trade names, trade styles
and service marks, and all registrations, recordings,
reissues, extensions and renewals thereof, and all pending
applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of
assignment
<PAGE>
or other papers necessary or reasonably advisable to effect
such purpose;
3. To execute any and all documents, statements,
certificates or other papers necessary or reasonably advisable
in order to obtain the purposes described above as Assignee
may in its sole discretion determine.
This power of attorney is made pursuant to a Security
Agreement and Mortgage - Patents and Trademarks, dated the date hereof, between
Assignor and Assignee and takes effect solely for the purposes of paragraphs
3(d) and (e) thereof and is subject to the conditions thereof and may not be
revoked until the payment in full of all "Secured Obligations" as defined in
such Security Agreement and Mortgage.
Dated: __________, 1997
MILLBROOK DISTRIBUTION SERVICES INC.
By: ________________________________
Name: __________________________
Title: _________________________
2
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this _____ day of ___________, 1997, before me personally
appeared ___________________________, to me known, who, being by me duly sworn,
did depose and say that he resides at _________________________________________
and that he is ________________________ of Millbrook Distribution Services Inc.,
the corporation described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was affixed pursuant to authority of the Board
of Directors of said corporation, and that he signed his name thereto pursuant
to such authority.
____________________________________
Notary Public
3
<PAGE>
EXHIBIT G-1
SECURITY AGREEMENT AND MORTGAGE -
PATENTS AND TRADEMARKS
AGREEMENT made as of this 1st day of May, 1998 (this
"Agreement") by and between THE B. MANISCHEWITZ COMPANY, LLC, a Delaware limited
liability company ("Debtor") having an office at One Manischewitz Plaza, Jersey
City, NJ 07302, and THE CHASE MANHATTAN BANK, a New York banking corporation
having an office at 600 Fifth Avenue, New York, New York 10020, as agent
(referred to herein as the "Secured Party") for the benefit of (i) the lenders
(the "Lenders") named in Schedules 2.01(a) and 2.01(b) of the Amended and
Restated Credit Agreement dated as of the date hereof, by and among the Debtor,
Millbrook Distribution Services Inc., the Lenders, the Secured Party and
NationsBank, N.A., as co-agent (the "Co-Agent") (as amended, modified or
supplemented from time to time in accordance with its terms, the "Credit
Agreement") and (ii) for itself as issuer of the Letters of Credit.
A. Debtor has adopted the terms and designs described in
Schedule A annexed hereto and made a part hereof.
B. Debtor is the owner and holder of the patents listed on
Schedule B hereto.
C. The Secured Party, the Co-Agent and the Lenders have agreed
to extend Loans and certain other financial accommodations including, without
limitation, the issuance of Letters of Credit to the Debtor pursuant to, and
subject to the terms and conditions of, the Credit Agreement. The obligation of
the Lenders to extend such Loans and of the Secured Party to issue Letters of
Credit under the Credit Agreement is conditioned on the execution and delivery
by the Debtor of a security agreement in the form hereof to secure the following
(the "Secured Obligations"): all Obligations (such Obligations to include,
without limitation, the due and punctual payment and performance of (a) the
principal of and interest on the Loans (including the payment of amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a), and interest that, but for
the filing of a petition in bankruptcy with respect to the Debtor, would accrue
on such obligations, whether or not a claim is allowed against the Debtor for
such interest in the related bankruptcy proceeding), when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (b) Indebtedness at any time and from time to time under the Letters
of Credit, (c) all obligations of the Debtor at any time and from time to time
under this security agreement and (d) all other obligations of the Debtor at any
time and from time to time under the Credit Agreement and the other Loan
Documents).
NOW, THEREFORE, IT IS AGREED that, as security for the full
and prompt payment and performance of the Secured Obligations, Debtor does
hereby mortgage to and pledge with the Secured Party for its own benefit and the
benefit of the
<PAGE>
Lenders, and grant to the Secured Party a security interest in, all of its
right, title and interest in and to (i) each of the Trademarks (as hereinafter
defined), and the goodwill of the business symbolized by each of the Trademarks,
and each of the registrations described in Schedule A; (ii) each of the Patents
(as hereinafter defined) and each of the registrations listed on Schedule B
hereto; (iii) the right (but not the obligation) to register claims under any
state or federal law or regulation or any law or regulation of any foreign
country and to apply for, renew and extend the Trademarks or Patents, (iv) the
right (but not the obligation) to sue or bring opposition or cancellation
proceedings in the name of the Debtor or in the name of the Secured Party or
otherwise for past, present and future infringements of the Trademarks or
Patents and all rights (but not obligations) corresponding thereto in the United
States and any foreign country; and (v) any and all proceeds of the foregoing
(collectively, the "Collateral").
1. Terms defined in the Credit Agreement and not otherwise
defined herein, shall have the meaning set forth in the Credit Agreement. As
used in this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the
United States or any other country, all right, title and interest therein and
thereto, and all registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political subdivision
thereof, all whether now owned or hereafter acquired by Debtor, including, but
not limited to, those described in Schedule B annexed hereto and made a part
hereof, and (ii) all reissues, continuations, continuations-in-part, extensions
or divisionals thereof and all licenses thereof.
"Trademarks" shall mean (i) all trademarks, trade
names, trade styles, service marks, prints and labels on which said trademarks,
trade names, trade styles and service marks have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof, or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule A annexed hereto and made a part hereof, and
(ii) all reissues, extensions or renewals thereof and all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as
follows:
(a) Debtor has the sole, full and clear title to the
registered U.S. Trademarks set forth on Schedule A annexed hereto and such
registrations are valid and subsisting and in full force and effect.
2
<PAGE>
(b) Debtor will perform all acts and execute all documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, substantially in the
forms of Exhibits 1 and 2 hereof, respectively, reasonably requested by the
Secured Party at any time to evidence, perfect, maintain, record and enforce the
Secured Party's security interest in the Collateral and Debtor hereby authorizes
the Secured Party to execute and file one or more financing statements (and
similar documents) or copies thereof or of this Security Agreement with respect
to the Collateral signed only by the Secured Party.
(c) Debtor (either itself or through licensees) will maintain
the Trademarks in full force free from any claim of abandonment for nonuse and
Debtor will not (and will not permit any licensee thereof to) do any act or
knowingly omit to do any act whereby any Trademark may become invalidated.
(d) Debtor is the sole registered owner of each of the Patents
shown on Schedule B hereto and the registrations thereof are valid and in full
force and effect. None of the Patents has been abandoned or dedicated, and,
except to the extent that the Secured Party, upon prior written notice by
Debtor, shall consent, Debtor will not do any act, or omit to do any act,
whereby the Patents may become abandoned or dedicated unless such abandonment or
declaration would not have a Material Adverse Affect and in any event shall
notify the Secured Party immediately if it knows of any reason or has reason to
know that any application or registration may become abandoned or dedicated.
(e) The Debtor shall be obligated to, upon demand, pay to the
Secured Party the amount of any and all reasonable out-of-pocket expenses,
including the reasonable fees and expenses of its counsel and of any experts or
agents which the Secured Party may incur in connection with (i) the custody or
preservation of (after the occurrence and continuance of an Event of Default),
or the sale of, collection from, or other realization upon, any of the
Collateral in accordance herewith, or (ii) the exercise or enforcement of any of
the rights of the Secured Party hereunder in accordance herewith. In addition,
the Debtor indemnifies and holds the Secured Party and the Lenders harmless from
and against any and all liability incurred by the Secured Party or the Lenders
hereunder or in connection herewith, unless such liability shall be due to the
gross negligence or willful misconduct of the Secured Party or the Lenders, as
the case may be. Any such amounts payable as provided hereunder or thereunder
shall be additional Secured Obligations secured hereby and by the other Security
Documents.
(f) In no event shall Debtor, either itself or through any
agent, employee, licensee or designee, (i) file an application for the
registration of any Patent, Trademark or Copyright with the United States Patent
and Trademark Office or any similar office or agency of the United States, any
State thereof, any other country or any political subdivision thereof or (ii)
file any assignment of any patent or trademark, which Debtor may acquire from a
third party, with the United States Patent and Trademark Office or any similar
office or agency of the United States, any State thereof, any other country or
any political subdivision thereof, unless Debtor shall, on or prior to the date
of
3
<PAGE>
such filing, notify the Secured Party thereof, and, upon the written request of
the Secured Party, execute and deliver any and all assignments, agreements,
instruments, documents and papers as the Secured Party may reasonably request to
evidence the Secured Party's interest in such Patent or Trademark and the
goodwill and general intangibles of Debtor relating thereto or represented
thereby, and Debtor hereby appoints the Secured Party its attorney-in-fact,
which appointment shall be effective upon the occurrence and continuance of an
Event of Default, to execute and file all such writings for the foregoing
purposes, all reasonable acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Secured Obligations are paid in full.
(g) Debtor has the right and power to make the assignment and
to grant the security interest herein granted; and the Collateral is not now,
and at all times hereafter will not be, subject to any liens, mortgages,
assignments, security interests or encumbrances of any nature whatsoever, except
in favor of the Secured Party and as permitted in the Credit Agreement, and to
the best knowledge of Debtor none of the Collateral is subject to any claim.
(h) Except as set forth in Section 7.05(z) of the Credit
Agreement, Debtor will not assign, sell, mortgage, lease, transfer, pledge,
hypothecate, grant a security interest in or lien upon, encumber, grant an
exclusive or non-exclusive license, or otherwise dispose of any of the
Collateral, and nothing in this Agreement shall be deemed a consent by the
Secured Party to any such action except as expressly permitted herein or in the
Credit Agreement.
(i) As of the date hereof neither Debtor nor any subsidiary
thereof owns any Patents, Trademarks or Copyrights or has any Patents,
Trademarks or Copyrights registered in, or the subject of pending applications
in, the United States Patent and Trademark Office or any similar office or
agency of the United States, any State thereof, any other country or any
political subdivision thereof, other than those described in Schedules A and B
hereto.
(j) Debtor will take all necessary steps in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency of the United States, any State thereof, any other country or any
political subdivision thereof, to maintain each application and registration of
the Trademarks and Patents, including, without limitation, filing of renewals,
affidavits of use, affidavits of incontestability and opposition, interference
and cancellation proceedings (except to the extent that dedication, abandonment
or invalidation is permitted under paragraphs 2(c), 2(d) and 2(e) hereof).
(k) Debtor assumes all responsibility and liability arising
from the use of the Trademarks, and Debtor hereby indemnifies and holds Secured
Party harmless from and against any claim, suit, loss, damage or expense
(including reasonable attorneys' fees) arising out of any alleged defect in any
product promoted, distributed or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark
4
<PAGE>
or out of the manufacture, promotion, labeling, sale or advertisement of any
such product by Debtor (or any affiliate or subsidiary thereof). Debtor agrees
that Secured Party does not assume, and shall have no responsibility for, the
payment of any sums due or to become due under any agreement or contract
included in the Collateral or the performance of any obligations to be performed
under or with respect to any such agreement or contract by Debtor, and Debtor
hereby agrees to indemnify and hold the Secured Party harmless with respect to
any and all claims by any person relating thereto.
(l) Subject to Debtor's right to contest as provided in the
Credit Agreement, Secured Party may, in its sole discretion, pay any amount or
do any act required of Debtor hereunder or requested by Secured Party to
preserve, defend, protect, maintain, record or enforce Debtor's obligations
contained herein, the Secured Obligations, the Collateral, or the right, title
and interest granted Secured Party herein. In the event Secured Party makes a
payment pursuant to this subparagraph, such payment shall be deemed an advance
by Secured Party to Debtor and shall be payable on demand, and if not paid,
shall constitute an Alternate Base Rate Loan.
(m) Debtor agrees that if it, or any affiliate or subsidiary
thereof, learns of any use by any person of any term or design likely to cause
confusion with any Trademark, it shall promptly notify Secured Party of such use
and, if requested by Secured Party, shall join with Secured Party, at its
expense, in such action as Secured Party, in its reasonable discretion may deem
advisable for the protection of Secured Party's interest in and to such
Trademarks (except to the extent abandonment of such Trademark may be permitted
under Paragraph 2(c) and 2(d)).
(n) All licenses of its Trademarks and Patents which Debtor
has granted to third parties are set forth in Schedule C hereto.
(o) This Agreement assigns and, when this Agreement has been
filed and recorded with the United States Patent and Trademark Office and
financing statements describing the Collateral have been filed with the filing
offices set forth on Schedule D hereto, this Agreement will create a valid and
perfected first priority security interest in the Collateral, securing the
payment of the Secured Obligations.
(p) If Debtor shall obtain rights to any new Trademarks,
Patents or Copyrights, the provisions of this Agreement shall automatically
apply thereto. Debtor shall promptly notify Secured Party in writing of any
rights to any new Trademarks or Patents acquired by Debtor after the date hereof
and of any registrations issued or applications for registration made after the
date hereof. Concurrently with the filing of an application for registration for
any Trademarks or Patents, Debtor shall execute, deliver and record in all
places where this Agreement is recorded an appropriate agreement, substantially
in the form hereof, with appropriate insertions, or an amendment to this
Agreement, in form and substance reasonably satisfactory to the Secured Party,
pursuant to which Debtor shall assign and grant a security interest to the
extent of its interest in such registration as provided herein to the Secured
Party.
5
<PAGE>
3. Upon the occurrence and during the continuance of an Event
of Default, in addition to all other rights and remedies of the Secured Party,
whether under law, the Credit Agreement or otherwise, all such rights and
remedies being cumulative, not exclusive and enforceable alternatively,
successively or concurrently, without (except as provided herein) notice to, or
consent by, Debtor, the Secured Party shall have the following rights and
remedies: (a) subject to any existing license of the Trademarks or Patents which
Debtor has granted to third parties and which is set forth in Schedule C hereto,
the Secured Party may, at any time and from time to time, upon 10 days' prior
notice to Debtor, license, whether general, special or otherwise, and whether on
an exclusive or nonexclusive basis, any of the Patents or Trademarks, throughout
the world for such term or terms, on such conditions, and in such manner, as the
Secured Party shall in its sole discretion determine; (b) the Secured Party may
(without assuming any obligations or liability thereunder), at any time, enforce
(and shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of Debtor in, to and under any one or more
license agreements with respect to the Collateral, and take or refrain from
taking any action under any thereof, and Debtor hereby releases the Secured
Party from, and agrees to hold the Secured Party free and harmless from and
against any claims arising out of, any action taken or omitted to be taken with
respect to any such license agreement, except for damages caused by Secured
Party's gross negligence or willful misconduct; (c) the Secured Party may, at
any time and from time to time, upon 10 days' prior written notice to Debtor,
assign, sell, or otherwise dispose of, the Collateral or any of it, either with
or without special or other conditions or stipulations, with power to buy the
Collateral or any part of it, and with power also to execute assurances, and do
all other acts and things for completing the assignment, sale or disposition
which the Secured Party shall, in its sole discretion, deem reasonably
appropriate or proper, and provided that such assignment, sale or disposition
conforms to the standards of commercial reasonableness as provided in the
Uniform Commercial Code to the extent applicable thereto; (d) with respect to
any Patents or Trademarks that are the subject of any action taken pursuant to
this Section 3, Debtor shall not make any further use of such Patents or
Trademarks or any mark similar thereto for any purpose; and (e) in addition to
the foregoing, in order to implement the assignment, sale or other disposal of
any of the Collateral pursuant to subparagraph 3(c) hereof, the Secured Party
may, at any time, pursuant to the authority granted in the Powers of Attorney
described in paragraph 4 hereof (such authority becoming effective on the
occurrence or continuation as herein above provided of an Event of Default),
execute and deliver on behalf of Debtor, one or more instruments of assignment
of the Patents or Trademarks (or any application or registration thereof), in
form suitable for filing, recording or registration in any country. Debtor
agrees to pay when due all reasonable costs incurred in any such transfer of the
Patents or Trademarks, including any taxes, fees and reasonable attorneys' fees,
and all such costs shall be added to the Secured Obligations. The Secured Party
may apply the proceeds actually received from any such license, assignment, sale
or other disposition to the reasonable costs and out-of-pocket expenses thereof,
including, without limitation, reasonable attorneys' fees and all other expenses
which may be reasonably incurred by the Secured Party, and then to the Secured
Obligations, in such order as to
6
<PAGE>
principal or interest as the Secured Party may desire; and Debtor shall remain
liable and will pay the Secured Party on demand any deficiency remaining,
together with interest thereon at a rate equal to the highest rate then payable
on the Secured Obligations and the balance of any expenses unpaid. Nothing
herein contained shall be construed as requiring the Secured Party to take any
such action at any time.
The proceeds of any sale of Collateral, as well as any
Collateral consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the payment of all reasonable costs and
out-of-pocket expenses incurred by the Secured Party in connection with such
sale or otherwise in connection with this Agreement or any of the Secured
Obligations, including, but not limited to, all court costs and the reasonable
fees and expenses of its agents and legal counsel, the repayment of all advances
made by the Secured Party hereunder on behalf of the Debtor and any other
reasonable out-of-pocket costs or expenses incurred in connection with the
exercise of any right or remedy hereunder;
SECOND, to the Secured Party to reimburse the Secured Party
for that portion of the payments, if any, made by it with respect to Letters of
Credit for which a Lender, as a participant in such Letter of Credit pursuant to
Section 2.18 of the Credit Agreement, failed to pay its pro rata share thereof
as required pursuant to such Section 2.18;
THIRD, to the Secured Party to be held as cash collateral to
the extent of the undrawn amount, if any, or outstanding Letters of Credit;
FOURTH, to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lenders in accordance
with the amounts of the Loans made by them pursuant to the Credit Agreement);
FIFTH, pro rata to the payment in full of all Secured
Obligations (other than those referred to above) owed to the Lenders (pro rata
as among the Lenders in accordance with their respective Commitments); and
SIXTH, to the Debtor, its successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor
is executing and delivering to the Secured Party, in the form of Exhibit 3
hereto, five originals of a Power of Attorney for the implementation of the
assignment, sale or other disposal of the Trademarks and Patents pursuant to
paragraph 2(d) hereof and Debtor hereby releases the Secured Party from any
claims, causes of action and demands at any time arising out of or with respect
to any actions taken or omitted to be taken by the Secured Party under the
powers of attorney granted herein, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of the Secured Party.
7
<PAGE>
5. All rights of the Secured Party hereunder, the security
interest granted to the Secured Party hereunder, and all obligations of the
Debtor hereunder, shall be absolute and unconditional irrespective of (i) any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document or any other agreement with respect to any of the Secured Obligations
other than as resulting from the Agent's gross negligence or willful misconduct,
(ii) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Secured Obligations, or any other amendment or waiver of
or consent to any departure from the Credit Agreement or any other Loan
Document, (iii) any exchange, release or nonperfection of any other Collateral,
or any release or amendment or waiver of or consent to or departure from any
guarantee, for all or any of the Secured Obligations, or (iv) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, the Debtor, any of the Guarantors or any other obligor in respect
of the Secured Obligations or in respect of this Agreement.
6. No failure on the part of the Secured Party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Secured Party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The Secured Party and the Lenders shall not be deemed to have waived any
rights hereunder or under any other agreement or instrument unless such waiver
shall be in writing and signed by such parties.
7. This Agreement, and the terms, covenants and conditions
hereof, shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that the Debtor shall not be
permitted to assign this Agreement or any interest herein or in the Collateral,
or any part thereof, or any cash or property held by the Secured Party as
Collateral under this Agreement, except as contemplated by this Agreement or the
Credit Agreement. The Agent may not assign its rights hereunder, except in
connection with a resignation of the Agent and the appointment of a substitute
Agent in the manner permitted by the Credit Agreement.
8. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
8
<PAGE>
9. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement.
10. In the event of any inconsistency or conflict between the
terms and provisions of the Credit Agreement and the terms and provisions of
this Agreement, or with respect to any payment provisions which could be
construed as requiring duplicative payments, the terms and provisions of the
Credit Agreement shall control. Nothing herein shall require the Debtor to make
a duplicate payment if the payment is otherwise provided for in any other Loan
Document.
11. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable the remaining
provisions contained herein shall not in any way be affected or impaired.
12. Section headings used herein are for convenience only and
are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
13. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when a counterpart which bears the signature of the Debtor shall have
been delivered to the Secured Party.
14. This Agreement and the security interest granted hereunder
shall terminate when (a) all the Secured Obligations have been fully and
indefeasibly paid in cash, (b) the Lenders have no further commitment to make
any Loans under the Credit Agreement, and (c) the Secured Party shall have no
further obligation to issue any Letters of Credit, at which time the Secured
Party shall execute and deliver to the Debtor all Uniform Commercial Code
termination statements, terminations of assignment and similar documents (in
form and substance reasonably satisfactory to the Debtor) which the Debtor shall
reasonably request to evidence such termination and release the security
interest granted hereunder free and clear of any Liens created in favor of the
Agent; provided, however, that all indemnities of the Debtor contained in this
Agreement shall survive, and remain operative and in full force and effect
regardless of, the termination of this Agreement.
[Remainder of Page Intentionally Left Blank]
9
<PAGE>
IN WITNESS WHEREOF, Debtor and the Secured Party have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
THE B. MANISCHEWITZ COMPANY, LLC
By: _________________________________________
Richard A. Bernstein, its Managing Member
THE CHASE MANHATTAN BANK, as Agent
By: _________________________________________
Name: ___________________________________
Title: __________________________________
[Signature Page to Security Agreement and Mortgage - Patents and Trademarks]
<PAGE>
Schedule A to Security Agreement
--------------------------------
TRADEMARKS
----------
APPLICATIONS
------------
================================================================================
Trademark Filing Date Serial Number
================================================================================
================================================================================
FEDERAL TRADEMARKS
------------------
================================================================================
Trademark Registration Date Registration Number
================================================================================
================================================================================
<PAGE>
STATE REGISTRATIONS
-------------------
<PAGE>
================================================================================
Trademark State Registration Date Registration Number
================================================================================
================================================================================
UNREGISTERED TRADEMARKS
-----------------------
COMMON LAW
===============
===============
===============
TRADENAMES
================================================================================
Type Name Place
================================================================================
================================================================================
<PAGE>
Schedule B to Security Agreement
--------------------------------
PATENTS
-------
Title Date Issued Patent No.
----- ----------- ----------
None.
<PAGE>
Schedule C to Security Agreement
--------------------------------
LICENSES
--------
1. License Agreement dated January 22, 1981 between Frank's Beverages
and Manischewitz, as amended on February 20, 1990.
2. Agreement dated January 23, 1962 between Manischewitz and Bakers
Franchise Corporation, as assigned to Franchise Brands, Inc., as amended by
letters dated July 11, 1963, December 5, 1963, June 9, 1965, December 14, 1966,
January 9, 1967, August 13, 1969, July 24, 1972 and June 27, 1978.
3. Agreement dated December 9, 1986 with the Union of Orthodox Jewish
Congregation of America (unexecuted).
4. Agreement dated October 23, 1986 between Manischewitz and
Canandaigua Wine Company, Inc., as amended May 19, 1988.
5. Agreement dated April 3, 1944 between Manischewitz Food Products,
Inc., Max Manischewitz, Edith Manischewitz and Monarch Wine Company, Inc., as
supplemented December 30, 1948.
6. Agreement dated December 30, 1948 between Manischewitz and Monarch
Wine Company, Inc., as supplemented December 2, 1953, January 12, 1962, August
12, 1963, November 27, 1964 and January 16, 1985.
7. Consent and Assignment dated October 23, 1986 between Manischewitz,
Canandaigua Wine Company, Inc. and Monarch Wine Company, Inc.
8. Purchase, License and Sublicense Agreement dated May 30, 1980 among
Goodman Matzoh Products, Inc., Joyce Food Products, Inc. and Manischewitz, as
amended October 31, 1983 and March 20, 1990.
9. Agreement dated January 8, 1992 between Manischewitz and Bartons.
10. Agreement dated October 20, 1976 between Manischewitz and Block and
Guggenheimer.
11. Manufacturing Agreement dated as of January 25, 1993 between
Manischewitz and Burns & Ricker Inc.
<PAGE>
Schedule D to Security Agreement
--------------------------------
FILING OFFICES
--------------
United States Patent and Trademark Office
<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
-----------------------
(PATENTS)
-------
WHEREAS, The B. Manischewitz Company, LLC, a Delaware limited
liability company (herein referred to as "Assignor"), owns the letters patent,
and/or applications for letters patent, of the United States, more particularly
described on Schedule 1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to The Chase Manhattan Bank, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for the benefit of (i) the lenders (the "Lenders") named in Schedules 2.01(a)
and 2.01(b) of the Amended and Restated Credit Agreement dated as of the date
hereof, by and among the Assignor, Millbrook Distribution Services Inc., the
Lenders, the Assignee and NationsBank, N.A., as co-agent (as amended, modified
or supplemented from time to time in accordance with its terms, the "Credit
Agreement") and (ii) for itself as issuer of the Letters of Credit and Assignor
has entered into a Security Agreement and Mortgage-Patents, Trademarks and
Copyrights dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in all right, title and
interest of Assignor in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof (the "Collateral"), to
secure the prompt payment, performance and observance of the Secured
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in the Collateral to secure
the prompt payment, performance and observance of the Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in and mortgage on the Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
Assignee's address is 600 Fifth Avenue, New York, New York
10020.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the 1st day of May,
1998.
<PAGE>
THE B. MANISCHEWITZ COMPANY, LLC
By:_________________________________________
Richard A. Bernstein, its Managing Member
2
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
---------------------------------------
PATENTS
-------
Title Date Issued Patent No.
----- ----------- ----------
3
<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
-----------------------
(TRADEMARKS)
----------
WHEREAS, The B. Manischewitz Company, LLC, a Delaware limited
liability company (herein referred to as "Assignor"), has adopted, used and is
using the trademarks listed on the annexed Schedule 2-A, which trademarks are
registered in the United States Patent and Trademark Office (the "Trademarks");
WHEREAS, Assignor is obligated to The Chase Manhattan Bank, a
New York banking corporation, as agent (referred to herein as the "Assignee")
for the benefit of (i) the lenders (the "Lenders") named in Schedules 2.01(a)
and 2.01(b) of the Amended and Restated Credit Agreement dated as of the date
hereof, by and among the Assignor, Millbrook Distribution Services Inc., the
Lender, the Assignee and NationsBank, N.A., as Co-Agent (as amended, modified or
supplemented from time to time in accordance with its terms, the "Credit
Agreement") and (ii) for itself as issuer of the Letters of Credit and Assignor
has entered into a Security Agreement and Mortgage-Patents, Trademarks and
Copyrights dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee and granted to Assignee a security interest in all right, title and
interest of Assignor in and to the Trademarks, together with the goodwill of the
business symbolized by the Trademarks and the applications and registrations
thereof, and all proceeds thereof (the "Collateral"), to secure the payment,
performance and observance of the Secured Obligations, as defined in the
Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby further assign unto
Assignee and grant to Assignee a security interest in the Collateral to secure
the prompt payment, performance and observance of the Secured Obligations.
Assignor does hereby further acknowledge and affirm that the
rights and remedies of Assignee with respect to the assignment of, security
interest in the Collat eral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 600 Fifth Avenue, New York, New York
10020.
<PAGE>
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
duly executed by its officer thereunto duly authorized as of the 1st day of May,
1998.
THE B. MANISCHEWITZ COMPANY, LLC
By:_________________________________________
Richard A. Bernstein, its Managing Member
2
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
---------------------------------------
TRADEMARKS
----------
APPLICATIONS
------------
Trademark Filing Date Serial No.
--------- ----------- ----------
FEDERAL TRADEMARKS
------------------
================================================================================
Trademark Registration Date Registration Number
================================================================================
================================================================================
3
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
-------------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT The B. Manischewitz
Company, LLC, a Delaware limited liability company with its principal office at
One Manischewitz Plaza, Jersey City, NJ 07302 (hereinafter called "Assignor")
hereby appoints and constitutes The Chase Manhattan Bank, a New York banking
corporation, as agent (referred to herein as the "Assignee") for the benefit of
(i) the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b) of the
Amended and Restated Credit Agreement dated as of the date hereof, by and among
the Assignor, Millbrook Distribution Services Inc., the Lenders, the Assignee
and NationsBank, N.A., as Co-Agent (as amended, modified or supplemented from
time to time in accordance with its terms, the "Credit Agreement") and (ii) for
itself as issuer of the Letters of Credit its true and lawful attorney, with
full power of substitution, and with full power and authority to perform the
following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing
or otherwise disposing of all right, title and interest of
Assignor in and to any letters patent of the United States or
any other country or political subdivision thereof, and all
registrations, recordings, reissues, continuations,
continuations-in-part and extensions thereof, and all pending
applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of
assignment or other papers necessary or reasonably advisable
to effect such purpose;
2. For the purpose of assigning, selling, licensing
or otherwise disposing of all right, title and interest of
Assignor in and to any trademarks, trade names, trade styles
and service marks, and all registrations, recordings,
reissues, extensions and renewals thereof, and all pending
applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of
assignment
<PAGE>
or other papers necessary or reasonably advisable to effect
such purpose; and
3. To execute any and all documents, sta tements,
certificates or other papers necessary or reasonably advisable
in order to obtain the purposes described above as Assignee
may in its sole discretion determine.
This power of attorney is made pursuant to a Security
Agreement and Mortgage - Patents and Trademarks, dated the date hereof, between
Assignor and Assignee and takes effect solely for the purposes of paragraphs
2(d) thereof and is subject to the conditions thereof and may not be revoked
until the payment in full of all "Secured Obligations" as defined in such
Security Agreement and Mortgage.
Dated: __________, 199_
THE B. MANISCHEWITZ COMPANY, LLC
By:_________________________________________
Richard A. Bernstein, its Managing Member
2
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this _____ day of ____________, 1998, before me personally
appeared _________________, to me known, who, being by me duly sworn, did depose
and say that he resides at _____________________________________________________
and that he is _____________________ of The B. Manischewitz Company, LLC, the
limited liability company described in and which executed the foregoing
instrument; that he knows the seal of said limited liability company; that the
seal affixed to said instrument is such company seal; that it was affixed
pursuant to authority of the Board of Managers of said limited liability
company, and that he signed his name thereto pursuant to such authority.
________________________________
Notary Public
3
<PAGE>
EXHIBIT H
SUBORDINATED PROMISSORY NOTE
$21,3000,000.00 As of May 1, 1998
New York, New York
1. Obligation.
1.1. FOR VALUE RECEIVED, the undersigned, MILLBROOK DISTRIBUTION
SERVICES INC,. a Delaware corporation (the "Payor"), having its executive office
and principal place of business at P.O. Box 35 - Route 56, Huntoon Memorial
Highway, Leicester, Massachusetts 01524, hereby promises to pay to R.A.B.
ENTERPRISES, INC., a Delaware corporation (together with its successors and
assigns, the "Payee"), at its office at 444 Madison Avenue, Suite 201, New York,
New York 10022, the principal sum of [ ] ($_______) payable, together with all
unpaid and accrued interest, as set forth in this promissory note (as the same
may be supplemented, modified, amended, restated or replaced from time to time
in the manner provided herein, the "Note").
1.2. The Payor shall repay, and this Note shall mature and the
outstanding principal amount thereof will become due and payable on [November 1,
2005] (the "Maturity Date").
2. Interest.
2.1. The unpaid principal amount shall bear interest equal to 12.5% per
annum.
2.2. Interest shall be payable semiannually on May 1 and November 1 of
each year, commencing on November 1, 1998, and in full on the Maturity Date (or
on any such earlier date of payment of this Note is prepaid as hereinafter
provided).
2.3. If payment on the principal amount hereof and interest accrued
thereon is not made when due and payable, at the Maturity Date or upon
acceleration, then interest shall accrue on such unpaid amount, to the extent
permitted by law, from the Maturity Date at the rate then in effect plus 2.00%
per annum.
2.4. In no event shall the Payee be entitled to receive interest,
however characterized and including other consideration received in connection
with this Note, at an effective rate in excess of the maximum rate permitted by
law. If a court of competent jurisdiction determines that such amounts paid or
agreed to be paid by the Payor in connection with this Note causes the effective
interest rate on this Note to exceed the maximum rate permitted by law, such
interest or other consideration shall automatically be reduced to a rate that
results in an effective interest rate under
<PAGE>
this Note equal to the maximum rate permitted by law over the term hereof, and,
in such event, the Payee shall either apply to the reduction of the unpaid
principal balance of this Note any amounts received by it deemed to constitute
excessive interest or refund such excess to Payor.
3. Events of Default: Remedies. If any of the following events (any
such event, an "Event of Default") shall occur and be continuing, subject to the
subordination provisions in Section 4 hereto:
3.1. the Payor shall fail to make any payment of principal of or
interest on this Note within thirty (30) days after such payment is due;
3.2. an event of default occurs and is continuing under any
indebtedness for borrowed money of the Payor, which default has resulted in the
acceleration of such indebtedness prior to its expressed maturity and the
principal amount of such indebtedness, together with the principal amount of any
other such indebtedness the maturity of which has been so accelerated and has
not been paid, aggregates at least Two Million Dollars ($2,000,000);
3.3. a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Payor and
shall remain unpaid or shall not be released, discharged, dismissed, stayed or
fully bonded for a period of at least sixty (60) days and are not insured
against (after giving effect to customary deductibles), provided that the
aggregate of all such judgments exceeds Two Thousand Dollars ($2,000,000);
3.4. the Payor shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect, the
"Bankruptcy Code") or (iv) file a petition seeking to take advantage of any
bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors' rights generally; or
3.5. a court of competent jurisdiction enters an order or decree under
the Bankruptcy Code, seeking (i) the liquidation, reorganization, moratorium,
dissolution, winding up, or composition or readjustment of the Payor's debts,
(ii) the appointment of a trustee, receiver, custodian or liquidator of the
Payor or of all or any substantial part of its assets, or (iii) relief in
respect of the Payor in an involuntary case, and such order or decree described
in clause (i), (ii) or (iii) of this Section 3.5 shall continue undismissed or
unstayed and in effect, for a period of sixty (60) days;
then, subject to Section 4.3 hereto, (i) upon the occurrence and during the
continuance of any Event of Default described in Section 3.4 or 3.5, the unpaid
principal amount of this Note, together with the interest accrued thereon (which
interest shall be deemed matured), and all other amounts payable by the Payor
hereunder, shall automatically become immediately due and payable, without
presentment, demand, protest, notice of intention to accelerate, notice of
acceleration, or other
- 2 -
<PAGE>
requirements of any kind, all of which are hereby expressly waived by the Payor,
or (ii) during the continuance of any other Event of Default, the Payee may
declare the entire unpaid principal amount of this Note to be, and the same
shall forthwith become, due and payable, together with the interest accrued
thereon (which interest shall be deemed matured) and all other amounts payable
hereunder, without presentment, demand, protest, notice of intention to
accelerate, notice of acceleration, or other requirements of any kind, all of
which are hereby expressly waived by the Payor.
4. Subordination.
4.1. All obligations of the Payor for principal, interest and other
amounts payable hereunder (collectively, the "Subordinated Obligations") shall
be subordinate and junior in right of payment to all liabilities and obligations
of the Payor in connection with the Amended and Restated Credit Agreement, dated
as of May l, 1998 (the "Credit Agreement"), by and among the Payor, The Chase
Manhattan Bank, as administrative agent and collateral agent, and NationsBank,
N.A., as co-agent (the "Senior Debt"), and the holder of this Note, by
acceptance hereof, agrees to be bound by the provisions of this Section 4.
4.2. The Payor hereby agrees that payment of principal and interest in
respect of this Note shall be junior and subordinate and subject in right of
payment to all Senior Debt.
4.3. Unless and until all Senior Debt shall have been paid in full, the
Payor will not make, and the holder of this Note shall not demand, accept or
receive any direct or indirect payment (in cash, property, by set-off or
otherwise) of or on account of any Subordinated Obligations and no such payment
shall be due; provided, however, that if and so long as no Senior Event of
Default (as hereinafter defined) exists or would exist after giving effect to
such payment (unless such Senior Event of Default has been cured or waived by
the holders of Senior Debt), nothing contained in this Section 4.3 shall prevent
the Payor from making or the holder of this Note from accepting and receiving,
any payment of interest on account of the Subordinated Obligations. Unless and
until all Senior Debt shall be paid in full, no holder of this Note will
commence any proceeding against the Payor under, or join with any creditor in
any such proceeding under, any bankruptcy, reorganization, readjustment of debt,
arrangement of debt, receivership, liquidation or insolvency law or statute of
any state government, unless the holder or holders of Senior Debt shall also
join in or consent to the bringing of such proceeding. "Senior Event of Default"
shall mean any default by the Payor in the payment when due of any Senior Debt
or any default under any Senior Debt which constitutes an event of default
permitting the holder or holders of Senior Debt to cause such Senior Debt to
cause the same to become due prior to its stated maturity.
4.4. No payment or distribution of any character, whether in cash,
securities or other property, to which the holder of this Note would have been
entitled except for the provisions of this Section 4 and which shall have been
made to or for the account of the holders of the Senior Debt shall, as among the
Payor and its creditors (other than the holders of such Senior Debt) and the
holder of this Note, be deemed to be a payment or distribution by the Payor to
or for the account of the holders of such Senior Debt, and from and after the
payment in full of all such Senior Debt, the
- 3 -
<PAGE>
holders of this Note shall be subrogated to all rights of the holders of such
Senior Debt to receive payments or distributions of cash, securities or other
property applicable to such Senior Debt until all Subordinated Obligations shall
be paid in full.
4.5. The provisions of this Section 4 are solely for the purpose of
defining the relative rights of the holders of the Senior Debt, on the one hand,
and the holder of this Note, on the other hand, and the provisions of this
Section 4 may be enforced by any holder of the Senior Debt directly against the
holder of this Note and the Payor. No holder of Senior Debt shall be prejudiced
in the right to enforce subordination of this Note by any act or failure to act
by the Payor or anyone in custody of its assets or property. Nothing herein
shall impair, as between the Payor and the holder of this Note, the obligation
of the Payor, which is unconditional and absolute, to pay to the holder of this
Note the principal of and interest on this Note as and when the same shall
become due in accordance with the terms hereof, as the case may be, nor shall
anything herein prevent the holder of this Note from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject,
however, to the provisions of this Note and the rights of any holder of Senior
Debt under this Section 4.
4.6. Upon any payment or distribution of assets of the Payor referred
to in this Section 4, the holder of this Note shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which any
dissolution, winding up, liquidation or reorganization proceeding affecting the
affairs of the Payor is pending or upon a certificate of the liquidating trustee
or agent or other person making any payment or distribution to the holder of
this Note for the purpose of ascertaining the persons entitled to participate in
such payment or distribution, the holder or holders of the Senior Debt and other
indebtedness of the Payor, the amount thereof or payable thereon, the amount
paid or distributed thereon and all other facts pertinent thereto or to this
Section 4.
4.7. If any payment, distribution or security or the proceeds of any
thereof, shall be collected or received by the holder of this Note in
contravention of any of the terms of this Section 4 and prior to the payment in
full of the Senior Debt thereunder at the time outstanding, the holder hereof
will hold in trust for, and forthwith deliver such payment, distribution,
security or proceeds, to the extent necessary to pay all the Senior Debt in full
to, the holder or holders of such Senior Debt. If at the time any payment,
distribution, security or proceeds is delivered to any holder of the Senior Debt
pursuant to this Section 4 and the Senior Debt then due and payable is less than
the amount of such payment, distribution, security or proceeds, only the amount
so due and payable shall be applied to the payment of Senior Debt, and such
excess shall be applied to the payment of amounts of principal of or interest
then due and payable on this Note.
4.8. The Payor shall give prompt notice to the holder of this Note, on
the one hand, and the holder or holders of the Senior Debt, on the other, of any
notice, presentation or demand received by the Payor from the holder of Senior
Debt or the holder of this Note, respectively, as the case may be, provided
that, any failure to provide such notice shall not prejudice or impair any right
of any holder of the Senior Debt to enforce the provisions of this Section 4.
- 4 -
<PAGE>
4.9. The Payee understands and agrees that the obligations of the Payor
hereunder are fully subordinated to all obligations of the Payor owing under the
Credit Agreement and the Senior Debt and the Payee shall have no recourse to any
assets or property of the Payor hereunder and further agrees that in the event
of any assignment for the benefit of creditors, marshalling of assets,
dissolution, winding up or liquidation of the Payor, whether voluntary or
involuntary, in bankruptcy or insolvency or other similar proceedings, the
obligations of the Payor to pay principal and interest on this Note shall remain
fully subordinated.
5. Miscellaneous.
5.1. Lost, Etc. Notes. Upon receipt by the Payor of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Note,
and (in case of loss, theft or destruction) of indemnity of security in form
satisfactory to it, or, if mutilated, upon surrender of this Note for
cancellation, the Payor will issue and deliver in lieu of such Note a new Note,
of like tenor in a like unpaid principal amount, dated so that there will be no
loss of interest on such lost, stolen, destroyed or mutilated Note.
Notwithstanding the foregoing provisions of this Section 5.1, if this Note is
lost, stolen or destroyed, then the written statement of the Payee as to such
loss, theft or destruction shall be accepted as satisfactory evidence thereof,
and no indemnity or security shall be required as a condition to the execution
and delivery by the Payor of a new Note in lieu of such Note (or as a condition
to the payment thereof, if due and payable) other than the Payee's unsecured
written agreement to indemnify the Payor.
5.2. No Waiver; Remedies Cumulative. No failure on the part of the
Payee to exercise, and no delay in exercising any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise by the Payee of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
5.3. Amendments. No amendment, modification or waiver of any provision
of this Note nor consent to any departure by the Payor therefrom shall be
effective unless the same shall be in writing and signed by the Payee and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
5.4. Successors and Assigns. This Note shall be binding upon
the Payor and its successors and assigns and the terms hereof shall inure to the
benefit of the Payee and its successors and assigns. The Payee shall not assign
its rights or obligations hereunder without the prior written consent of the
Payor.
5.5. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the state of New York without giving effect to the
provisions thereof governing conflict of law principles.
- 5 -
<PAGE>
5.6. Severability. The provisions of this Note are severable, and if
any provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Note in any jurisdiction.
5.7. Jurisdiction. The Payor hereby irrevocably consents to the
jurisdiction of any New York State or federal court located in New York, New
York over any action or proceeding arising out of any dispute between the Payor
and the Payee.
MILLBROOK DISTRIBUTION SERVICES INC.
By: /s/ Steven M. Grossman
-------------------------------
Name: Steven M. Grossman
Title: Executive Vice President
- 6 -
<PAGE>
[Page 662 to 666 to Come]
<PAGE>
SCHEDULE 4.01
QUALIFIED JURISDICTIONS
MILLBROOK DISTRIBUTION SERVICES INC.
Alabama Maryland Pennsylvania
Arizona Massachusetts Rhode Island
Arkansas Michigan South Carolina
California Minnesota South Dakota
Colorado Mississippi Tennessee
Connecticut Missouri Texas
Delaware* Montana Utah
District of Columbia Nebraska Vermont
Florida Nevada Virginia
Georgia New Hampshire Washington
Idaho New Jersey West Virginia
Illinois New Mexico Wisconsin
Indiana** New York Wyoming
Iowa Noth Carolina
Kansas North Dakota
Kentucky Ohio
Louisiana Oklahoma
Maine Oregon
THE B. MANISCHEWITZ COMPANY, LLC
Delaware*
New Jersey
*state of formation
** application for the certificate of authority to do business has been filed
<PAGE>
SCHEDULE 4.05
MATERIAL ADVERSE CHANGE
MILLBROOK DISTRIBUTION SERVICES INC.
None
THE B. MANISCHEWITZ COMPANY, LLC
None
<PAGE>
[SCHEDULE 4.06(a) to Come]
<PAGE>
SCHEDULE 4.06(b)
COMPLIANCE WITH LAWS
MILLBROOK DISTRIBUTION SERVICES INC.
1. See Schedule 4.06(a).
2. The information contained on Schedules 4.06(a) and 4.19 is incorporated
herein by reference.
THE B. MANISCHEWITZ COMPANY, LLC
1. The information contained on Schedules 4.06(a) and 4.19 is incorporated
herein by reference.
<PAGE>
SCHEDULE 4.09
TAXES
MILLBROOK DISTRIBUTION SERVICES INC.
1. Any taxes for which Millbrook may be liable and which are for a period
prior to and including the acquisition date of Millbrook by Holdings
are the responsibility of McKesson Corporation, and are not included in
this Schedule 4.09. Any audits for periods prior to and including the
acquisition date may be controlled by McKesson Corporation, Millbrook
or jointly at the direction of McKesson Corporation.
State Sales Tax
2. Kentucky has notified the Borrower of an intent to conduct a sales tax
audit in November 1998 for the period October 1, 1994 through September
30, 1998.
3. Tennessee has notified the Borrower of an intent to conduct a sales tax
audit for the period January 1, 1995 through December 31, 1997.
4. Virginia is currently conducting a sales tax audit for the period April
1, 1995 through March 31, 1998. No findings have been communicated to
date.
State Income/Franchise
6. Returns on Extension:
Ohio Franchise Tax -- Fiscal Year ended 3/31/98
Alabama Franchise Tax -- Calender Year ended 12/31/97
THE B. MANISCHEWITZ COMPANY, LLC
1. Manischewitz has not filed separate tax returns. MANO Holdings
Corporation filed its 1991, 1992, 1994 and 1995 New Jersey Corporate
Business Tax Returns late. Although no extensions were granted, all
four returns were filed on February 29, 1996.
<PAGE>
[SCHEDULE 4.10 To 4.18 To Come]
<PAGE>
SCHEDULE 4.19
ENVIRONMENTAL LAW COMPLIANCE
MILLBROOK DISTRIBUTION SERVICES INC.
1. In a letter dated January 18, 1996, the State of Arkansas Department
of Pollution Control and Ecology (the "Department") notified the
Company of its determination that "facilities similar to your company
should be covered under the general storm water permit." The Department
enclosed a form Notice of Intent for "your facility" (presumably the
Company's Harrison facility), and requested that the form be completed
and submitted to the Department by March 15, 1996. A completed form was
not submitted; however, the Company's attorney has submitted a response
stating that the Company believes it has no discharges of storm water
associated with industrial activity.
2. On two occasions in 1995-1996 the Company exceeded the exempt volume
of hazardous waste generation (cleaning solvent).
3. The Company is the defendant in the Corrected Consent Decree entered
September 24, 1992, by the United States District Court for the Western
District of Arkansas Harrison Division in United States of America v.
Mass Merchandisers, Inc. (the "Decree"). The Decree concerns the
Arkwood, Inc. Superfund Site in Omaha, Arkansas, which was formerly
leased by the Company. The soils remedy was completed in 1995, leaving
only monitoring off area springs and possible groundwater remediation
if natural attenuation does not occur. The Company and R.A.B. Holdings,
Inc. are indemnified by McKesson Corporation for this matter.
4. There are 4 underground storage tanks ("USTs") at the Harrison,
Arkansas site and 5 USTs at the Leicester site.
5. In August 1994, the Occupation Safety and Health Administration
("OSHA") published final asbestos rules which revise certain
requirements that existed in two OSHA standards issued in June 1986
(one governing general industry asbestos exposure, and the other,
construction workplaces). One new requirement is that building owners
and lessees with workplaces in a building (collectively, "facility
owners") must identify the presence, location, and quantity of known
asbestos containing materials or, in buildings constructed before 1981,
"presumed" asbestos containing materials. All pre-1981 thermal system
insulation, sprayed or troweled on surfacing materials, and resilient
flooring material is presumed to be asbestos containing unless an
industrial hygienist or person of similar skill determines that it is
asbestos-free. The Company leases facilities constructed before 1981
and has not had such a determination made by an industrial hygienist or
performed such asbestos compliance activities.
<PAGE>
THE B. MANISCHEWITZ COMPANY, LLC
1. The information contained in the following environmental reports is
incorporated herein by reference:
Environmental Compliance Audit for Jersey City facility dated May 8,
1995; Phase I Environmental Site Assessment for Jersey City facility
dated May 26, 1994; Enviro-Science Phase I Assessment for Vineland
facility dated May 26, 1994; New Jersey DEP Notification of Historical
Discharge dated November 13, 1995; Enviro-Science Past Uses of Property
dated June 13, 1994; and Carlson Environmental, Inc. Phase I Assessment
for Vacant Warehouse Building (4038-4048 West Belmont Avenue, Chicago,
Illinois) dated August 20, 1997.
2. From time to time during renovations and maintenance, asbestos
contained in the Owned Real Property and Leased Real Property has been
disturbed in such a manner as to require remediation, which remediation
has been performed. In August 1994, the Occupation Safety and Health
Administration ("OSHA") published final asbestos rules which revise
certain requirements that existed in two OSHA standards issued in June
1986 (one governing general industry asbestos exposure, and the other,
construction workplaces). One new requirement is that building owners
and lessees with workplaces in a building (collectively, "facility
owners") must identify the presence, location, and quantity of known
asbestos containing materials or, in buildings constructed before 1981,
"presumed" asbestos containing materials. All pre-1981 thermal system
insulation, sprayed or troweled on surfacing materials, and resilient
flooring material is presumed to be asbestos containing unless an
industrial hygienist or person of similar skill determines that it is
asbestos-free. The Company leases facilities constructed before 1981
and has not had such a determination made by an industrial hygienist or
performed such asbestos compliance activities.
3. Manischewitz's Jersey City, NJ facility is located on property formerly
occupied, in part, by an iron foundry, brass foundry, brass works, and
metal shop. These operations may have caused the release of hazardous
materials in or from such facility.
-2-
<PAGE>
[Page 678 to 680 To Come - Pl. Check with CS]
<PAGE>
ANNEX A
Page 1 of 6
<TABLE>
<CAPTION>
DEBTOR JURISDICTION UCC FINANCING STATEMENTS
- ------ ------------ ------------------------
<S> <C> <C>
Millbrook Distribution Secretary of Secured Party: General Electric Company
Services State, Alabama GE Lighting, Mgr. Credit Administration
400 Roy Parker Road 1975 Noble Road, Cleveland, OH 44112
Ozark, AL 36360 Amendment: Debtor's name and address
changed
File Date: 3/3/97
File Number: A043637
Collateral: Inventory consisting of lamps and
light bulbs, lighting fixtures, wiring devices,
batteries, portable lighting products,
accessories and parts; accounts receivable,
chattel paper, and any other right to the
payment of money and security therefor, now
or hereafter arising from the sale,
consignment or other transfer by Debtor of
the foregoing inventory; and proceeds of the
foregoing.
Original File Date: 4/5/82
File Number: A043637R
Amendment: Debtor's name, Secured Party's
address and collateral description amended
File Date: 7/27/94 File Number: A043637
Amendment: Name of Debtor and Secured
Party changed
File Date: 4/14/92 File Number: A043657
Continuation:
File Date: 1/27/92 File Number: A043637
Continuation:
File Date: 11/24/86 File Number: A043637R
Millbrook Distribution Boone County, Secured Party: Lawrence Photo- Graphic,
Service Arkansas Inc.
P.O.Box 790 1211 Cambridge Circle, Kansas City, KS
Hwy. 43 Rogers Ind. 66103
Harrison, AR 72601 File Date: 9/26/94 File Number: 94-1378
Collateral: Consigned graphic arts and
materials
</TABLE>
<PAGE>
ANNEX A
Page 2 of 6
<TABLE>
<CAPTION>
DEBTOR JURISDICTION UCC FINANCING STATEMENTS
- ------ ------------ ------------------------
<S> <C> <C>
Millbrook Distribution Secretary of Secured Party: General Electric Company
Services Inc State, Arkansas GE Lighting, Mgr. Credit Administration
Route 56 (Huntoon 1975 Noble Road, Cleveland, OH 44112
Memorial Highway) Amendment: Debtor's name and address
Leicester, MA 01524 changed
File Date: 1/6/97 File Number: 164720
Original Date: 12/6/74 File Number: 164720
Collateral: Inventory consisting of lamps and
light bulbs, lighting fixtures, wiring devices,
batteries, portable light products, accessories
and parts; accounts receivable, chattel paper,
and any other right to the payment of money
and security therefor, now or hereafter
arising from the sale, consignment or other
transfer by Debtor of the foregoing
inventory; and proceeds of the foregoing.
Continuation:
File Date: 10/27/94 File Number: 164720
Amendment: Debtor's name changed;
secured party's name and address changed;
collateral description amended.
File Date: 7/28/94 File Number: 164720
Amendment: Debtor's and secured party's
name and address changed.
File Date: 3/27/92 File Number: 164720
Continuation:
File Date: 7/25/89 File Number: 164720
Continuation:
File Date: 7/25/84 File Number: 164720
Continuation:
File Date: 11/14/79 File Number: 164720
</TABLE>
<PAGE>
ANNEX A
Page 3 of 6
<TABLE>
<CAPTION>
DEBTOR JURISDICTION UCC FINANCING STATEMENTS
- ------ ------------ ------------------------
<S> <C> <C>
Millbrook Distribution Boone County, Secured Party: General Electric Company
Services Inc. Arkansas GE Lighting Mgr. Credit Administration
Route 56 (Huntoon 1975 Noble Road, Cleveland, OH 44112
Memorial Highway) Amendment: Debtor's name and address
Leicester, MA 01524 changed.
File Date: 12/30/96 File Number: 13827
Original File Date: 12/6/74 File Number:
13827
Collateral: Inventory consisting of lamps and
light bulbs, lighting fixtures, wiring devices,
batteries, portable lighting products,
accessories and parts; accounts receivable,
chattel paper, and any other right to the
payment of money and security therefor, now
or hereafter arising from the sale,
consignment or other transfer by Debtor of
the foregoing inventory; and proceeds of the
foregoing.
Continuation:
File Date: 10/27/94 File Number: 13827
Amendment: Debtor's name changed;
Secured Party's address changed, collateral
description amended.
File Date: 7/27/94 File Number: 13827
Amendment: Debtor's and Secured Party's
name and address changed.
File Date: 3/19/92 File Number: 13827
Continuations:
File Date: 8/4/89 File Number: 13827
File Date: 7/23/84 File Number: 13827
File Date: 11/13/79 File Number: 13827
</TABLE>
<PAGE>
ANNEX A
Page 4 of 6
<TABLE>
<CAPTION>
DEBTOR JURISDICTION UCC FINANCING STATEMENTS
- ------ ------------ ------------------------
<S> <C> <C>
Millbrook Distribution Secretary of Secured Party: General Electric Company
Services Inc State, GE Lighting, Mgr. Credit Administration
Route 56 (Huntoon Massachusetts 1975 Noble Road, Cleveland, Ohio 44112
Memorial Hwy) Amendment: Debtor's and Secured Party's
Leicester, MA 01524 name and address changed
File Date: 12/27/96 File Number: 438878
Original File Date: 3/10/90 File Number:
944358
Collateral: Inventory consisting of
lamps and light bulbs, lighting
fixtures, wiring devices, batteries,
portable lighting products, accessories
and parts; accounts receivable, chattel
paper, and any other right to the
payment of money and security therefor,
now or hereafter arising from the sale,
consignment or other transfer by Debtor
of the foregoing inventory; and proceeds
of the foregoing.
</TABLE>
<PAGE>
ANNEX A
Page 5 of 6
<TABLE>
<CAPTION>
DEBTOR JURISDICTION UCC FINANCING STATEMENTS
- ------ ------------ ------------------------
<S> <C> <C>
Millbrook Distribution Secretary of Secured Party: General Electric Company
Services Inc. State, North GE Lighting, Mgr Credit Administration
Route 56 (Huntoon Carolina 1975 Noble Road, Cleveland, OH 44112
Memorial Highway) Amendment: Debtor's name and address
Leicester, MA 01524 changed.
File Date: 12/31/96 File Number: 001412887
Collateral: Inventory consisting of lamps and
light bulbs, lighting fixtures, wiring devices,
batteries, portable lighting products,
accessories and parts; accounts receivable,
chattel paper, and any other right to the
payment of money and security therefor, now
or hereafter arising from the sale,
consignment or other transfer by Debtor of
the foregoing inventory; and proceeds of the
foregoing.
Original File Date: 8/27/90 File Number:
0709408
Continuation:
File Date: 5/18/95 File Number: 1227182
Amendment: debtor's name changed,
Secured Party's address changed, collateral
description amended
File Date: 7/28/94 File Number: 1131034
Amendment: Debtor's name changed
File Date: 3/20/92 File Number: 0872779
</TABLE>
<PAGE>
ANNEX A
Page 6 of 6
<TABLE>
<CAPTION>
DEBTOR JURISDICTION UCC FINANCING STATEMENTS
- ------ ------------ ------------------------
<S> <C> <C>
Millbrook Distribution Pitt County,
Services Inc North Carolina Secured Party: General Electric Company,
Route 56 (Huntoon GE Lighting, Mgr. Credit Administration
Memorial Highway) 1975 Noble Road, Cleveland, OH 44112
Leicester, MA 01524 Amendment: Debtor's name and address
changed
File Date: 12/30/96 File Number: 963699
Collateral: Inventory consisting of lamps and
light bulbs, lighting fixtures, wiring devices,
batteries, portable lighting products,
accessories and parts; accounts receivable,
chattel paper, and any other right to the
payment of money and security therefor, now
or hereafter arising from the sale,
consignment or other transfer by Debtor of
the foregoing inventory; and proceeds of the
foregoing.
Original File Date: 8/27/90 File Number:
902012
Continuation:
File Date: 5/19/95 File Number: 951605
Amendment: Debtor's name and Secured
Party's address changed, collateral
description amended
File Date: 7/29/94 File Number: 94-2044
Amendment: Debtor's name changed
File Date: 3/20/92 File Number: 920645
</TABLE>
<PAGE>
Exhibit 12.1
Computation of Ratio of Earnings to Fixed Charges
R.A.B. Holdings, Inc. and R.A.B. Enterprises, Inc.
Pro Forma
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Ended
March 31, 1998 June 30, 1998
--------------------- ----------------------
(Dollars in Thousands)
Company Holdings Company Holdings
------- -------- ------- --------
<S> <C> <C> <C> <C>
Income(loss) before taxes $ 917 $ (4,490) $ (3,580) $ (4,911)
Interest expense, net 16,772 22,171 3,918 5,249
Rental expense 1,569 1,569 400 400
-------- -------- -------- --------
Earnings 19,258 19,250 738 738
Fixed charges 18,341 23,740 4,318 5,649
-------- -------- -------- --------
Ratio of earnings to fixed charges 1.05
========
Deficiency in earnings to fixed charges $ (4,490) $ (3,580) $ (4,911)
======== ======== ========
</TABLE>
Historical
<TABLE>
<CAPTION>
Fiscal Year Ended Three Months Ended
March 31, 1998 June 30, 1998
--------------------- ----------------------
(Dollars in Thousands)
Company Holdings Company Holdings
------- -------- ------- --------
<S> <C> <C> <C> <C>
Income(loss) before taxes $ 2,304 $ 2,296 $ (2,748) $ (3,638)
Interest expense, net 5,079 5,079 2,973 3,863
Rental expense 1,423 1,423 389 389
-------- -------- -------- --------
Earnings 8,806 8,798 614 614
Fixed charges 6,502 6,502 3,362 4,252
-------- -------- -------- --------
Ratio of earnings to fixed charges 1.35 1.35
======== ========
Deficiency in earnings to fixed charges $ (2,748) $ (3,638)
======== ========
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
OF
R.A.B. HOLDINGS, INC.
---------------------
R.A.B. Enterprises, Inc.
Millbrook Distribution Services Inc
Mano Holding Corporation
Mano Holdings I, LLC
Mano Inc.
Mano Holdings II, LLC
The B. Manischewitz Company, LLC
SUBSIDIARIES
OF
R.A.B. ENTERPRISES, INC.
------------------------
Millbrook Distribution Services Inc
Mano Holding Corporation
Mano Holdings I, LLC
Mano Inc.
Mano Holdings II, LLC
The B. Manischewitz Company, LLC
<PAGE>
Exhibit 23.2
Independent Auditors' Consent and Report on Schedules
To the Board of Directors and Stockholders' of R.A.B. Holdings, Inc.
and R.A.B. Enterprises, Inc.
New York, New York
We consent to the use in this Registration Statement of R.A.B. Holdings, Inc.
and R.A.B. Enterprises, Inc. on Form S-4, of our reports dated July 10, 1998,
on the consolidated financial statements of R.A.B. Holdings, Inc. and R.A.B.
Enterprises, Inc., appearing in the Prospectus, which is a part of this
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
Our audits of the consolidated financial statements referred to in our
aforementioned reports also included the financial statement schedules of
R.A.B. Holdings, Inc. and R.A.B. Enterprises, Inc., listed in Item 21(b).
These financial statement schedules are the responsibility of the
Corporations' management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statements schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth herein.
DELOITTE & TOUCHE LLP
New York, New York
October 27, 1998
<PAGE>
Exhibit 23.3
Independent Auditors' Consent
We consent to the use in this Registration Statement of R.A.B. Holdings, Inc.
and R.A.B. Enterprises, Inc., on Form S-4 of our report dated April 30, 1998,
on the Statements of Operations of Millbrook Distribution Services Inc.,
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
October 27, 1998
<PAGE>
Exhibit 23.4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To MANO Holdings Corporation and
KBMC Acquisition Company, L.P.:
We have audited in accordance with generally accepted auditing standards, the
combined financial statements of MANO Holdings Corporation and KBMC
Acquisition Company, L.P. included in this registration statement and have
issued our report thereon dated September 24, 1997. Our audit was made for the
purpose of forming and opinion on the basic financial statements taken as a
whole. The schedule listed in item 21(b) is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
September 24, 1997
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To MANO Holdings Corporation and
KBMC Acquisition Company, L.P.:
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm included in or made a part of this
prospectus.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
October 27, 1998
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) __
PNC BANK, NATIONAL ASSOCIATION
(Exact Name of Trustee as Specified in its Charter)
NOT APPLICABLE
(Jurisdiction of incorporation or
organization if not a U.S. national bank)
25-1197336
(I.R.S. Employer Identification No.)
One PNC Plaza
Fifth Avenue and Wood Street, Pittsburgh, Pennsylvania 15222
(Address of principal executive offices - Zip code)
Allan K. Poust, Vice President, PNC Bank, National Association
4th Floor, Two PNC Plaza, Pittsburgh, Pennsylvania 15222
(412) 762-2838
(Name, address and telephone number of agent for service)
R.A.B. HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-3893246
(I.R.S. Employer Identification No.)
444 Madison Avenue, Suite 601
New York, New York 10022
(Address of principal executive offices - Zip code)
13% Senior Notes due 2008
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 1. General information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of Cleveland Cleveland, Ohio
Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
Yes. (See Exhibit T-1-3)
Item 2. Affiliations with obligor and underwriters.
If the obligor or any underwriter for the obligor is an affiliate of
the trustee, describe each such affiliation.
Neither the obligor (which terms includes, for the
purposes of this Form T-1, the co-registrants specified in
the Form S-4 to which this Form T-1 is an Exhibit) nor any
underwriter for the obligor is an affiliate of the
trustee.
Item 3 through Item 14.
The issuer currently is not in default under any of its outstanding
securities for which PNC Bank is trustee. Accordingly, responses to
Items 3 through 14 of Form T-1 are not required pursuant to Form T-1
General Instructions B.
Item 15. Foreign trustee.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under the indentures qualified or to
be qualified under the Act.
Not applicable (trustee is not a foreign trustee).
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of eligibility.
Exhibit T-1-1 - Articles of Association of the trustee,
with all amendments thereto, as presently
in effect, filed as Exhibit 1 to Trustee's
Statement of Eligibility and
Qualification, Registration No. 333-43153
and incorporated herein by reference.
Exhibit T-1-2 - Copy of Certificate of the Authority of
the Trustee to Commence Business, filed as
Exhibit 2 to Trustee's Statement of
Eligibility and Qualification,
Registration No. 2-58789 and incorporated
herein by reference.
-2-
<PAGE>
Exhibit T-1-3 - Copy of Certificate as to Authority of the
Trustee to Exercise Trust Powers, filed as
Exhibit 3 to Trustee's Statement of
Eligibility and Qualification,
Registration No. 2-58789, and incorporated
herein by reference.
Exhibit T-1-4 - The By-Laws of the trustee, filed as
Exhibit 4 to Trustee's Statement of
Eligibility and Qualification,
Registration No. 333-28711 and
incorporated herein by refenence.
Exhibit T-1-5 - The consent of the trustee required by
Section 321(b) of the Act.
Exhibit T-1-6 - The copy of the Balance Sheet taken from
the latest Report of Condition of the
trustee published in response to call made
by Comptroller of the Currency under
Section 5211 U.S. Revised Statutes.
NOTE
The answers to this statement, insofar as such answers relate to (a)
what persons have been underwriters for any securities of the obligor within
three years prior to the date of filing this statement, or are owners of 10%
or more of the voting securities of the obligor, or are affiliates or
directors or executive officers of the obligor, and (b) the voting securities
of the trustee owned beneficially by the obligor and each director and
executive officer of the obligor, are based upon information furnished to the
trustee by the obligor and also, in the case of (b) above, upon an examination
of the trustee's records. While the trustee has no reason to doubt the
accuracy of any such information furnished by the obligor, it cannot accept
any responsibility therefor.
-------------------------------------
Signature appears on next page
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, PNC Bank, National Association, a corporation organized and existing
under the laws of the United States of America, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Pittsburgh and Commonwealth of Pennsylvania on
October 22, 1998.
PNC BANK, NATIONAL ASSOCIATION
(Trustee)
By /s/ Douglas A. Wilson
-------------------------------
Douglas A. Wilson
Trust Officer
-4-
<PAGE>
EXHIBIT T-1-5
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform Act of 1990, in
connection with the proposed issuance by R.A.B. Holdings, Inc. of its 13%
Senior Notes due 2008, we hereby consent that reports of examination by
Federal, State, Territorial, or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
PNC BANK, NATIONAL ASSOCIATION
(Trustee)
By /s/ Douglas A. Wilson
-------------------------------
Douglas A. Wilson
Trust Officer
Dated: October 22, 1998
-5-
<PAGE>
EXHIBIT T-1-6
SCHEDULE RC - BALANCE SHEET
FROM
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of
PNC BANK, NATIONAL ASSOCIATION
of PITTSBURGH in the state of PENNSYLVANIA
at the close of business on
June 30, 1998
filed in response to call made by
Comptroller of the Currency,
under title 12, United States Code, Section 161
Charter Number 540
Comptroller of the Currency Northeastern District
BALANCE SHEET
<TABLE>
<CAPTION>
Thousands
of Dollars
----------
ASSETS
<S> <C>
Cash and balances due from depository institutions
Noninterest-bearing balances and currency and coin................................... $ 2,125,144
Interest-Bearing Balances............................................................ 86,718
Securities
Held-to-maturity securities.......................................................... 0
Available-for-sale securities........................................................ 6,268,812
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds sold and
Securities purchased under agreements to resell...................................... 533,355
Loans and lease financing receivables:
Loans and leases, net of unearned income $56,487,879
LESS: Allowance for loan and lease losses 826,069
LESS: Allocated transfer risk reserve 0
Loans and leases, net of unearned income,
allowance and reserve............................................................ 55,661,810
Trading assets ........................................................................ 190,500
Premises and fixed assets (including capitalized leases)............................... 797,786
Other real estate owned ............................................................... 43,023
Investments in unconsolidated subsidiaries and
associated companies ............................................................... 4,401
Customers' liability to this bank on acceptances
outstanding......................................................................... 70,753
Intangible assets ..................................................................... 2,144,235
Other assets........................................................................... 2,345,052
-----------
Total Assets........................................................................ $ 70,271,589
===========
</TABLE>
<PAGE>
LIABILITIES
<TABLE>
<S> <C>
Deposits:
In domestic offices................................................................. $40,095,977
Noninterest-bearing $ 9,645,083
Interest-bearing 30,450,894
In foreign offices, Edge and Agreement subsidiaries,
and IBFs......................................................................... 4,133,211
Noninterest-bearing $ 5,376
Interest-bearing 4,127,835
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs:
Federal funds purchased and
Securities sold under agreements to repurchase................................... 1,950,155
Demand notes issued to U.S. Treasury................................................... 25
Trading Liabilities.................................................................... 489,268
Other borrowed money
With original maturity of one year or less.......................................... 8,780,835
With original maturity of more than one year through three years.................... 1,754,215
With original maturity of more than one year........................................ 4,710,181
Bank's liability on acceptances executed and outstanding............................... 70,753
Subordinated notes and debentures ..................................................... 901,354
Other liabilities...................................................................... 1,250,979
--------------
Total liabilities...................................................................... 64,136,953
EQUITY CAPITAL
Perpetual preferred stock and related surplus.......................................... 0
Common Stock........................................................................... 218,919
Surplus. . . .......................................................................... 2,549,559
Undivided profits and capital reserves................................................. 3,380,559
Net unrealized holding gains (losses) on
available-for-sale securities....................................................... (14,401)
Cumulative foreign currency translation adjustments.................................... 0
Total equity capital................................................................... 6,134,636
-----------
Total liabilities and equity capital................................................... $ 70,271,589
==========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
PNC BANK, NATIONAL ASSOCIATION
(Exact Name of Trustee as Specified in its Charter)
NOT APPLICABLE
(Jurisdiction of incorporation or
organization if not a U.S. national bank)
25-1197336
(I.R.S. Employer Identification No.)
One PNC Plaza
Fifth Avenue and Wood Street, Pittsburgh, Pennsylvania 15222
(Address of principal executive offices - Zip code)
Allan K. Poust, Vice President, PNC Bank, National Association
4th Floor, Two PNC Plaza, Pittsburgh, Pennsylvania 15222
(412) 762-2838
(Name, address and telephone number of agent for service)
R.A.B. ENTERPRISES, INC.
(Exact name of obligor as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-3988873
(I.R.S. Employer Identification No.)
444 Madison Avenue, Suite 601
New York, New York 10022
(Address of principal executive offices - Zip code)
10 1/2% Senior Notes due 2005
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 1. General information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of Cleveland Cleveland, Ohio
Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
Yes. (See Exhibit T-1-3)
Item 2. Affiliations with obligor and underwriters.
If the obligor or any underwriter for the obligor is an affiliate of
the trustee, describe each such affiliation.
Neither the obligor (which terms includes, for the purposes
of this Form T-1, the co-registrants specified in the Form
S-4 to which this Form T-1 is an Exhibit) nor any
underwriter for the obligor is an affiliate of the trustee.
Item 3 through Item 14.
The issuer currently is not in default under any of its outstanding
securities for which PNC Bank is trustee. Accordingly, responses to
Items 3 through 14 of Form T-1 are not required pursuant to Form T-1
General Instructions B.
Item 15. Foreign trustee.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under the indentures qualified or
to be qualified under the Act.
Not applicable (trustee is not a foreign trustee).
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
Exhibit T-1-1 - Articles of Association of the trustee,
with all amendments thereto, as presently
in effect, filed as Exhibit 1 to Trustee's
Statement of Eligibility and
Qualification, Registration No. 333-43153
and incorporated herein by reference.
Exhibit T-1-2 - Copy of Certificate of the Authority of
the Trustee to Commence Business, filed as
Exhibit 2 to Trustee's Statement of
Eligibility and Qualification,
Registration No. 2-58789 and incorporated
herein by reference.
-2-
<PAGE>
Exhibit T-1-3 - Copy of Certificate as to Authority of the
Trustee to Exercise Trust Powers, filed as
Exhibit 3 to Trustee's Statement of
Eligibility and Qualification,
Registration No. 2-58789, and incorporated
herein by reference.
Exhibit T-1-4 - The By-Laws of the trustee, filed as
Exhibit 4 to Trustee's Statement of
Eligibility and Qualification,
Registration No. 333-28711 and
incorporated herein by refenence.
Exhibit T-1-5 - The consent of the trustee required by
Section 321(b) of the Act.
Exhibit T-1-6 - The copy of the Balance Sheet taken from
the latest Report of Condition of the
trustee published in response to call made
by Comptroller of the Currency under
Section 5211 U.S. Revised Statutes.
NOTE
The answers to this statement, insofar as such answers relate to (a)
what persons have been underwriters for any securities of the obligor within
three years prior to the date of filing this statement, or are owners of 10%
or more of the voting securities of the obligor, or are affiliates or
directors or executive officers of the obligor, and (b) the voting securities
of the trustee owned beneficially by the obligor and each director and
executive officer of the obligor, are based upon information furnished to the
trustee by the obligor and also, in the case of (b) above, upon an examination
of the trustee's records. While the trustee has no reason to doubt the
accuracy of any such information furnished by the obligor, it cannot accept
any responsibility therefor.
-------------------------------------
Signature appears on next page
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, PNC Bank, National Association, a corporation organized and existing
under the laws of the United States of America, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Pittsburgh and Commonwealth of Pennsylvania on
October 22, 1998.
PNC BANK, NATIONAL ASSOCIATION
(Trustee)
By /s/ Douglas A. Wilson
-------------------------------
Douglas A. Wilson
Trust Officer
-4-
<PAGE>
EXHIBIT T-1-5
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform Act of 1990, in
connection with the proposed issuance by R.A.B. Enterprises, Inc. of its 10
1/2% Senior Notes due 2005, we hereby consent that reports of examination by
Federal, State, Territorial, or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
PNC BANK, NATIONAL ASSOCIATION
(Trustee)
By /s/ Douglas A. Wilson
-------------------------------
Douglas A. Wilson
Trust Officer
Dated: October 22, 1998
-5-
<PAGE>
EXHIBIT T-1-6
SCHEDULE RC - BALANCE SHEET
FROM
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of
PNC BANK, NATIONAL ASSOCIATION
of PITTSBURGH in the state of PENNSYLVANIA
at the close of business on
June 30, 1998
filed in response to call made by
Comptroller of the Currency,
under title 12, United States Code, Section 161
Charter Number 540
Comptroller of the Currency Northeastern District
BALANCE SHEET
<TABLE>
<CAPTION>
Thousands
of Dollars
----------
ASSETS
<S> <C>
Cash and balances due from depository institutions
Noninterest-bearing balances and currency and coin................................... $ 2,125,144
Interest-Bearing Balances............................................................ 86,718
Securities
Held-to-maturity securities.......................................................... 0
Available-for-sale securities........................................................ 6,268,812
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds sold and
Securities purchased under agreements to resell...................................... 533,355
Loans and lease financing receivables:
Loans and leases, net of unearned income $56,487,879
LESS: Allowance for loan and lease losses 826,069
LESS: Allocated transfer risk reserve 0
Loans and leases, net of unearned income,
allowance and reserve............................................................ 55,661,810
Trading assets ........................................................................ 190,500
Premises and fixed assets (including capitalized leases)............................... 797,786
Other real estate owned ............................................................... 43,023
Investments in unconsolidated subsidiaries and
associated companies ............................................................... 4,401
Customers' liability to this bank on acceptances
outstanding......................................................................... 70,753
Intangible assets ..................................................................... 2,144,235
Other assets........................................................................... 2,345,052
-----------
Total Assets........................................................................ $ 70,271,589
===========
</TABLE>
<PAGE>
LIABILITIES
<TABLE>
<S> <C>
Deposits:
In domestic offices................................................................. $40,095,977
Noninterest-bearing $ 9,645,083
Interest-bearing 30,450,894
In foreign offices, Edge and Agreement subsidiaries,
and IBFs......................................................................... 4,133,211
Noninterest-bearing $ 5,376
Interest-bearing 4,127,835
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs:
Federal funds purchased and
Securities sold under agreements to repurchase................................... 1,950,155
Demand notes issued to U.S. Treasury................................................... 25
Trading Liabilities.................................................................... 489,268
Other borrowed money
With original maturity of one year or less.......................................... 8,780,835
With original maturity of more than one year through three years.................... 1,754,215
With original maturity of more than one year........................................ 4,710,181
Bank's liability on acceptances executed and outstanding............................... 70,753
Subordinated notes and debentures ..................................................... 901,354
Other liabilities...................................................................... 1,250,979
--------------
Total liabilities...................................................................... 64,136,953
EQUITY CAPITAL
Perpetual preferred stock and related surplus.......................................... 0
Common Stock........................................................................... 218,919
Surplus. . . .......................................................................... 2,549,559
Undivided profits and capital reserves................................................. 3,380,559
Net unrealized holding gains (losses) on
available-for-sale securities....................................................... (14,401)
Cumulative foreign currency translation adjustments.................................... 0
Total equity capital................................................................... 6,134,636
-----------
Total liabilities and equity capital................................................... $ 70,271,589
==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 1067702
<NAME> R.A.B. Holdings, Inc.
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> MAR-31-1998 JUN-30-1998
<PERIOD-START> APR-01-1997 APR-01-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998
<CASH> 2,623 2,731
<SECURITIES> 0 0
<RECEIVABLES> 30,383 42,040
<ALLOWANCES> (2,441) (2,893)
<INVENTORY> 41,814 50,973
<CURRENT-ASSETS> 5,707 13,626
<PP&E> 27,455 45,301
<DEPRECIATION> (4,060) (5,115)
<TOTAL-ASSETS> 108,772 269,358
<CURRENT-LIABILITIES> 48,083 65,112
<BONDS> 0 168,000
0 0
9,906 9,906
<COMMON> 1 1
<OTHER-SE> 1,270 (916)
<TOTAL-LIABILITY-AND-EQUITY> 108,772 269,358
<SALES> 0 0
<TOTAL-REVENUES> 470,201 116,571
<CGS> 360,162 88,915
<TOTAL-COSTS> 462,826 116,346
<OTHER-EXPENSES> 102,664 27,431
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,079 3,863
<INCOME-PRETAX> 2,296 (3,638)
<INCOME-TAX> 1,122 (1,454)
<INCOME-CONTINUING> 1,174 (2,184)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,174 (2,184)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 1067700
<NAME> R.A.B. Enterprises, Inc.
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> MAR-31-1998 JUN-30-1998
<PERIOD-START> APR-01-1997 APR-01-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998
<CASH> 2,623 2,731
<SECURITIES> 0 0
<RECEIVABLES> 30,383 42,040
<ALLOWANCES> (2,441) (2,893)
<INVENTORY> 41,814 50,973
<CURRENT-ASSETS> 5,810 7,945
<PP&E> 27,455 45,301
<DEPRECIATION> (4,060) (5,115)
<TOTAL-ASSETS> 108,875 250,355
<CURRENT-LIABILITIES> 48,081 64,082
<BONDS> 0 120,000
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 11,282 39,018
<TOTAL-LIABILITY-AND-EQUITY> 108,875 250,355
<SALES> 0 0
<TOTAL-REVENUES> 470,201 116,571
<CGS> 360,162 88,915
<TOTAL-COSTS> 462,818 116,346
<OTHER-EXPENSES> 102,656 27,431
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,079 2,973
<INCOME-PRETAX> 2,304 (2,748)
<INCOME-TAX> 1,122 (1,102)
<INCOME-CONTINUING> 1,182 (1,646)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,182 (1,646)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
