<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1999
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
-------------------------
NEW WORLD PASTA COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2098 52-2006441
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
WINCHESTER PASTA, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2098 54-1924168
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
-------------------------
PASTA GROUP, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2098 25-1825424
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
100 CRYSTAL A DRIVE
HERSHEY, PENNSYLVANIA 17033
(717) 534-6711
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
MARK E. KIMMEL, ESQ.
VICE PRESIDENT, ADMINISTRATION AND DEVELOPMENT, GENERAL COUNSEL AND SECRETARY
100 CRYSTAL A DRIVE
HERSHEY, PENNSYLVANIA 17033
(717) 534-4634
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
ROBERT B. PINCUS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE RODNEY SQUARE
WILMINGTON, DELAWARE 19801
(302) 651-3000
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
-------------------------
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>
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- --------------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1) REGISTRATION FEE(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Subordinated Exchange
Notes Due 2009...................... $160,000,000 100% $160,000,000 $44,480
- --------------------------------------------------------------------------------------------------------------------------
Guarantees of the 9 1/4% Senior
Subordinated Exchange Notes(2)...... -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total................................. $160,000,000 100% $160,000,000 $44,480
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with Rule 457(f) promulgated under the Securities
Act of 1933, as amended.
(2) No separate consideration will be received for the Guarantees, and,
therefore, no additional registration fee is required.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE> 2
PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE INFORMATION IN THIS PROSPECTUS WILL BE AMENDED OR COMPLETED;
DATED APRIL 21, 1999
OFFER TO EXCHANGE ALL 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009
FOR 9 1/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009
OF
NEW WORLD PASTA COMPANY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON [ ], 1999, UNLESS EXTENDED.
------------------------
Terms of the Exchange Offer:
- - We will issue up to $160,000,000 aggregate principal amount of New Notes.
- - We will exchange New Notes for all outstanding Old Notes that are validly
tendered and not withdrawn prior to the expiration of the Exchange Offer.
- - You may withdraw tenders of Old Notes at any time prior to the expiration of
the Exchange Offer.
- - The exchange of Old Notes for New Notes will not be a taxable transaction for
U.S. federal income tax purposes but you should see the discussion under the
caption "Certain United States Federal Income Tax Considerations" on page 35
for more information.
- - We will not receive any cash proceeds from the Exchange Offer.
- - The terms of the New Notes are substantially identical to those of the
outstanding Old Notes, except that the transfer restrictions and registration
rights relating to the Old Notes do not apply to the New Notes
- - The Old Notes are, and the New Notes will be, unconditionally guaranteed by
New World Pasta's wholly owned subsidiaries, Winchester Pasta, L.L.C. and
Pasta Group, L.L.C.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF RISKS YOU SHOULD
CONSIDER BEFORE TENDERING YOUR OLD NOTES.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is [ ], 1999.
<PAGE> 3
FORWARD-LOOKING STATEMENTS
This Prospectus includes or incorporates forward-looking statements. We
have based these forward-looking statements on our current expectations and
projections about future events. Many of these statements may be identified by
the use of forward-looking words such as "believe," "expect," "anticipate,"
"should," "planned," "estimated," and "potential," among others. These
forward-looking statements are subject to risks, uncertainties and assumptions,
including, among other things, those discussed below under the caption "Risk
Factors" on pages 15 to 25, as well as under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 53 to 61, and as follows:
- our high degree of leverage;
- our ability to service indebtedness incurred as a result of the
recapitalization transaction in which we acquired New World Pasta Company
from Hershey;
- our lack of history as an independent operating company;
- our ability to successfully implement our business strategies;
- our ability to realize certain cost savings and operating synergies from
better plant utilization and sourcing arrangements;
- the risks associated with several of our new marketing initiatives;
- intense levels of competition in the pasta industry;
- the historical variability in the price of raw materials;
- our dependence on a single key supplier;
- our ability to implement our year 2000 compliance plan; and
- our ability to successfully integrate any future acquisitions.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary highlights selected information from this Prospectus
and may not contain all of the information that is important to you. This
Prospectus includes specific terms of the New Notes, as well as information
regarding our business and detailed financial data. We encourage you to
carefully read this entire Prospectus. In this Prospectus, the words "New World
Pasta," "Company," "we," "our," "ours" and "us" refer to New World Pasta Company
and its subsidiaries. Where appropriate in context, references to New World
Pasta or the Company will include Hershey Pasta Group ("Hershey Pasta"), a
division of Hershey Foods Corporation (collectively with its subsidiaries,
"Hershey"), which division was the predecessor of New World Pasta. Hershey Pasta
consisted of Hershey Pasta Manufacturing Company, Hershey Pasta Winchester, Inc.
and certain directly owned pasta-related assets of Hershey. Through a series of
transactions effected by Hershey, Hershey Pasta Manufacturing Company became the
owner, directly or indirectly, of all of the net assets of Hershey Pasta.
Hershey Pasta Manufacturing Company subsequently changed its name to New World
Pasta Company. As used in this Prospectus, "Old Notes" means the 9 1/4% Senior
Subordinated Notes due 2009 issued by New World Pasta on February 19, 1999; "New
Notes" means the 9 1/4% Senior Subordinated Exchange Notes due 2009 to be issued
by New World Pasta in the Exchange Offer; and "Notes" means the Old Notes and
the New Notes.
THE EXCHANGE OFFER
OLD NOTES....................... 9 1/4% Senior Subordinated Notes due 2009,
which were issued on February 19, 1999.
NEW NOTES....................... 9 1/4% Senior Subordinated Exchange Notes
due 2009. The terms of the New Notes are
substantially identical to those of the
outstanding Old Notes, except that the
transfer restrictions and registration
rights relating to the Old Notes do not
apply to the New Notes.
EXCHANGE OFFER.................. We are offering to issue up to $160,000,000
aggregate principal amount of the New Notes
in exchange for a like principal amount of
the Old Notes to satisfy our obligations
under the registration rights agreement that
we entered into when the Old Notes were sold
in transactions under Rule 144A and
Regulation S under the Securities Act.
RESALES......................... Based on interpretations by the staff of the
Securities and Exchange Commission, as set
forth in no-action letters issued to third
parties, we believe that the New Notes you
receive in the Exchange Offer may be offered
for resale, resold or otherwise transferred
without compliance with the registration and
prospectus delivery provisions of the
Securities Act of 1933, as amended. However,
3
<PAGE> 5
you will not be able to freely transfer the
New Notes if:
- you are an "affiliate" (as defined in Rule
405 under the Securities Act) of New World
Pasta;
- you are not acquiring the New Notes in the
Exchange Offer in the ordinary course of
your business;
- you have an arrangement or understanding
with any person to participate in the
distribution (as defined in the Securities
Act) of the New Notes you will receive in
the Exchange Offer; or
- you are a broker-dealer that receives New
Notes for its own account in the Exchange
Offer in exchange for Old Notes that were
acquired as a result of market-making or
other trading activities.
If you fall within one of the exceptions
listed above, you must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction
involving the New Notes.
EXPIRATION DATE; TENDERS........ The Exchange Offer will expire at 5:00 p.m.,
New York City time, on [ ],
1999, unless extended. By tendering your Old
Notes, you represent to us:
- that you are not an "affiliate" (as
defined in Rule 405 under the Securities
Act) of New World Pasta;
- that any New Notes you receive in the
Exchange Offer are being acquired by you
in the ordinary course of your business;
- that, at the time of commencement of the
Exchange Offer, neither you nor, to your
knowledge, anyone receiving New Notes from
you, has any arrangement or understanding
with any person to participate in the
distribution (as defined in the Securities
Act) of the New Notes in violation of the
Securities Act;
- if you are not a broker-dealer, that you
are not engaged in, and do not intend to
engage in, the distribution (as defined in
the Securities Act) of the New Notes; and
- if you are a broker-dealer, that you will
receive the New Notes for your own account
in exchange for Old Notes that were
acquired by
4
<PAGE> 6
you as a result of your market-making or other trading activities and that you
will deliver a prospectus in connection with any resale of the New Notes you
receive. For further information regarding resales of the New Notes by
participating broker-dealers, see the
discussion below under the caption "Plan
of Distribution" on pages 142 to 143.
WITHDRAWAL; NON-ACCEPTANCE...... You may withdraw any Old Notes tendered in
the Exchange Offer at any time prior to 5:00
p.m., New York City time, on
[ ], 1999. If we decide for
any reason not to accept any Old Notes for
exchange, the Old Notes will be returned to
the registered holder at our expense
promptly after the expiration or termination
of the Exchange Offer. In the case of Old
Notes tendered by book-entry transfer into
the Exchange Agent's account at The
Depository Trust Company, any withdrawn or
unaccepted Old Notes will be credited to the
tendering holder's account at The Depository
Trust Company. For further information
regarding the withdrawal of tendered Old
Notes, see "The Exchange Offer -- Terms of
the Exchange Offer; Period for Tendering Old
Notes" on pages 27 to 28 and " -- Withdrawal
Rights" on pages 32 to 33.
CONDITIONS TO THE EXCHANGE
OFFER........................... The Exchange Offer is subject to customary
conditions, which we may waive. See the
discussion below under the caption "The
Exchange Offer -- Conditions to the Exchange
Offer" on page 33 for more information
regarding the conditions to the Exchange
Offer.
PROCEDURES FOR TENDERING OLD
NOTES........................... Unless you comply with the procedures
described below under the caption "The
Exchange Offer -- Guaranteed Delivery
Procedures" on pages 31 to 32, you must do
one of the following on or prior to the
expiration of the Exchange Offer to
participate in the Exchange Offer:
- tender your Old Notes by sending the
certificates for your Old Notes, in proper
form for transfer, a properly completed
and duly executed Letter of Transmittal,
with any required signature guarantees,
and all other documents required by the
Letter of Transmittal, to The Bank of New
York, as Exchange Agent, at one
5
<PAGE> 7
of the addresses listed below under the
caption "The Exchange Offer -- Exchange
Agent" on pages 33 to 34; or
- tender your Old Notes by using the
book-entry transfer procedures described
below and transmitting a properly
completed and duly executed Letter of
Transmittal, with any required signature
guarantees, or an Agent's Message instead
of the Letter of Transmittal, to the
Exchange Agent. In order for a book-entry
transfer to constitute a valid tender of
your Old Notes in the Exchange Offer, the
Bank of New York, as Exchange Agent, must
receive a confirmation of book-entry
transfer of your Old Notes into the
Exchange Agent's account at The Depository
Trust Company prior to the expiration of
the Exchange Offer. For more information
regarding the use of book-entry transfer
procedures, including a description of the
required Agent's Message, see the
discussion below under the caption "The
Exchange Offer -- Book Entry Transfer" on
page 31.
GUARANTEED DELIVERY
PROCEDURES...................... If you are a registered holder of the Old
Notes and wish to tender your Old Notes in
the Exchange Offer, but (1) the Old Notes
are not immediately available, (2) time will
not permit your Old Notes or other required
documents to reach the Exchange Agent before
the expiration of the Exchange Offer, or (3)
the procedure for book-entry transfer cannot
be completed prior to the expiration of the
Exchange Offer, you may tender Old Notes by
following the procedures described below
under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures" on
pages 31 to 32.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............... If you are a beneficial owner whose Old
Notes are registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee and you wish to
tender your Old Notes in the Exchange Offer,
you should promptly contact the person in
whose name the Old Notes are registered and
instruct that person to tender on your
behalf. If you wish to tender in the
Exchange Offer on your own behalf, prior to
completing and executing the Letter of
Transmittal and delivering your Old Notes,
you must either make appropriate
arrangements to register ownership of the
Old Notes in your name or obtain a properly
completed bond
6
<PAGE> 8
power from the person in whose name the Old
Notes are registered.
CERTAIN FEDERAL TAX
CONSIDERATIONS.................. The exchange of Old Notes for New Notes in
the Exchange Offer will not be a taxable
transaction for United States federal income
tax purposes. See the discussion below under
the caption "Certain United States Federal
Income Tax Considerations" on pages 35 to 39
for more information regarding the tax
consequences to you of the Exchange Offer.
USE OF PROCEEDS................. We will not receive any cash proceeds from
the Exchange Offer.
EXCHANGE AGENT.................. The Bank of New York is the Exchange Agent
for the Exchange Offer. The addresses and
telephone number of the Exchange Agent can
be found below under the caption "The
Exchange Offer -- Exchange Agent."
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
If you do not exchange your Old Notes in the Exchange Offer, your Old Notes
will continue to be subject to the restrictions on transfer described in the
legend on the certificate for your Old Notes. In general, you may offer or sell
your Old Notes only:
- if they are registered under the Securities Act and applicable state
securities laws;
- if they are offered or sold under an exemption from registration under
the Securities Act and applicable state securities laws; or
- if they are offered or sold in a transaction not subject to the
Securities Act and applicable state securities laws.
We do not currently intend to register the Old Notes under the Securities Act.
Under certain circumstances, however, holders of the Old Notes (including
holders who are not permitted to participate in the Exchange Offer or who may
not freely resell New Notes received in the Exchange Offer) may require us to
file, and cause to become effective, a shelf registration statement which would
cover resales of Old Notes by these holders. For more information regarding the
consequences of not tendering your Old Notes and our obligation to file a shelf
registration statement, see "The Exchange Offer -- Consequences of Exchanging or
Failing to Exchange Old Notes" on pages 34 to 35 and "Description of the
Notes -- Registration Rights" on pages 137 to 139.
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and those of the outstanding Old Notes are
substantially identical, except that the transfer restrictions and registration
rights relating to the Old Notes do not apply to the New Notes. In addition, if
the Exchange Offer is not completed by [the 35th day following effectiveness of
the Registration Statement], 1999, and we do not have an effective shelf
registration statement on file with the Securities and Exchange Commission to
register the Old Notes on that date, the interest rate on the Old Notes will
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<PAGE> 9
increase by 0.5% every 90 days, to a maximum of 1.0%, until the Exchange Offer
is completed or an effective shelf registration statement is on file.
SECURITIES OFFERED.............. $160,000,000 aggregate principal amount of
9 1/4% Senior Subordinated Exchange Notes
due 2009.
MATURITY DATE................... February 15, 2009.
INTEREST........................ Interest on the New Notes will accrue at the
rate of 9 1/4% per annum and will be payable
semiannually in cash on February 15 and
August 15 of each year, commencing on August
15, 1999.
RANKING......................... The New Notes will rank equally with our
other senior subordinated indebtedness. The
New Notes will be junior to all of our
senior indebtedness.
At December 31, 1998, after giving pro forma
effect to the offering of the Old Notes and
the recapitalization transaction in which
our current principals acquired control of
New World Pasta, New World Pasta and its
subsidiaries had approximately $310.7
million of long-term indebtedness
outstanding, of which approximately $150.7
million was senior to the Old Notes and will
be senior to the New Notes.
SINKING FUND.................... None.
OPTIONAL REDEMPTION............. We may redeem any of the New Notes beginning
on February 15, 2004 at an initial
redemption price equal to 104.625% of their
principal amount, plus accrued and unpaid
interest. The redemption price will decline
each year after 2004 and will be 100% of the
principal amount, plus accrued and unpaid
interest, beginning on February 15, 2007.
In addition, before February 15, 2002, we
may redeem up to 35% of the aggregate
principal amount of all Notes outstanding on
the date of redemption at a redemption price
equal to 109.25% of the aggregate principal
amount redeemed, plus accrued and unpaid
interest and liquidated damages, if any. We
may only redeem the Notes using the net cash
proceeds from issuances of our capital
stock, subject to certain limitations. For
additional information regarding optional
redemption of the New Notes, see the
discussion below under the caption
"Description of the Notes -- Optional
Redemption" on pages 93 to 94.
CHANGE OF CONTROL............... Upon a change of control of New World Pasta,
we will be required to make an offer to
purchase all outstanding New Notes. The
purchase price will equal 101% of the
aggregate principal amount of
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<PAGE> 10
all New Notes outstanding on the date of
purchase, plus accrued and unpaid interest.
We may not have sufficient funds available
at the time of any change of control to make
any required debt repayment -- including
repurchases of the New Notes -- and the
terms of our senior credit facilities may
block these payments.
COVENANTS....................... The terms of the New Notes restrict our
ability, among other things, to:
- pay dividends or make distributions on our
capital stock,
- repurchase or redeem our capital stock,
- create liens,
- make particular kinds of investments and
other restricted payments,
- incur additional indebtedness,
- merge or consolidate with other companies,
- sell assets, and
- enter into transactions with our
stockholders or affiliates.
These limitations are subject to a number of
important qualifications and exceptions. For
further information regarding the
restrictions imposed on New World Pasta by
the terms of the New Notes, see the
discussion below under the caption
"Description of the Notes -- Covenants" on
pages 97 to 111.
SUBSIDIARY GUARANTEES........... Some of our subsidiaries will guarantee the
obligations of New World Pasta under the New Notes. These guarantees will be
subordinated to all senior indebtedness of
the subsidiary guarantors.
RISK FACTORS
You should carefully consider all of the information contained in this
Prospectus before deciding to tender your Old Notes in the Exchange Offer. In
particular, you should carefully review the specific factors described below
under the caption "Risk Factors" beginning on page 15, which contain important
information about New World Pasta and the risks that may affect our business.
THE COMPANY
COMPANY OVERVIEW. We are the leading manufacturer and distributor of
retail branded pasta in the United States, and a supplier of dry pasta to the
U.S. private label, industrial and foodservice sectors. Our primary business is
the production of dry pasta which is marketed and sold under regional brands in
supermarkets and foodstores. We believe our brands are among the oldest and most
prominent brands in the industry. These brand names include such leading
regional brands as Ronzoni, San Giorgio, American
9
<PAGE> 11
Beauty, Skinner, Ideal and P&R. On a combined basis, these brands give us an
industry-leading national market share of approximately 27%, which is about 45%
larger than our closest competitor. With approximately 19% of the national
retail egg noodle market, our noodle products also have the #1 market share in
the United States and include such famous brand names as Light 'N Fluffy,
American Beauty, Skinner, Mrs. Weiss, P&R, Ideal and San Giorgio. For the year
ended December 31, 1998, we generated net sales of $373.1 million. Our principal
executive offices are located at 100 Crystal A Drive, Hershey, Pennsylvania
17033 and our telephone number is (717) 534-6711. Effective May 3, 1999, our
principal executive offices will be located at 85 Shannon Road, Harrisburg,
Pennsylvania 17112 and our telephone number will be (717) 526-2200.
RECAPITALIZATION. On January 28, 1999, New World Pasta, LLC ("New World
LLC") and Miller Pasta, LLC ("Miller LLC") acquired control of the Company in a
recapitalization transaction (the "Recapitalization"). After completing the
Recapitalization, New World LLC owned 83.4% of our common stock, Miller LLC
owned 10.6% of our common stock and Hershey retained 6.0% of our common stock.
The Recapitalization valued New World Pasta at $453.0 million, subject to a
subsequent working capital adjustment. For more information regarding this
Recapitalization, see the discussion below under the caption "The
Recapitalization" on pages 40 to 41.
OWNERSHIP OF THE COMPANY. New World LLC, which owns 83.4% of our common
stock, is controlled by Joseph Littlejohn & Levy Fund III, L.P. ("JLL Fund
III"), which is controlled by Joseph Littlejohn & Levy ("JLL"). JLL was founded
in 1988 as a private partnership dedicated to making strategic investments in
consolidating industries and to investing in corporate divestitures,
recapitalizations and restructurings. To date, JLL has raised $1.6 billion of
capital on behalf of a variety of institutional investors. Since its formation,
JLL has made investments in a variety of industries, including food products,
automotive parts, healthcare, radio, building products, specialty chemicals and
basic manufacturing. In February 1998, JLL closed on its third fund, the $1.0
billion JLL Fund III. The investment in New World Pasta through New World LLC is
the first investment by JLL Fund III and represents the largest investment JLL
has made in a single entity.
Miller LLC, which owns 10.6% of our common stock, is controlled by a group
of investors, including C. Mickey Skinner, John Miller, Michael Snow and Miller
Milling Company. Messrs. Skinner, Miller and Snow are executive officers and
directors of New World Pasta. Mr. Skinner was the President and Chief Executive
Officer of Hershey Pasta from 1984 to 1997 and Messrs. Miller and Snow are
principals of Miller Milling Company. Miller Milling Company, which was Hershey
Pasta's largest durum/semolina supplier for over 11 years, is one of the largest
procurers of durum/semolina in North America and is now responsible for the
procurement of 100% of New World Pasta's durum/semolina needs.
COMPETITIVE STRENGTHS. We believe we are well-positioned to increase our
market share, sales and profitability due to the following competitive
strengths:
- we are a national market leader in branded pasta;
- we market a significant number of strong regional pasta brands;
- we have a low-cost and efficient manufacturing and distribution system;
- we have a consistent, low-cost supply of durum/semolina, our primary raw
material;
- we are a focused, vertically-integrated pasta company; and
- we are operated by an experienced team of owner-managers.
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<PAGE> 12
GROWTH STRATEGY. We have developed a growth strategy that capitalizes and
builds upon our competitive strengths and the historical advantages that enabled
Hershey Pasta to generate consistent levels of cash flow and remain one of the
leading pasta companies in the United States. We expect to achieve consistent
revenue growth through highly-developed marketing and promotional programs,
opportunistic private label and industrial collaborations, the introduction of
innovative new products and geographic expansion of our strong regional brands.
We can utilize our 29% excess production capacity to support increased sales
volumes and generate higher incremental profit margins. The principal elements
of our strategy to maximize these opportunities include the following:
- increase our branded sales through promotional spending;
- pursue strategic private label partnerships;
- grow pasta sales opportunistically in the industrial and foodservice
sectors;
- distribute our Light 'N Fluffy brand nationally;
- capitalize on our category management capabilities; and
- expand into new markets and introduce new products.
SYNERGIES AND COST SAVING OPPORTUNITIES. In addition to the durum/semolina
cost savings we expect to realize from a new procurement contract we entered
into with Miller Milling Company, our management team has identified a number of
manufacturing cost saving initiatives. We expect to save $2.0 to $2.5 million
per year on an ongoing basis after an initial capital investment of $8.3 million
at our Lebanon and Fresno plants. We have also identified a number of synergies
and cost saving initiatives which we expect will save an additional $3.0 to $4.0
million per year, with minimal up-front cost. These initiatives include shifting
of production between plants, other staffing and shift adjustments, line
upgrades and changes in packaging procurement. Finally, we believe significant
efficiencies and savings can be realized by having an independent, focused and
coordinated organization dedicated to pasta. We expect to continue to identify
and to evaluate opportunities of this kind.
MARKET DATA. The market data and some of the industry forecasts used
throughout this Prospectus were obtained from internal surveys, market research,
publicly available information and industry publications. Industry publications
generally state that the information they present has been obtained from sources
believed to be reliable, but that the accuracy and completeness of the
information are not guaranteed. Similarly, internal surveys, industry forecasts
and market research, while believed to be reliable, have not been independently
verified, and we make no representations as to the accuracy of this information.
All market share statistics are from Information Resources, Inc., an independent
marketing research firm, and are based upon data for the 52-week period ended
December 6, 1998. The industry data was compiled from a series of industry and
government reports, including U.S. Department of Commerce, Business Trends
Analysis and Find SVP Research Publications.
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary historical and pro forma financial
data for New World Pasta. The financial data for the years ended December 31,
1998, 1997 and 1996 has been derived from the audited combined financial
statements of New World Pasta appearing elsewhere in this Prospectus. The
financial data for the year ended December 31, 1995 has been derived from the
unaudited combined financial statements of
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<PAGE> 13
New World Pasta which have not been included in this Prospectus. The financial
data for the year ended December 31, 1994 has been derived from the unaudited
internal records of New World Pasta. In the opinion of management, the unaudited
data for 1995 and 1994 reflects all adjustments necessary for a fair
presentation of the information included in the financial data for these
periods. The data set forth in the following table should be read in conjunction
with our combined financial statements and the related notes appearing elsewhere
in this Prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The unaudited pro forma operating and other data for the year ended
December 31, 1998 gives effect to (i) the Recapitalization and (ii) the offering
of the Old Notes, as if these events had occurred on the first day of the period
presented. The unaudited pro forma balance sheet data at December 31, 1998 gives
effect to (i) the Recapitalization and (ii) the offering of the Old Notes, as if
those events had occurred as of that date.
The unaudited pro forma financial data does not purport to represent what
our financial position or results of operations would actually have been if
these events had in fact occurred as of the dates or at the beginning of the
periods presented, or to project our financial position or results of operations
for any future date or period. The unaudited pro forma financial data should be
read in conjunction with the unaudited pro forma combined financial statements
and the related notes and our historical combined financial statements and the
related notes appearing elsewhere in this Prospectus.
Prior to 1996, the Company's financial and management reporting information
was commingled with other operating divisions of Hershey. As a result, the
Company's summary data as of and for the years ended December 31, 1995 and 1994
is limited and some historical financial data is unavailable.
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<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED DECEMBER 31, YEAR ENDED
---------------------------------------------------------- DECEMBER 31,
1994 1995 1996 1997 1998 1998
----------- ----------- -------- -------- -------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................... $397,770 $419,090 $407,370 $386,218 $373,096 $373,096
Cost of sales............... 237,485 241,464 235,025 210,003 205,773 205,773
-------- -------- -------- -------- -------- --------
Gross profit................ 160,285 177,626 172,345 176,215 167,323 167,323
Marketing expenses.......... 93,146 109,123 106,121 101,731 92,081 92,081
Selling, general and
administrative expenses... 36,543 36,878 35,080 32,764 33,374 35,537
-------- -------- -------- -------- -------- --------
Operating income before
provision for income
taxes..................... 30,596 31,625 31,144 41,720 41,868 39,705
Interest expense(1)(2)(3)... -- -- -- -- -- 28,211
-------- -------- -------- -------- -------- --------
Income before provision for
income taxes.............. 30,596 31,625 31,144 41,720 41,868 11,494
Provision for income
taxes..................... 13,470 13,188 12,451 16,563 15,954 4,597
-------- -------- -------- -------- -------- --------
Net income.................. 17,126 18,437 18,693 25,157 25,914 6,897
Dividends on preferred
stock..................... -- -- -- -- -- 13,618
-------- -------- -------- -------- -------- --------
Net income (loss)
attributable to common
stock..................... $ 17,126 $ 18,437 $ 18,693 $ 25,157 $ 25,914 $ (6,721)
======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital............. $ 19,621 $ 14,739 $ 15,084 $ 8,183 $ 20,798 $ 15,649
Total assets................ 293,678 259,731 246,563 231,920 225,017 342,936
Long-term debt (including
current portion)(3)....... -- -- -- -- -- 310,749
Mandatorily redeemable non-
voting preferred stock.... -- -- -- -- -- 113,485
Stockholders' equity........ 234,450 194,155 183,698 162,777 166,944 (117,434)
OTHER DATA:
EBITDA...................... $ 46,466 $ 47,558 $ 47,136 $ 57,157 $ 56,515(6) $ 54,352
EBITDA as a percentage of
net sales................. 11.7% 11.3% 11.6% 14.8% 15.1% 14.6%
Depreciation and
amortization expense...... $ 15,870 $ 15,933 $ 15,992 $ 15,437 $ 14,647 $ 14,647
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED DECEMBER 31, YEAR ENDED
---------------------------------------------------------- DECEMBER 31,
1994 1995 1996 1997 1998 1998
----------- ----------- -------- -------- -------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Capital expenditures(3)..... 9,097 5,952 8,906 1,850 4,660 4,660
Cash interest
expense(1)(4)............. -- -- -- -- -- 27,479
Ratio of Pro Forma EBITDA to
cash interest............. -- -- -- -- -- 2.0x
Ratio of earnings to
combined fixed
charges(5)................ -- -- -- -- -- 0.9x
</TABLE>
- -------------------------
(1) A 0.25% increase or decrease in the assumed average interest rate on the
variable-rate debt incurred in connection with the Recapitalization would
change the pro forma interest expense for the year ended December 31, 1998
by approximately $377,000 and the pro forma net income for the year ended
December 31, 1998 by approximately $226,000.
(2) Pro forma includes $732,000 of amortization of debt issuance costs for 1998.
(3) Historically, New World Pasta has not incurred indebtedness or related
interest expense as a division of Hershey. As an independent company, New
World Pasta is required to service the interest expense on any borrowings
incurred by it including the debt associated with the Recapitalization and
to fund its capital expenditures.
(4) Excludes $732,000 of amortization of debt issuance costs for 1998.
(5) Historically, New World Pasta has not incurred indebtedness or related
interest expense as a division of Hershey. On a pro forma basis, combined
fixed charges exceed earnings before income taxes for 1998 by $2.1 million.
(6) EBITDA represents earnings before interest, taxes, depreciation and
amortization. We believe that EBITDA provides useful information regarding
our ability to service our debt. EBITDA is not a measure of operating
performance computed in accordance with GAAP and should not be considered as
a substitute for operating income, net income, cash flows from operations,
or other statement of operations or cash flow data prepared in conformity
with GAAP, or as a measure of profitability or liquidity. In addition,
EBITDA may not be comparable to similarly titled measures of other
companies. EBITDA may not be indicative of the historical operating results
of New World Pasta, and is not meant to be predictive of future results of
operation or cash flows. You should also see the audited statement of cash
flows contained within the audited combined financial statements appearing
elsewhere in this Prospectus. During 1998, the Company incurred certain
legal expenses and paid retention bonuses related to the Recapitalization.
EBITDA on an adjusted basis without the effect of these non-recurring
charges would have been $59.0 million for the year ended December 31, 1998.
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<PAGE> 16
RISK FACTORS
You should carefully consider the risk factors described below as well as
all other information contained in this Prospectus before deciding to tender
your Old Notes in the Exchange Offer. The risk factors described below -- other
than "-- Consequences Of Not Exchanging Old Notes" -- are generally applicable
to the Old Notes as well as the New Notes.
The risks and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties not presently known to us or that we
currently believe to be immaterial may also materially and adversely affect our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected.
WE ARE A HIGHLY LEVERAGED COMPANY
As a result of the Recapitalization in which our current principals
acquired control of New World Pasta, we are a highly leveraged company. After
completing the Recapitalization, we had, and at December 31, 1998, we would have
had, on a pro forma basis, after giving effect to the Recapitalization and the
offering of the Old Notes, $310.7 million of outstanding debt -- including
approximately $150.7 million of senior indebtedness. We also had negative
stockholders' equity of $117.4 million and negative tangible net worth of $184.5
million.
Our level of indebtedness could have important consequences to you because
it:
- limits our ability to obtain additional financing to fund our growth
strategy, working capital requirements, capital expenditures, debt
service requirements or other needs;
- limits our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
make principal payments and fund debt service;
- increases our vulnerability to interest rate fluctuations because much of
our debt may be at variable interest rates, although a portion of this
indebtedness is required to be hedged under the terms of our senior
credit facilities;
- limits our ability to compete with others who are not as highly
leveraged; and
- limits our ability to react to changing market conditions, changes in our
industry and economic downturns.
Our ability to pay principal and interest on the New Notes and to satisfy
our other debt obligations will depend upon our future operating performance.
Prevailing economic conditions and financial, business and other factors, many
of which are beyond our control, will also affect our ability to make these
payments. If we cannot generate sufficient cash from operations to make
scheduled payments on the New Notes or to meet our other obligations, we will
need to refinance our debt, obtain additional financing or sell assets. We
cannot assure you that our business will generate cash flow, or that we will be
able to refinance our debt or obtain additional financing, sufficient to satisfy
our debt service requirements. If our cash flow is insufficient and we are
unable to refinance or obtain sufficient additional financing, we could be
forced to dispose of assets on unfavorable terms to make up for any shortfall in
our payment obligations. Our senior credit facilities restrict our ability to
sell assets and also restrict the use of any proceeds from sales of assets.
Moreover, our senior credit facilities are secured by substantially all of our
assets. We
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<PAGE> 17
cannot be sure that our assets could be sold quickly enough or for sufficient
amounts to enable us to meet our obligations, including our obligations with
respect to the New Notes. Furthermore, a substantial portion of our assets are,
and may continue to be, intangible assets. Therefore, it may be difficult for
the holders of the New Notes to be paid in the event of an acceleration of the
New Notes.
NEW NOTES WILL BE SUBORDINATED TO OUR SENIOR CREDIT FACILITIES
The New Notes will be subordinated to all of our senior indebtedness, in
particular, our senior credit facilities. After completing the Recapitalization
in which our current principals acquired control of New World Pasta, we had, and
on a pro forma basis, after giving effect to the Recapitalization and the
offering of the Old Notes, at December 31, 1998, we would have had, $150.7
million of senior indebtedness. We also may incur additional senior indebtedness
consistent with the terms of our debt agreements. In the event of our
bankruptcy, liquidation or dissolution, our assets would be available to pay
obligations on the New Notes only after all payments had been made on our senior
indebtedness. We cannot assure you that sufficient assets would remain to make
any payments on the New Notes. In addition, certain events of default under our
senior indebtedness would prohibit us from making any payments on the New Notes,
including interest payments.
OUR DEBT AGREEMENTS CONTAIN OPERATING AND FINANCIAL RESTRICTIONS
The operating and financial restrictions and covenants in our existing debt
agreements, including our senior credit facilities and the indenture under which
the Old Notes were issued and the New Notes will be issued, and any future
financing agreements may adversely affect our ability to finance future
operations or capital needs or to engage in other business activities.
Specifically, our debt agreements restrict our ability to:
- declare dividends or redeem or repurchase capital stock;
- prepay, redeem or purchase debt, including the New Notes;
- incur liens and engage in sale-leaseback transactions;
- make loans and investments;
- incur additional indebtedness;
- amend or otherwise change debt and other material agreements;
- make capital expenditures;
- engage in mergers, acquisitions and asset sales;
- enter into transactions with our affiliates; and
- change our primary business.
For a further description of the restrictions imposed on New World Pasta by the
terms of our debt agreements, see the discussion below under the caption
"Description of the Notes -- Covenants" on pages 97 to 111 and "Description of
Other Indebtedness" on pages 140 to 141. A breach of any of the restrictions or
covenants in our debt agreements could cause a default under our senior credit
facilities, other debt agreements, the Old Notes or the New Notes. A significant
portion of our indebtedness then may become immediately due and payable. We are
not certain whether we would have, or
16
<PAGE> 18
would be able to obtain, sufficient funds to make these accelerated payments,
including payments on the New Notes.
WE DO NOT HAVE AN INDEPENDENT OPERATING HISTORY
Since 1966, our business operations have been conducted by various entities
owned directly or indirectly by Hershey, and we do not have an independent
operating history. While owned by Hershey, we were able to use some of the
financial and administrative resources and infrastructure of Hershey in such
areas as treasury, legal, systems and benefits administration. As a result of
the Recapitalization in which our current principals acquired control of New
World Pasta, we will now be required to supplement our financial, administrative
and other resources to provide services necessary to operate successfully as an
independent company. We will also need to fund our working capital requirements
and other cash needs from our cash flow and other sources. We have a $50.0
million revolving credit facility -- all of which was available for borrowing as
of April 21, 1999 -- that can be used to fund our working capital and other
general corporate requirements. Our cash flow and the revolving credit facility
may not, however, be adequate to meet our working capital and other cash needs
in the future.
In connection with the Recapitalization, we entered into a Transitional
Services Agreement in which Hershey agreed to continue to provide us with a
variety of services for a period generally not to exceed six months from January
28, 1999, including the following:
- lease of office space;
- systems technology services;
- transition support for open positions at New World Pasta;
- telephone, copies and fax services; and
- benefits administration.
When this agreement terminates, we will have to provide these services in-house
or contract with third parties. We cannot assure you that we have not
underestimated the difficulties and costs of replacing these services and
successfully operating as an independent company.
OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE COMPARABLE TO FUTURE PERIODS
The historical financial information included in this Prospectus may not
necessarily reflect our results of operations, financial position and cash flows
in the future or be illustrative of what our results of operations, financial
position and cash flows would have been had we been a separate, independent
entity during the periods presented. The historical financial information
included in this Prospectus does not reflect many significant changes that have
occurred in our capital structure, funding and operations as a result of the
Recapitalization in which our current principals acquired control of New World
Pasta and the offering of the Old Notes or the additional costs we expect to
incur in operating as an independent company. For example, funds required for
working capital and other cash needs historically were obtained from Hershey on
an interest-free intercompany basis without any debt service requirement. In
addition, because we cannot currently estimate these adjustments, the pro forma
combined financial statements appearing elsewhere in this Prospectus do not
reflect the potentially significant working capital adjustments that may be
required subsequent to the completion of the Recapitalization. Also, Hershey's
cash
17
<PAGE> 19
management system -- in which Hershey Pasta participated -- historically
resulted in Hershey Pasta maintaining zero cash balances. As a result, our
results of operations and financial condition subsequent to the Recapitalization
are not and will not be comparable to prior periods. In addition, the
information regarding the results of operations, cash flows and financial
condition of Hershey Pasta for 1994 and 1995 are unaudited. If this information
had been audited, the results for these periods might have been different.
WE MAY BE UNABLE TO ACHIEVE OUR BUSINESS STRATEGIES
We expect many positive changes in the operations of New World Pasta as a
result of our business strategies and cost saving initiatives. However, we
cannot assure you that we will successfully implement our plans or that the
costs of implementing our plans will not be greater than currently expected. We
also cannot be sure as to the timing or amount of any positive changes which may
be realized as a result of our business strategies or that the changes in our
business strategy might not result in unanticipated material adverse
consequences.
Our future results of operations will also depend upon a number of factors
and events, some of which are beyond our control, including the following:
- the levels of demand for our existing products;
- our ability to develop new products and successfully implement our
marketing initiatives;
- our ability to maintain acceptable profit margins on product sales;
- our ability to increase our private label business;
- our ability to control our costs and repay our indebtedness;
- the substantial competition we encounter;
- our transition to operating as an independent company and the costs
associated with that transition; and
- possible changes in the pasta industry or the grocery industry and
general economic conditions.
WE ARE CONTROLLED BY JLL
JLL Fund III, which is controlled by JLL, beneficially owns 83.4% of our
outstanding common stock and voting power through its membership interest in New
World LLC. As a result of its voting power and a stockholders agreement among
the holders of our common stock, JLL Fund III is in a position to elect a
majority of our board of directors and control all matters affecting New World
Pasta, including any determination with respect to:
- the direction and policies of New World Pasta;
- the acquisition and disposition of assets;
- future issuances of common and preferred stock or other securities;
- our future incurrence of debt; and
- any dividends on our common stock or preferred stock.
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<PAGE> 20
Some decisions concerning the operations or financial structure of New
World Pasta may present conflicts of interest between JLL Fund III and the
holders of the New Notes. If we encounter financial difficulties, or we are
unable to pay our debts as they mature, the interests of our equity holders
might conflict with those of the holders of the New Notes. In addition, our
equity holders may have an interest in pursuing acquisitions, divestitures,
financings or other transactions, that, in their judgment, could enhance their
equity investment, even though these transactions might involve risks to the
holders of the New Notes.
WE OPERATE IN A HIGHLY COMPETITIVE ENVIRONMENT
We operate in a highly competitive environment and compete against numerous
national, regional and foreign companies, as well as many smaller companies, in
the procurement of raw materials, the development of new pasta products and
product lines, the improvement and expansion of previously introduced pasta
products and product lines and the production, marketing and sale of pasta
products. Our main competitors are American Italian Pasta Company, Barilla
G.ER.F. LLI S.p.A., Bestfoods Inc., Borden Food Holdings Corporation and Dakota
Growers Pasta Company. Some of our competitors have greater production capacity
and financial or other resources than we have.
Many pasta producers have disclosed that they recently increased or intend
to increase production capacity by either constructing new facilities or
expanding existing facilities by adding additional processing lines. Although we
do not expect that this increase in our competitors' capacity will have a
significant impact on our competitive position, it could cause increased
competition for sales, potentially causing pressure on profit margins. If
increased competition were to occur, it could have a material adverse effect on
our business, financial condition and results of operations.
RETAIL PASTA SALES ARE DECLINING
Although the overall U.S. pasta industry has been growing, retail pasta
sales as measured by Information Resources, Inc. have been declining since 1997,
and the rate of decline has been increasing. Although retail private label sales
have increased during this period, this increase has been more than offset by a
decrease in retail branded pasta sales. Furthermore, sales of dry pasta through
our primary distribution channels -- grocery store chains and grocery
wholesalers -- have declined, as measured by Information Resources, Inc. You
should note that in making this calculation, Information Resources, Inc. does
not include sales through mass merchants and club stores, where we also sell our
products. Moreover, our management believes that reduced expenditures for
marketing during the last two years by the largest domestic branded pasta
makers, specifically Hershey Pasta, Borden Food Holdings Corporation and
Bestfoods Inc., have contributed to this decline. Our management plans to
increase our promotional expenditures, but we cannot assure you that these
marketing initiatives will be successful. In addition, Hershey Pasta has
historically had a limited share of the private label market. We plan to
increase our activity in the private label business, but we cannot assure you
that we will successfully implement our plans.
WE ARE EXCLUSIVELY FOCUSED ON THE DRY PASTA INDUSTRY
We have focused exclusively on the dry pasta industry and expect to
continue to derive substantially all of our revenues from the sale of dry pasta
and pasta-related products. Because of this product concentration, any decline
in the demand or pricing for dry pasta, any shift in consumer preferences away
from dry pasta, or any other factor that
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<PAGE> 21
adversely affects the pasta market, could have a more significant adverse effect
on our business, financial condition and results of operations. In addition, our
pasta production equipment is highly specialized and is not adaptable to the
production of non-pasta food products.
OUR RAW MATERIAL PRICES HAVE HISTORICALLY BEEN VOLATILE
The principal raw material in our products is semolina, a flour made from
durum wheat. Durum/semolina is used almost exclusively in pasta production and
is a narrowly traded commodity crop. As a result, the profitability of New World
Pasta will be subject to changes in the market prices for durum/semolina.
The supply and price of durum/semolina is subject to market conditions and
is influenced by numerous factors beyond our control, including general economic
conditions, natural disasters, weather conditions, agricultural problems such as
pestilence, competition and governmental programs and regulations. The cost of
durum/semolina has varied in recent years and future changes in durum/semolina
costs may cause our results of operations and profit margins to fluctuate
significantly.
Miller Milling Company will have responsibility, on behalf of New World
Pasta, for durum/semolina procurement. The prices we will pay for durum/semolina
under procurement arrangements with Miller Milling Company will be based upon
prevailing market prices. Miller Milling Company will attempt to minimize the
effects of durum/semolina cost fluctuations through forward purchase contracts
and, where appropriate, hedging activities. While our commodity procurement and
pricing practices are intended to reduce the risk of durum/semolina cost
increases on profitability, these practices also may temporarily affect our
ability to benefit from possible durum/semolina cost decreases.
We also rely on the supply of packaging materials, primarily cartons,
flexible packaging and corrugated cardboard, which have experienced price
fluctuations as well. A large, rapid increase in the cost of these raw materials
could have a material adverse effect on our business, financial condition and
results of operations.
Historically, changes in prices of our pasta products have lagged behind
changes in our raw material costs. Competitive pressures may also limit our
ability to raise prices in response to increased raw material costs in the
future. Accordingly, we cannot assure you that we will be able to offset raw
material cost increases with increased product prices. For further information
regarding the impact on our business of new material costs, see the discussions
below under the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Raw Materials."
WE RELY ON A SINGLE VENDOR FOR OUR RAW MATERIAL PROCUREMENT
New World Pasta has historically sourced up to 67% of its durum/semolina
needs through Miller Milling Company under two milling agreements. We have
negotiated a procurement agreement with Miller Milling Company to supply us with
all of our additional durum/semolina needs at a competitive rate. Despite the
expected advantages associated with having a single procurement source for our
durum/semolina needs, we may not obtain the expected benefits from this
relationship. Moreover, an adverse change in, or termination or expiration
without renewal of, our relationship with Miller Milling Company could have a
material adverse effect on our business, financial condition and results of
operations. Similarly, any downturn in the financial viability of Miller Milling
Company, or its ability to perform under our contracts, would negatively impact
our business. If we had
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<PAGE> 22
to obtain durum/semolina from alternative sources, we might not be able to do so
on equally favorable terms.
In addition, two of the principals of Miller Milling Company, Messrs.
Miller and Snow, are executive officers and directors of the Company. As a
result, there may be conflicts between their interests as officers of the
Company and the interests of Miller Milling Company, which is neither owned nor
controlled by the Company. See "Business -- Miller Milling" and "Certain
Relationships and Related Transactions."
WE RELY ON OUR KEY PERSONNEL
Our operations and prospects depend in large part on the performance of our
senior management team. The team includes: Mickey Skinner, Chairman of the Board
and Chief Executive Officer; John Miller, Co-Chairman and President; Michael
Snow, Executive Vice President; James Bohenick, Vice President -- Finance and
Chief Financial Officer; Clifford Larsen, Executive Vice President -- Marketing
and Sales; and Mark E. Kimmel, Vice President, Administration and Development
and General Counsel. We cannot be sure that we would be able to find qualified
replacements for any of these individuals if their services were no longer
available. The loss of the services of one or more members of our senior
management team could have a material adverse effect on our business, financial
condition and results of operations. We do not currently maintain key person
life insurance on any of our key employees. We do, however, have employment
agreements with Messrs. Skinner, Miller and Snow. Messrs. Miller and Snow are
also employees of Miller Milling Company and will be devoting a considerable
portion of their business time to activities on behalf of Miller Milling
Company. For further information regarding our senior management team, see the
discussion below under the caption "Management."
WE COULD BE AFFECTED BY THE YEAR 2000 PROBLEM
Some computers, software and other equipment include a computer code in
which calendar year data is abbreviated to only two digits. As a result, some of
these systems could fail to operate or fail to produce correct results because
they may misinterpret "00" to mean the year 1900, rather than the year 2000.
This is widely known as the "Year 2000 Problem." The Year 2000 Problem affects
some of our computers, software and equipment. If we fail to properly recognize
and address the Year 2000 Problem in our systems, our business, financial
condition and results of operations could be materially adversely affected.
We are engaged in an ongoing process of assessing our exposure to the Year
2000 Problem. Our efforts to address this issue are described in more detail
below under the caption "Management's Discussion and Analysis of Financial
Conditions and Results of Operations." This process, including the development
of contingency plans to assess the likelihood of and address worst-case
scenarios, is continuing. While costs incurred to date to address the Year 2000
Problem have not been material, the Company expects to incur incremental
expenses of approximately $1.0 million through the end of 1999 to resolve any
known Year 2000 Problems that relate to mission critical systems. There can be
no assurance, however, that these incremental costs will not exceed our current
expectations, perhaps to a significant extent.
We expect to identify and resolve all Year 2000 Problems that could
materially adversely affect our business operations. However, the Year 2000
Problem also affects many of our major suppliers and customers. Miller Milling
Company, which is responsible for procuring all of New World Pasta's
durum/semolina requirements, believes that all of
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<PAGE> 23
its material Year 2000 Problems have been resolved. Despite Miller Milling
Company's belief, we cannot predict with certainty that all of Miller Milling
Company's Year 2000 Problems have been or will be effectively resolved. If
Miller Milling Company or any of our other suppliers or customers fails to
resolve its Year 2000 Problems, our business could be disrupted or otherwise
adversely affected. Our management believes that it is not possible to determine
with complete certainty all Year 2000 Problems affecting us or our customers and
suppliers. In addition, no one can accurately predict the severity, duration or
financial consequences of Year 2000 Problem-related failures.
WE ARE SUBJECT TO THE RISK OF PRODUCT LIABILITY CLAIMS
The sale of food products for human consumption involves the risk of injury
to consumers. These injuries may result from tampering by unauthorized third
parties, product contamination or spoilage, including the presence of foreign
objects, substances, chemicals, aflatoxin and other agents, or residues
introduced during the growing, storage, handling or transportation phases. We
have from time to time been involved in a limited number of product liability
lawsuits, none of which were material to our business. While we are subject to
U.S. Food & Drug Administration inspection and regulations and believe our
facilities comply in all material respects with all applicable laws and
regulations, we cannot be sure that consumption of our products will not cause a
health-related illness in the future or that we will not be subject to claims or
lawsuits relating to these matters. We maintain product liability insurance in
an amount which we believe to be adequate. However, we cannot be sure that we
will not incur claims or liabilities for which we are not insured or that exceed
the amount of our insurance coverage.
WE ARE SUBJECT TO THE RISK OF UNION DISPUTES AND ADVERSE EMPLOYEE RELATIONS
Some of our employees are unionized. As of December 1998, approximately 56%
of our employees were represented by The Bakery, Confectionary and Tobacco
Worker's Union of America, United Foods and Commercial Workers International
Union, International Union of Operating Engineers or the Teamsters. Our
collective bargaining agreements with these unions expire at various times and
are generally renegotiated every three years. The only collective bargaining
agreement scheduled for renegotiation in 1999 is with the United Foods and
Commercial Workers International Union, Local 271 at our Omaha, Nebraska
facility. Our historical relations with these unions have been satisfactory, and
our management anticipates a satisfactory renegotiation of this agreement.
However, we cannot assure you that this historical pattern will continue or that
satisfactory renegotiations will be obtained. While we believe that our
relations with our employees are satisfactory, a dispute between us and our
employees, or between any of our major suppliers or customers and its employees,
could have a material adverse effect on our business, financial condition and
results of operations.
WE ARE SUBJECT TO TRANSPORTATION RISKS
Durum/semolina is shipped to our production facilities in Virginia,
Pennsylvania, Kansas, Kentucky, California and Nebraska directly from North
Dakota and Canada -- and potentially Mexico, should some of our durum/semolina
supply be sourced from Mexico in the future. An extended interruption in our
ability to ship durum/semolina to our facilities could have a material adverse
effect on our business, financial condition and results of operations.
Similarly, any extended disruption in the distribution of our finished pasta
products could have a material adverse effect on our business, financial
condition and results of operations. While we would attempt to transport these
materials by alternative
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means if we were to experience an interruption due to strike, natural disasters
or otherwise, we cannot be sure that we would be able to do so or be successful
in doing so in a timely and cost-effective manner. For further information
regarding our transportation and distribution arrangements, see the discussion
below under the caption "Business -- Transportation and Distribution."
WE ARE SUBJECT TO GOVERNMENTAL REGULATION
Various federal, state and local laws and regulations impose liability on
current or former real property owners or operators for the cost of
investigating, cleaning up or removing contamination caused by hazardous or
toxic substances at the property. In addition, these laws impose liability for
clean-up costs on persons who disposed of or arranged for the disposal of
hazardous substances at third-party sites. This liability may be imposed
regardless of whether the original actions were legal or whether the person knew
of, or was responsible for, the presence of hazardous or toxic substances. This
liability may be joint and several with other parties. If the liability is joint
and several, the person could be responsible for payment of the full amount of
the liability, whether or not any other responsible party is also liable.
A number of current and former Hershey Pasta facilities have been operated
as manufacturing facilities for some time. Although we do not believe that we
will incur significant liability for environmental matters from these historic
operations, we cannot be sure that we will not incur liability in the future if
evidence of environmental problems is discovered in the future.
In addition, our operations are subject to extensive environmental laws and
regulations concerning, among other things, emissions to air, discharges to
water, and the generation, treatment and disposal of wastes and other materials.
We may also incur costs and expenses in connection with the repair or upgrade of
our facilities to meet existing or new requirements under environmental laws. In
many instances, the ultimate costs and the time period during which costs are
likely to be incurred are difficult to predict.
As a producer of products intended for human consumption, our operations
are also subject to various federal and state regulations, including regulations
promulgated by the U.S. Food and Drug Administration. We believe that we are in
material compliance with all applicable regulatory requirements relating to food
quality and safety.
WE MAY BE AFFECTED BY GOVERNMENT TRADE POLICIES
Our operations may be affected by governmental trade policies and
regulations, including those impacting the volume of pasta and the amount of
durum/semolina imported from Canada, and potentially Mexico, should some of our
durum/semolina supply be sourced from Mexico in the future. Pricing policy
actions by the Canadian Wheat Board in recent years may have resulted in
increased sales of Canadian durum/ semolina in the United States and lower
durum/semolina prices. These actions have resulted in complaints from
durum/semolina growers in the United States, and a continuing dispute over
possible restrictions on durum/semolina imports. If restrictions are
implemented, they could negatively impact our business.
Domestic pasta prices are also influenced by competition from foreign pasta
producers and, as such, by the trade policies of both the U.S. government and
foreign governments. In 1996, a U.S. Department of Commerce investigation
determined that several Italian and Turkish pasta producers were selling pasta
at less than fair value in U.S. markets, and some were benefitting from
subsidies from their respective governments. Consequently, the
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U.S. International Trade Commission imposed punitive anti-dumping and
countervailing duties on pasta imported from both nations, effective July, 1996.
However, foreign pasta producers have also entered the U.S. pasta market by
establishing production facilities in the United States, further increasing
competition in the U.S. pasta market.
SUBSIDIARY GUARANTEES COULD BE DEEMED TO BE FRAUDULENT CONVEYANCES
Some of our subsidiaries will guarantee the New Notes. The issuance of
these guarantees could be subject to review under applicable fraudulent transfer
or conveyance laws in a bankruptcy or other similar proceeding. Under these
laws, the issuance of a guarantee will be a fraudulent conveyance if either (1)
the subsidiary issued the guarantee with the intent of hindering, delaying or
defrauding its creditors, or (2) the subsidiary received less than reasonably
equivalent value or fair consideration in return for issuing the guarantee, and,
in the case of (2) only, one of the following is also true:
- the subsidiary was insolvent or became insolvent when it issued the
guarantee,
- issuing the guarantee left the subsidiary with an unreasonably small
amount of capital, or
- the subsidiary intended to, or believed that it would, be unable to pay
its debts as they matured.
If the issuance of the guarantee were a fraudulent conveyance, a court could,
among other things, void the subsidiary's obligations under the guarantee and
require the repayment of any amounts paid under the guarantee.
Generally, an entity will be considered insolvent if:
- the sum of its debts is greater than the fair value of its property,
- the present fair value of its assets is less than the amount that it will
be required to pay on its existing debts as they become due, or
- it cannot pay its debts as they become due.
We believe that immediately after issuance of the New Notes in the Exchange
Offer, our subsidiaries will be solvent, will have sufficient capital to carry
on their businesses and will be able to pay their debts as they mature. We
cannot be sure, however, as to what standard a court would apply in making these
determinations or that a court would reach the same conclusions with regard to
these issues.
YOU MAY FIND IT DIFFICULT TO SELL YOUR NOTES
There is no established trading market for the New Notes or the Old Notes.
Although Morgan Stanley & Co. Incorporated and Scotia Capital Markets (USA)
Inc., the placement agents from the offering of the Old Notes, have informed us
that they currently intend to make a market in the New Notes, they have no
obligation to do so and may discontinue making a market at any time without
notice.
We do not intend to apply for listing of the New Notes on any national
securities exchange or for quotation through The Nasdaq National Market.
The liquidity of any market for the New Notes will depend upon the number
of holders of the New Notes, the performance of New World Pasta, the market for
similar securities, the interest of securities dealers in making a market in the
New Notes and
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other factors relating to New World Pasta. A liquid trading market may not
develop for the New Notes.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE NOTES
If you do not exchange your Old Notes for New Notes in the Exchange Offer,
you will continue to be subject to the restrictions on transfer of your Old
Notes described in the legend on the certificates for your Old Notes. The
restrictions on transfer of your Old Notes arise because we issued the Old Notes
under exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, you may only offer or sell the Old Notes if they are registered under
the Securities Act and applicable state securities laws, or offered and sold
under an exemption from these requirements. We do not plan to register the Old
Notes under the Securities Act. In addition, if you exchange your Old Notes in
the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes, you may be deemed to have received restricted securities and, if
so, will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. To
the extent Old Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Old Notes would be adversely affected. For
further information regarding the consequences of tendering your Old Notes in
the Exchange Offer, see the discussions below under the captions "The Exchange
Offer -- Consequences of Exchanging or Failing to Exchange Old Notes" and
"Certain United States Federal Income Tax Considerations."
FORWARD-LOOKING STATEMENTS
This Prospectus includes or incorporates forward-looking statements about
our future financial condition, results of operations and business. We have
based these forward-looking statements on our current expectations and
projections about future events. When used in this Prospectus, words such as
"believe," "expect," "anticipate," "should," "planned," "estimated," and
"potential" or similar terminology are intended to identify forward-looking
statements. These forward-looking statements are subject to risks, uncertainties
and assumptions, including those discussed in the risk factors listed above and
in the other sections of this Prospectus, which could cause our results to
differ materially from those contained in any forward-looking statement.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the New Notes in
the Exchange Offer. We will receive Old Notes in like principal amount in
exchange for the issuance of the New Notes in the Exchange Offer. We will cancel
all Old Notes surrendered in exchange for New Notes in the Exchange Offer.
The net proceeds from the offering of the Old Notes, after deducting
underwriting discounts and our expenses, were approximately $155,276,500 and
were used to refinance our then outstanding senior subordinated increasing rate
notes (the "Senior Subordinated Increasing Rate Notes") and repay a $50.0
million term loan. See "Capitalization." The Senior Subordinated Increasing Rate
Notes bore interest at a floating rate, adjusted quarterly, equal to the greater
of (a) 3-month U.S. Dollar London Inter-Bank Offered Rate plus 5.75%, (b) the
base rate as announced by Citibank, N.A. plus 4.50% or (c) the yield on
specified U.S. Treasury obligations plus 6.25%. The interest rate increased the
longer the Senior Subordinated Increasing Rate Notes were outstanding, to a
maximum of
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18.0%. The Senior Subordinated Increasing Rate Notes were scheduled to be due on
January 28, 2000 and were issued to finance a portion of the Recapitalization.
Certain terms of the Term A Loan are described below under the caption
"Description of Other Indebtedness." Borrowings under the Term A Loan were used
to finance a portion of the Recapitalization.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
On February 19, 1999, we issued an aggregate principal amount of
$160,000,000 of our 9 1/4% Senior Subordinated Notes due 2009 in an offering
under Rule 144A and Regulation S of the Securities Act that was not registered
under the Securities Act. The Old Notes were issued, and the New Notes will be
issued, under an indenture (the "Indenture"), dated as of February 19, 1999, by
and among New World Pasta, New World Pasta's wholly owned subsidiaries, Pasta
LLC and Winchester LLC (the "Guarantors"), and The Bank of New York, as trustee
(the "Trustee"). We sold the Old Notes to Morgan Stanley & Co. Incorporated and
Scotia Capital Markets (USA) Inc. (the "Placement Agents") under a Purchase
Agreement, dated February 11, 1999, among New World Pasta, the Guarantors, and
the Placement Agents. When we sold the Old Notes to the Placement Agents, we
also signed a Registration Rights Agreement in which we agreed to exchange all
the issued and outstanding Old Notes for a like principal amount of our 9 1/4%
Senior Subordinated Exchange Notes due 2009. See "Description of the
Notes -- Registration Rights." The New Notes are identical to the Old Notes,
except that the transfer restrictions and registration rights relating to the
Old Notes do not apply to the New Notes.
This Prospectus and the enclosed Letter of Transmittal constitute an offer
to exchange New Notes for all the issued and outstanding Old Notes. This
Exchange Offer is being extended to all holders of the Old Notes. As of the date
of this Prospectus, $160,000,000 aggregate principal amount of the Old Notes are
outstanding. This Prospectus and the enclosed Letter of Transmittal are first
being sent on or about [ ], 1999, to all holders of Old Notes
known to us. Subject to the conditions listed below, we will accept for exchange
all Old Notes which are properly tendered on or prior to the Expiration Date and
not withdrawn as permitted below. See "-- Conditions to the Exchange Offer." As
used in this Prospectus, the term "Expiration Date" means 5:00 p.m., New York
City time, on [ ], 1999. However, if we, in our sole discretion,
extend the period of time during which the Exchange Offer is open, the term
"Expiration Date" will mean the latest time and date to which we extend the
Exchange Offer. Our obligation to accept Old Notes for exchange in the Exchange
Offer is subject to the conditions listed below under the caption "-- Conditions
to the Exchange Offer."
We expressly reserve the right, at any time and from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance for exchange of any Old Notes. If we elect to extend the period
of time during which the Exchange Offer is open, we will give you oral or
written notice of the extension and delay, as described below. During any
extension of the Exchange Offer, all Old Notes previously tendered and not
withdrawn will remain subject to the Exchange Offer and may be accepted for
exchange by us. We will return to the registered holder, at our expense, any Old
Notes not accepted for exchange as promptly as practicable after the expiration
or termination of the Exchange Offer. In the case of an extension, we will issue
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
We expressly reserve the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Old Notes not previously accepted for
exchange if any of the events described below under the caption "-- Conditions
to the Exchange Offer" should
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occur. We will give you oral or written notice of any amendment, termination or
non-acceptance as promptly as practicable.
Following completion of the Exchange Offer, we may, in our sole discretion,
commence one or more additional exchange offers to those Old Note holders who
did not exchange their Old Notes for New Notes. The terms of these additional
exchange offers may differ from those applicable to this Exchange Offer, as
provided in the Registration Rights Agreement. We may use this Prospectus, as
amended or supplemented from time to time, in connection with any additional
exchange offers. These additional exchange offers will take place from time to
time until all outstanding Old Notes have been exchanged for New Notes subject
to the terms and conditions contained in the prospectus and letter of
transmittal we will distribute in connection with these exchange offers.
PROCEDURES FOR TENDERING OLD NOTES
Old Notes tendered in the Exchange Offer must be in denominations of $1,000
principal amount and any integral multiple thereof.
When you tender your Old Notes, and we accept the Old Notes, this will
constitute a binding agreement between you and New World Pasta, subject to the
terms and conditions set forth in this Prospectus and the enclosed Letter of
Transmittal. Unless you comply with the procedures described below under the
caption "-- Guaranteed Delivery Procedures," you must do one of the following on
or prior to the Expiration Date to participate in the Exchange Offer:
- tender your Old Notes by sending the certificates for your Old Notes, in
proper form for transfer, a properly completed and duly executed Letter
of Transmittal, with any required signature guarantees, and all other
documents required by the Letter of Transmittal, to The Bank of New York,
as Exchange Agent, at one of the addresses listed below under the caption
"-- Exchange Agent"; or
- tender your Old Notes by using the book-entry procedures described below
under the caption "-- Book-Entry Transfer" and transmitting a properly
completed and duly executed Letter of Transmittal, with any required
signature guarantees, or an Agent's Message instead of the Letter of
Transmittal, to the Exchange Agent.
In order for a book-entry transfer to constitute a valid tender of your Old
Notes in the Exchange Offer, the Exchange Agent must receive a confirmation of
book-entry transfer (a "Book-Entry Confirmation") of your Old Notes into the
Exchange Agent's account at The Depository Trust Company prior to the Expiration
Date. The term "Agent's Message" means a message, transmitted by The Depository
Trust Company and received by the Exchange Agent and forming a part of the
Book-Entry Confirmation, which states that The Depository Trust Company has
received an express acknowledgment from you that you have received and have
agreed to be bound by the Letter of Transmittal. If you use this procedure, we
may enforce the Letter of Transmittal against you.
THE METHOD OF DELIVERY OF CERTIFICATES FOR OLD NOTES, LETTERS OF
TRANSMITTAL, AGENT'S MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR
ELECTION. IF YOU DELIVER YOUR OLD NOTES BY MAIL, WE RECOMMEND REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW
SUFFICIENT TIME TO ASSURE TIMELY DELIVERY. DO NOT SEND CERTIFICATES FOR OLD
NOTES, LETTERS OF TRANSMITTAL OR AGENT'S MESSAGES TO US.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless you are either (1) a registered Old Note
holder and have not completed the box entitled "Special Issuance Instructions"
or "Special Delivery
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Instructions" on the Letter of Transmittal or (2) you are exchanging Old Notes
for the account of an Eligible Guarantor Institution. An Eligible Guarantor
Institution means:
- Banks (as defined in Section 3(a) of the Federal Deposit Insurance Act);
- Brokers, dealers, municipal securities dealers, municipal securities
brokers, government securities dealers and government securities brokers
(as defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act"));
- Credit unions (as defined in Section 19B(1)(A) of the Federal Reserve
Act);
- National securities exchanges, registered securities associations and
clearing agencies (as these terms are defined in the Exchange Act); and
- Savings associations (as defined in Section 3(b) of the Federal Deposit
Insurance Act).
If signatures on a Letter of Transmittal or a notice of withdrawal are
required to be guaranteed, the guarantor must be an Eligible Guarantor
Institution. If you plan to sign the Letter of Transmittal but you are not the
registered holder of the Old Notes -- which term, for this purpose, includes any
participant in The Depository Trust Company's system whose name appears on a
security position listing as the owner of the Old Notes -- you must have the Old
Notes signed by the registered holder of the Old Notes and that signature must
be guaranteed by an Eligible Guarantor Institution. You may also send a separate
instrument of transfer or exchange signed by the registered holder and
guaranteed by an Eligible Guarantor Institution, but that instrument must be in
a form satisfactory to us in our sole discretion. In addition, if a person or
persons other than the registered holder or holders of Old Notes signs the
Letter of Transmittal, certificates for the Old Notes must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name or names of the registered holder or holders that appear on the
certificates for Old Notes.
All questions as to the validity, form, eligibility -- including time of
receipt -- and acceptance of Old Notes tendered for exchange will be determined
by us in our sole discretion. Our determination will be final and binding. We
reserve the absolute right to reject any and all tenders of Old Notes improperly
tendered or to not accept any Old Notes, the acceptance of which might be
unlawful as determined by us or our counsel. We also reserve the absolute right
to waive any defects or irregularities or conditions of the Exchange Offer as to
any Old Notes either before or after the Expiration Date -- including the right
to waive the ineligibility of any holder who seeks to tender Old Notes in the
Exchange Offer. Our interpretation of the terms and conditions of the Exchange
Offer as to any particular Old Notes either before or after the Expiration
Date -- including the terms and conditions of the Letter of Transmittal and the
accompanying instructions -- will be final and binding. Unless waived, any
defects or irregularities in connection with tenders of Old Notes for exchange
must be cured within a reasonable period of time, as determined by us. Neither
we, the Exchange Agent nor any other person has any duty to give notification of
any defect or irregularity with respect to any tender of Old Notes for exchange,
nor will we have any liability for failure to give this notification.
If you are a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or act in a similar fiduciary or representative
capacity, and wish to sign the Letter of Transmittal or any certificates for Old
Notes or bond powers, you must indicate your status when signing. If you are
acting in any of these capacities, you must submit
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proper evidence satisfactory to us of your authority to so act unless we waive
this requirement.
By tendering your Old Notes, you represent to us:
- that you are not an "affiliate" (as defined in Rule 405 under the
Securities Act) of New World Pasta;
- that any New Notes you receive in the Exchange Offer are being acquired
by you in the ordinary course of your business;
- that at the time of the commencement of the Exchange Offer, you do not
have any arrangement or understanding with any person to participate in
the distribution (as defined in the Securities Act) of the New Notes in
violation of the Securities Act;
- if you are not a Participating Broker-Dealer (as defined below), that you
are not engaged in, and do not intend to engage in, the distribution (as
defined in the Securities Act) of the New Notes; and
- if you are a Participating Broker-Dealer, that you will receive the New
Notes for your own account in exchange for Old Notes that were acquired
by you as a result of your market-making or other trading activities and
that you will deliver a prospectus in connection with any resale of the
New Notes you receive. See "Plan of Distribution." As used in this
Prospectus, a "Participating Broker-Dealer" is a broker-dealer that
receives New Notes for its own account in exchange for Old Notes that it
acquired as a result of market-making or other trading activities. The
Securities and Exchange Commission (the "Commission") has taken the
position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to resales of the New Notes (other
than a resale of an unsold allotment from the original sale of the Old
Notes) by delivering this Prospectus to prospective purchasers.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "-- Conditions to the Exchange Offer." For purposes of the Exchange
Offer, we will be deemed to have accepted properly tendered Old Notes for
exchange when, as and if we have given oral or written notice of acceptance to
the Exchange Agent, with written confirmation of any oral notice to be given
promptly after any oral notice.
For each Old Note accepted for exchange in the Exchange Offer, the holder
of the Old Note will receive a New Note having a principal amount at maturity
equal to that of the surrendered Old Note. Interest on the New Note will accrue
(1) from the later of (a) the last date to which interest was paid on the Old
Note surrendered in exchange for the New Note or (b) if the Old Note is
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of the exchange and
as to which interest will be paid, the date to which interest will be paid on
such interest payment date or (2) if no interest has been paid on the Old Note,
from and including February 19, 1999. If the Exchange Offer is not completed by
[the 35th day following effectiveness of the Registration Statement], 1999, and
New World Pasta does not have an effective shelf registration statement on file
with the Commission to register the Old Notes on that date, the interest rate on
the Old Notes will increase by 0.5% every 90 days, to a maximum of 1.0%, until
the Exchange Offer is completed or an
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effective shelf registration statement is on file with the Commission. Payments
of interest, if any, on Old Notes that were exchanged for New Notes will be made
on each August 15th and February 15th during which the New Notes are outstanding
to the person who, at the close of business on the February 1st or August 1st
next preceding the interest payment date, is the registered holder of the Old
Notes if the record date occurs prior to the exchange, or is the registered
holder of the New Notes if the record date occurs on or after the date of the
exchange, even if the Notes are cancelled after the record date and on or before
the interest payment date.
In all cases, the issuance of New Notes in exchange for Old Notes will be
made only after the Exchange Agent timely receives either certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation of transfer of the Old Notes into the Exchange Agent's account at
The Depository Trust Company, as the case may be, a properly completed and duly
executed Letter of Transmittal, with any required signature guarantees, and all
other required documents or, in the case of a Book-Entry Confirmation, a
properly completed and duly executed Letter of Transmittal, with any required
signature guarantees, or an Agent's Message instead of the Letter of
Transmittal. If for any reason we do not accept any tendered Old Notes or if Old
Notes are submitted for a greater principal amount than the holder desires to
exchange, we will return the unaccepted or non-exchanged Old Notes without
expense to the registered tendering holder. In the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at The Depository Trust
Company by using the book-entry procedures described below, the unaccepted or
non-exchanged Old Notes will be credited to an account maintained with The
Depository Trust Company. Any Old Notes to be returned to the holder will be
returned as promptly as practicable after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
Within two business days after the date of this Prospectus, the Exchange
Agent will establish an account at The Depository Trust Company for the Old
Notes tendered in the Exchange Offer. Once established, any financial
institution that is a participant in The Depository Trust Company's systems may
make book-entry delivery of Old Notes by causing The Depository Trust Company to
transfer the Old Notes into the Exchange Agent's account at The Depository Trust
Company in accordance with The Depository Trust Company's procedures for
transfer. Although delivery of the Old Notes may be effected through book-entry
transfer at The Depository Trust Company, the Letter of Transmittal or facsimile
of the Letter of Transmittal, with any required signature guarantees, or an
Agent's Message instead of a Letter of Transmittal, and any other required
documents, must be transmitted to and received by the Exchange Agent on or prior
to the Expiration Date at one of the addresses listed below under the caption
"-- Exchange Agent." In addition, the Exchange Agent must receive Book-Entry
Confirmation of transfer of the Old Notes into the Exchange Agent's account of
The Depository Trust Company prior to the Expiration Date. If you cannot comply
with these procedures, you may be able to use the guaranteed delivery procedures
described below.
GUARANTEED DELIVERY PROCEDURES
If you are a registered holder of the Old Notes and wish to tender your Old
Notes, but (1) the certificates for the Old Notes are not immediately available,
(2) time will not permit your certificates for the Old Notes or other required
documents to reach the Exchange Agent before the Expiration Date or (3) the
procedure for book-entry transfer
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cannot be completed before the Expiration Date, you may effect a tender of your
Old Notes if:
- the tender is made through an Eligible Guarantor Institution;
- prior to the Expiration Date, the Exchange Agent receives from an
Eligible Guarantor Institution a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form we have
provided, setting forth your name and address, and the amount of Old
Notes you are tendering and stating that the tender is being made by
Notice of Guaranteed Delivery. These documents may be sent by overnight
courier, registered or certified mail or facsimile transmission. If you
elect to use this procedure, you must also guarantee that within three
New York Stock Exchange, Inc. ("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 of transfer of the Old Notes into the Exchange
Agent's account at The Depository Trust Company (including the Agent's
Message that forms a part of the Book-Entry Confirmation), as the case
may be, a properly completed and duly executed Letter of Transmittal,
with any required signature guarantees, and any other documents required
by the Letter of Transmittal, will be deposited by the Eligible Guarantor
Institution with the Exchange Agent; and
- the Exchange Agent receives the certificates for all physically tendered
Old Notes, in proper form for transfer, or a Book-Entry Confirmation of
transfer of the Old Notes into the Exchange Agents account at The
Depository Trust Company, as the case may be, a properly completed and
duly executed Letter of Transmittal, with any required signature
guarantees, and all other required documents or, in the case of a
Book-Entry Confirmation, a properly completed and duly executed Letter of
Transmittal, with any required signature guarantees, or an Agent's
Message instead of the Letter of Transmittal, in each case, within three
NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
YOU MAY WITHDRAW TENDERS OF OLD NOTES AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to the Expiration Date at one of the
addresses listed below under the caption "-- Exchange Agent." Any notice of
withdrawal must specify the name of the person who tendered the Old Notes to be
withdrawn, identify the Old Notes to be withdrawn, including the principal
amount of the Old Notes, and, where certificates for Old Notes have been
transmitted, specify the name in which the Old Notes are registered, if
different from that of the withdrawing holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the release of the certificates, the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Guarantor
Institution unless the holder is an Eligible Guarantor Institution. If Old Notes
have been tendered using the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at The
Depository Trust Company to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of the book-entry transfer facility. All
questions as to the validity, form and eligibility -- including time of
receipt -- of these notices will be determined by us. Our determination will be
final and binding. Any Old Notes so
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withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
registered holder without cost to that holder as soon as practicable after
withdrawal, non-acceptance of tender or termination of the Exchange Offer. In
the case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at The Depository Trust Company by using the book-entry transfer
procedures described above, any withdrawn or unaccepted Old Notes will be
credited to the tendering holder's account at The Depository Trust Company.
Properly withdrawn Old Notes may be retendered at any time on or prior to the
Expiration Date by following one of the procedures described above under
"-- Procedures for Tendering Old Notes."
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, we will not be
required to accept any Old Notes for exchange or to issue any New Notes in
exchange for Old Notes, and we may terminate or amend the Exchange Offer if, at
any time before the acceptance of the Old Notes for exchange or the exchange of
New Notes for Old Notes, any of the following events occurs:
- the Exchange Offer violates any applicable law or any applicable
interpretation of the staff of the Commission;
- an action or proceeding is pending or threatened in any court or by any
governmental agency that might materially impair our ability to proceed
with the Exchange Offer;
- any material adverse development occurs in any existing legal action or
proceeding involving New World Pasta;
- we do not receive any governmental approval we deem necessary for the
completion of the Exchange Offer; or
- any of the conditions precedent to our obligations under the Registration
Rights Agreement are not fulfilled.
These conditions are for our benefit only and we may assert them regardless
of the circumstances giving rise to any condition. We may also waive any
condition in whole or in part at any time in our sole discretion. Our failure at
any time to exercise any of the foregoing rights will not constitute a waiver of
that right and each right is an ongoing right that we may assert at any time.
In addition, we will not accept any Old Notes for exchange or issue any New
Notes in exchange for Old Notes, if at the time a stop order is threatened or in
effect which relates to (1) the Registration Statement of which this Prospectus
forms a part or (2) the qualification of the Indenture under the Trust Indenture
Act of 1939 (the "TIA").
EXCHANGE AGENT
We have appointed The Bank of New York as the Exchange Agent for the
Exchange Offer. All completed Letters of Transmittal and Agent's Messages should
be directed to the Exchange Agent at one of the addresses listed below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or the Letter of Transmittal,
33
<PAGE> 35
Agent's Message and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent at one of the following addresses:
Delivery To: The Bank of New York, Exchange Agent
<TABLE>
<S> <C> <C>
By Regular or Certified Mail: By Facsimile: By Overnight Courier or Hand:
The Bank of New York (Eligible Guarantor The Bank of New York
101 Barclay Street, 7E Institutions Only) 101 Barclay Street
New York, NY 10286 (212) 815-6339 Corporate Trust Services
Attention: To Confirm by Telephone Window
Reorganization Section, or for Information Call: Ground Level
Marcia Brown (212) 815-3428 New York, NY 10286
Attention:
Reorganization Section,
Marcia Brown
</TABLE>
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS OTHER
THAN THE ADDRESS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER
THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER OF TRANSMITTAL OR
AGENT'S MESSAGE.
FEES AND EXPENSES
The principal solicitation is being made by mail by the Exchange Agent. The
Company will pay the Exchange Agent customary fees for its services, reimburse
the Exchange Agent for its reasonable out-of-pocket expenses incurred in
connection with the provision of these services and pay other registration
expenses, including fees and expenses of the Trustee under the Indenture, filing
fees, blue sky fees and printing and distribution expenses. We will not make any
payment to brokers, dealers or others soliciting acceptances of the Exchange
Offer.
Additional solicitation may be made by telephone, facsimile or in person by
officers and regular employees of New World Pasta and its affiliates and by
persons so engaged by the Exchange Agent.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection with the
tender of Old Notes in the Exchange Offer unless you instruct us to register New
Notes in the name of, or request that Old Notes not tendered or not accepted in
the Exchange Offer be returned to, a person other than the registered tendering
holder. In those cases, you will be responsible for the payment of any
applicable transfer tax.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
If you do not exchange your Old Notes for New Notes in the Exchange Offer,
your Old Notes will continue to be subject to the provisions of the Indenture
regarding transfer and exchange of the Old Notes and the restrictions on
transfer of the Old Notes described in the legend on your certificates. These
transfer restrictions are required because the Old Notes were issued under an
exemption from, or in transactions not subject to, the registration requirements
of the Securities Act and applicable state securities laws. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. We do not plan to register
the Old Notes under the Securities Act. See "Description of the
Notes -- Registration Rights." Based on interpretations by the staff of the
Commission, as set forth in no-action letters
34
<PAGE> 36
issued to third parties, we believe that the New Notes you receive in the
Exchange Offer may be offered for resale, resold or otherwise transferred
without compliance with the registration and prospectus delivery provisions of
the Securities Act. However, you will not be able to freely transfer the New
Notes if (1) you are an "affiliate" (as defined in Rule 405 under the Securities
Act) of New World Pasta, (2) you are not acquiring the New Notes in the Exchange
Offer in the ordinary course of your business, (3) you have an arrangement or
understanding with any person to participate in the distribution (as defined in
the Securities Act) of the New Notes you will receive in the Exchange Offer or
(4) you are a Participating Broker-Dealer. We do not intend to request the
Commission to consider, and the Commission has not considered, the Exchange
Offer in the context of a similar no-action letter. As a result, we cannot
guarantee that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in the circumstances described in the
no-action letters discussed above. Each holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of New Notes and has no arrangement or understanding to participate
in a distribution of New Notes. If you are an affiliate of New World Pasta, are
engaged in or intend to engage in a distribution of the New Notes or have any
arrangement or understanding with respect to the distribution of the New Notes
you will receive in the Exchange Offer, you (1) may not rely on the applicable
interpretations of the staff of the Commission and (2) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction involving the New Notes. If you are a
Participating Broker-Dealer, you must acknowledge that you will deliver a
prospectus in connection with any resale of the New Notes. See "Plan of
Distribution." In addition, to comply with state securities laws, you may not
offer or sell the New Notes in any state unless they have been registered or
qualified for sale in that state or an exemption from registration or
qualification is available and is complied with. The offer and sale of the New
Notes to "qualified institutional buyers" (as defined in Rule 144A of the
Securities Act) is generally exempt from registration or qualification under
state securities laws. We do not plan to register or qualify the sale of the New
Notes in any state where an exemption from registration or qualification is
required and not available.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations relating to the acquisition, ownership and disposition
of the Notes. This discussion is based on the Code, and regulations, rulings and
judicial decisions as of the date hereof, all of which may be repealed, revoked
or modified so as to result in United States federal income tax consequences
different from those described below. These changes could be applied
retroactively in a manner that could adversely affect holders of the Notes. In
addition, the authorities on which this discussion is based are subject to
various interpretations. It is therefore possible that the consequences of the
acquisition, ownership and disposition of the Notes may differ from the
treatment described below.
This discussion applies only to purchasers of the Old Notes in the original
offering at the first price at which a substantial amount of the Old Notes were
sold and does not address other purchasers, including purchasers of Notes with
"market discount" or "acquisition premium." In addition, the tax treatment of a
holder of the Notes may vary depending upon the particular situation of the
holder. This discussion is limited to investors who will hold the Notes as
capital assets and does not deal with holders that may be subject to special tax
rules (including, but not limited to, insurance companies, tax-exempt
35
<PAGE> 37
organizations, financial institutions, dealers or traders in securities or
currencies, U.S. holders whose functional currency is not the U.S. dollar,
certain U.S. expatriates or holders who will hold the Notes as a hedge against
currency risks or as part of a straddle, synthetic security, conversion
transaction or other integrated investment comprised of the Notes and one or
more other investments).
This discussion is for general information only and does not address all
aspects of United States federal income taxation that may be relevant to holders
of the Notes in light of their particular circumstances, and it does not address
any tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction. Holders should consult their own tax advisors as to the
particular tax consequences to them of acquiring, holding or disposing of the
Notes.
EXCHANGE OF OLD NOTE FOR NEW NOTE
The exchange of an Old Note for a New Note should not constitute a taxable
exchange. The Holder will have the same tax basis and holding period in the New
Note as it did in the Old Note at the time of such exchange.
U.S. HOLDERS
For purposes of this discussion, a "U.S. Holder" of a Note is a holder who
for United States federal income tax purposes is (1) an individual that is a
citizen or resident of the United States (including certain former citizens and
former longtime residents), (2) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (3) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (4) a trust if a
U.S. court is able to exercise primary supervision over the administration of
the trust and one or more U.S. persons have the authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence, to
the extent provided in United States Treasury regulations, certain trusts in
existence on August 20, 1996, and treated as United States persons prior to such
date, that elect to continue to be treated as United States persons also will be
U.S. Holders. A "Non-U.S. Holder" is a holder that is not a U.S. Holder.
INTEREST. Stated interest on a Note will generally be taxable to a U.S.
Holder as ordinary income from domestic sources at the time it is paid or
accrued in accordance with the U.S. Holder's method of accounting for income tax
purposes.
Our failure to consummate the Exchange Offer or to file or cause to be
declared effective the Shelf Registration Statement as described under
"Description of the Notes -- Registration Rights" will cause additional interest
to accrue on the Old Notes in the manner described in the Old Notes. In the
unlikely event that the interest rate on the Old Notes is increased, then the
increased interest may be treated as original issue discount, includable by a
U.S. Holder in income as such interest accrues, in advance of receipt of any
cash payment and regardless of the method of income tax accounting employed by
the U.S. Holder.
Even though the Notes may be redeemed prior to their stated maturity at our
or the holder's option upon certain circumstances or automatically upon the
occurrence of certain events, we believe that none of these redemption rights or
obligations are more likely than not to occur, and, thus, under applicable
Treasury regulations, none of these redemption rights or obligations will affect
the manner of including original issue discount, if any, in income.
36
<PAGE> 38
DISPOSITION OF NOTES. Upon the sale, retirement at maturity or other
taxable disposition of a Note (collectively, a "disposition"), a U.S. Holder
generally will recognize capital gain or loss equal to the difference between
the amount realized by the holder (except to the extent such amount is
attributable to accrued interest, which will be treated as ordinary interest
income) and the holder's adjusted tax basis in the Note. This capital gain or
loss will be long-term capital gain or loss if the U.S. Holder's holding period
for the Note exceeds one year at the time of the disposition.
NON-U.S. HOLDERS
INTEREST. Interest that we pay to a Non-U.S. Holder will not be subject to
United States federal income or withholding tax if the interest is not
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Holder and, among other things, the Non-U.S. Holder (1)
does not actually or constructively own 10% or more of the total combined voting
power of all classes of our stock; (2) is not a controlled foreign corporation
for United States federal income tax purposes and to which we are a related
person and (3) certifies to us, our paying agent or the person who would
otherwise be required to withhold United States tax, on Form W-8 or W-9 or
substantially similar form signed under penalties of perjury, that the holder is
not a United States person and provides the holder's name and address (the
"Certification Requirement"). In the case of interest on a Note that is not
"effectively connected with the conduct of a trade or business within the United
States" and does not satisfy the three requirements of the preceding sentence,
the Non-U.S. Holder's interest on a Note would generally be subject to United
States withholding tax at a flat rate of 30% (or a lower applicable treaty
rate). If a Non-U.S. Holder's interest on a Note is "effectively connected with
the conduct of a trade or business within the United States," then the Non-U.S.
Holder will be subject to United States federal income tax on such interest
income in essentially the same manner as a U.S. Holder and, in the case of a
Non-U.S. Holder that is a foreign corporation, may also be subject to the branch
profits tax.
GAIN ON DISPOSITION. A Non-U.S. Holder generally will not be subject to
United States federal income tax with respect to gain recognized on a sale,
redemption or other disposition of a Note unless (1) the gain is effectively
connected with the conduct of a trade or business within the United States by
the Non-U.S. Holder or (2) in the case of a Non-U.S. Holder who is a nonresident
alien individual and holds the Note as a capital asset, such holder is present
in the United States for 183 or more days in the taxable year and certain other
requirements are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We will, when required, report to the holders of the Notes and the Internal
Revenue Service ("IRS") the amount of any interest paid on the Notes in each
calendar year and the amount of tax withheld, if any, with respect to these
payments.
Certain non-corporate U.S. Holders may be subject to backup withholding at
a rate of 31% on payments of principal, premium and interest on, and the
proceeds of the disposition of, the Notes. In general backup withholding will be
imposed only if the U.S. Holder (1) fails to furnish its taxpayer identification
number ("TIN"), which, for an individual, would be his or her Social Security
number, (2) furnishes an incorrect TIN, (3) is notified by the IRS that it has
failed to report payments of interest or dividends or (4) under certain
circumstances, fails to certify, under penalty of perjury, that it has furnished
a correct TIN and has been notified by the IRS that it is subject to backup
37
<PAGE> 39
withholding tax for failure to report interest or dividend payments. In
addition, payments of principal and interest to U.S. Holders will generally be
subject to information reporting. U.S. Holders should consult their own tax
advisors regarding their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption, if applicable.
In the case of payments of interest to Non-U.S. Holders, the general 31%
backup withholding tax and certain information reporting will not apply to those
payments with respect to which either the Certification Requirement has been
satisfied or an exemption has otherwise been established, provided that neither
we nor our payment agent has actual knowledge that the holder is a United States
person or that the conditions of any other exemption are not in fact satisfied.
Information reporting and backup withholding requirements will apply to the
gross proceeds paid to a Non-U.S. Holder on the disposition of the Notes by or
through a United States office of a United States or foreign broker, unless the
holder certifies to the broker under penalties of perjury as to its name,
address and status as a foreign person or the holder otherwise establishes an
exemption. Information reporting requirements, but not backup withholding, will
also apply to a payment of the proceeds of a disposition of the Notes by or
through a foreign office of a United States broker or foreign brokers with
certain types of relationships to the United States unless such broker has
documentary evidence in its file that the holder of the Notes is not a United
States person and such broker has no actual knowledge to the contrary, or the
holder establishes an exception. Neither information reporting nor backup
withholding generally will apply to a payment of the proceeds of a disposition
of the Notes by or through a foreign office of a foreign broker not subject to
the preceding sentence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be credited toward a holder's United States
federal income tax liability, if any. To the extent that the amounts withheld
exceed a holder's tax liability, the excess may be refunded to the holder
provided the required information is furnished to the IRS, and the holder files
a United States tax return claiming a refund of excess withholding.
RECENTLY ISSUED TREASURY REGULATIONS
The United States Treasury Department has promulgated new regulations
regarding the withholding and information reporting rules discussed above. In
general, the new regulations do not significantly alter the substantive
withholding and information reporting requirements but rather unify current
certification procedures and forms and clarify reliance standards. The new
regulations require, however, that a foreign person furnish its taxpayer
identification number in certain circumstances to claim a reduction in United
States federal withholding tax and new rules are provided for foreign persons
that hold debt instruments through a foreign intermediary. In particular, in the
case of payments to foreign partnerships (other than payments to foreign
partnerships that qualify as "withholding foreign partnerships" within the
meaning of the new regulations and payments to foreign partnerships that are
effectively connected with the foreign partnership's conduct of a trade or
business in the United States), the partners of such partnerships will be
required to provide the certification discussed above in order to establish an
exemption from backup withholding tax and information reporting requirements.
Moreover, a payor may rely on a certification provided by a Non-U.S. Holder only
if such payor does not have actual knowledge or a reason to know that any
information or certification stated in such certificate is unreliable. The new
regulations are generally effective for payments made after December 31, 1999,
subject to certain transition rules.
38
<PAGE> 40
NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
IMPACT, IF ANY, OF THE NEW REGULATIONS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. PROSPECTIVE U.S. HOLDERS AND NON-U.S. HOLDERS OF THE NOTES
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE INCOME AND OTHER
TAX CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER UNITED STATES FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE EFFECTS OF CHANGES IN SUCH LAWS.
39
<PAGE> 41
THE RECAPITALIZATION
On January 28, 1999, Hershey completed the Recapitalization, in which New
World LLC and Miller LLC acquired control of Hershey Pasta, while Hershey
retained a 6% minority equity interest. Prior to the Recapitalization, Hershey
completed a reorganization in which the net assets of Hershey Pasta were
transferred into Hershey Pasta Manufacturing Company ("Hershey Manufacturing"),
a pre-existing operating subsidiary of Hershey. Hershey Manufacturing
subsequently changed its name to New World Pasta Company.
As part of the Recapitalization, New World Pasta repurchased $307.7 million
of its common stock from Hershey, and New World LLC purchased from Hershey
$100.6 million of our mandatorily redeemable non-voting preferred stock and
$41.7 million of our common stock. We sold $12.9 million of our mandatorily
redeemable non-voting preferred stock and $5.3 million of our common stock
directly to Miller LLC. After completing the Recapitalization, Hershey retained
6.0% of our common stock and voting equity (at an implied value of $3.0
million), and New World LLC and Miller LLC held 83.4% and 10.6%, respectively,
of our common stock and voting equity. The historical basis of accounting for
New World Pasta has been maintained.
The Recapitalization valued New World Pasta at $453.0 million, subject to a
subsequent working capital adjustment.
In connection with the Recapitalization, a syndicate of lenders led by The
Bank of Nova Scotia provided us with $250.0 million of senior credit facilities,
including a (1) $50.0 million revolving credit facility (the "Revolving Credit
Facility") and (2) $200.0 million in term loans consisting of a $50.0 million
term loan (the "Term A Loan") and a $150.0 million term loan (the "Term B
Loan"). The Revolving Credit Facility, the Term A Loan and the Term B Loan are
collectively referred to in this Prospectus as the "Senior Credit Facilities."
The Recapitalization was financed with the Term A Loan (which was repaid with a
portion of the proceeds from the offering of the Old Notes), the Term B Loan,
the $142.3 million stock purchase by New World LLC from Hershey, the equity
investment of $18.2 million by Miller LLC and the issuance of $110.0 million in
Senior Subordinated Increasing Rate Notes, which were refinanced with a portion
of the proceeds from the offering of the Old Notes. The sources and uses of
funds for the Recapitalization are summarized below:
SOURCES AND USES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
SOURCES OF FUNDS
Senior Credit Facilities:
Revolving Credit Facility................................. --
Term A Loan(1)............................................ $ 50,000
Term B Loan............................................... 150,000
Senior Subordinated Increasing Rate Notes(1)................ 110,000
Preferred stock investments:
New World LLC............................................. 100,636
Miller LLC................................................ 12,849
</TABLE>
40
<PAGE> 42
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Common stock investments:
New World LLC............................................. 41,679
Miller LLC................................................ 5,321
Common stock retained by Hershey (implied value)............ 3,000
Fees paid by Hershey........................................ 1,925
--------
Total sources..................................... $475,410
========
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
USES OF FUNDS
Repayment of demand note used to repurchase common stock
from Hershey and purchase of common and preferred stock
from Hershey.............................................. $450,000
Common stock retained by Hershey (implied value)(2)......... 3,000
Estimated fees and expenses................................. 22,050
Cash retained by New World Pasta............................ 360
--------
Total uses........................................ $475,410
========
</TABLE>
- -------------------------
(1) Net proceeds from the issuance and sale of the Old Notes were used to repay
the Term A Loan and refinance the Senior Subordinated Increasing Rate Notes.
(2) Represents the post-Recapitalization value of the retained shares based on
the price per share paid by Miller LLC. This non-cash retention has been
included to show the implied value of the retained interest in relation to
the overall capitalization of the Company.
41
<PAGE> 43
CAPITALIZATION
The following table sets forth (1) the actual capitalization of New World
Pasta as of December 31, 1998 and (2) the capitalization of New World Pasta as
of December 31, 1998 after giving pro forma effect to the Recapitalization as if
it had occurred as of December 31, 1998.
This table should be read in conjunction with "Unaudited Pro Forma Combined
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the historical combined financial
statements of New World Pasta and the notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------
ACTUAL PRO FORMA
-------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt (including current portion):
Senior Credit Facilities
Revolving Credit Facility(1)............... $ -- $ 749
Term A Loan(2)............................. -- 0
Term B Loan................................ -- 150,000
Old Notes(2).................................. -- 160,000
-------- ---------
Total long-term debt.................. -- 310,749
Preferred stock (stated at liquidation
value)(3)..................................... -- 113,485
Stockholders' equity (deficit)(4)............... 166,944 (117,434)
-------- ---------
Total capitalization.................. $166,944 $ 306,800
======== =========
</TABLE>
- -------------------------
(1) The Revolving Credit Facility provides for a total commitment of $50
million. On a pro forma basis, New World Pasta anticipated borrowing
approximately $749,000 thereunder to pay certain costs related to the
offering of the Old Notes. Currently, New World Pasta has not drawn upon the
Revolving Credit Facility.
(2) The Recapitalization was financed in part with the $50.0 million Term A Loan
and the $110.0 million Senior Subordinated Increasing Rate Notes. The net
proceeds from the offering of the Old Notes were used to repay the Term A
Loan and refinance the Senior Subordinated Increasing Rate Notes.
(3) The preferred stock is stated at fair value and is mandatorily redeemable in
11 years. The dividends on this preferred stock are payable semi-annually in
cash in arrears when, as and if declared by our board of directors and are
cumulative. The Senior Credit Facilities and the Indenture impose
restrictions on our ability to pay cash dividends on the preferred stock.
(4) The Unaudited Pro Forma Combined Balance Sheet included elsewhere in this
Prospectus reflects the common stock held by Miller LLC, New World LLC and
Hershey net of the pro forma adjustments relating to the recapitalization of
stockholders' equity described in footnote (j) to the Unaudited Pro Forma
Combined Balance Sheet. The implied value of these common stock investments
totals $50 million. Prior to the Recapitalization, Hershey's equity interest
in Hershey Pasta was recorded as "parent company's investment and advances."
See "Unaudited Pro Forma Combined Financial Information."
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<PAGE> 44
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Set forth below is certain unaudited pro forma combined financial
information for the Company. The Unaudited Pro Forma Combined Balance Sheet as
of December 31, 1998 gives effect to the Recapitalization and this Offering as
if they had occurred at December 31, 1998. The Unaudited Pro Forma Combined
Statement of Operations for the year ended December 31, 1998 gives effect to the
Recapitalization and the offering of the Old Notes as if they had occurred on
the first day of the period presented. The historical basis of the Company's
assets and liabilities was not impacted by the Recapitalization.
The unaudited pro forma adjustments, as described in the notes to the
Unaudited Pro Forma Combined Financial Statements, are based on available
information and upon certain assumptions that management believes are
reasonable.
The unaudited pro forma combined financial information does not purport to
represent what our financial position or results of operations would have been
if such events had in fact occurred as of the dates or at the beginning of the
periods presented, or to project our financial position or results of operations
for any future date or period. The unaudited pro forma combined financial
information should be read in conjunction with the historical combined financial
statements of the Company and notes thereto included elsewhere in this
Prospectus.
43
<PAGE> 45
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------------------------
HISTORICAL ADJUSTMENTS Pro Forma(a)
---------- ----------- ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................ $ -- $ 0(b) $ 0
Accounts receivable, net................. 18,447 -- 18,447
Inventories.............................. 22,547 -- 22,547
Deferred income taxes.................... 3,275 (3,275)(c) 0
Prepaid expenses and other current
assets................................ 4,793 -- 4,793
--------- ---------- ---------
Total current assets............. 49,062 (3,275) 45,787
--------- ---------- ---------
Property, plant and equipment:
Land..................................... 3,666 -- 3,666
Buildings and leasehold improvements..... 33,486 -- 33,486
Machinery and equipment.................. 188,185 -- 188,185
Less accumulated depreciation............ (116,409) -- (116,409)
--------- ---------- ---------
Property, plant and equipment, net....... 108,928 -- 108,928
Other Assets:
Goodwill................................. 67,027 -- 67,027
Deferred tax asset....................... -- 112,906(d) 112,906
Other...................................... -- 8,288(e) 8,288
--------- ---------- ---------
Total Assets..................... $ 225,017 $ 117,919 $ 342,936
========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving Credit Facility................ $ -- $ 749(f) $ 749
Current portion of term loans............ -- 1,125(g) 1,125
Trade accounts payable................... 9,657 -- 9,657
Accrued expenses and other current
liabilities........................... 18,607 -- 18,607
--------- ---------- ---------
Total current liabilities........ 28,264 1,874 30,138
Term loans, excluding current portion...... -- 148,875(h) 148,875
Notes...................................... -- 160,000(i) 160,000
Other long-term liabilities................ 7,872 -- 7,872
Deferred income taxes...................... 21,937 (21,937)(c) --
--------- ---------- ---------
Total liabilities................ 58,073 288,812 346,885
Mandatorily redeemable non-voting preferred
stock.................................... -- 113,485(j) 113,485
Stockholders' equity (deficit)............. 166,944 (284,378)(j) (117,434)
--------- ---------- ---------
Total liabilities and
stockholders' equity........... $ 225,017 $ 117,919 $ 342,936
========= ========== =========
</TABLE>
See accompanying notes to the Unaudited Pro Forma Combined Balance Sheet.
44
<PAGE> 46
NOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(a) Pro forma to give effect to the Recapitalization and the issuance of the
Notes as if they had occurred as of December 31, 1998.
(b) Reflects the following (in thousands):
<TABLE>
<S> <C>
Borrowings under Senior Credit Facilities................... $ 200,749
Proceeds from issuance of Senior Subordinated Increasing
Rate Notes................................................ 110,000
Repurchase of common stock from Hershey..................... (307,685)
Proceeds from issuance of common and preferred stock to
Miller LLC................................................ 18,170
Proceeds from Old Notes..................................... 160,000
Repayment of Term A Loan and Refinancing of Senior
Subordinated Increasing Rate Notes (including accrued
interest of $286 and $823, respectively).................. (161,109)
Estimated total fees and expenses........................... (22,050)
Fees reimbursed by Hershey.................................. 1,925
---------
$ 0
=========
</TABLE>
(c) Reflects elimination of historical deferred tax assets and liabilities.
(d) Reflects the increase in the deferred income tax assets of the Company
since, for United States federal and state income tax purposes, the
Recapitalization is treated as an asset purchase under Section 338h(10) of
the Code. As a result there is a step-up in the tax basis of the assets
which will provide incremental future income tax deductions of $282.3
million over the next 15 years to reduce future taxable income. The deferred
tax asset was determined as follows (in thousands):
<TABLE>
<S> <C>
Recapitalized equity at implied market value................ $ 453,000
Interest and fees relating to the repaid Term A Loan and the
refinanced Senior Subordinated Increasing Rate Notes to be
refinanced................................................ 5,384
Estimated fees and expenses incurred in connection with the
Recapitalization.......................................... 9,487
---------
Total Enterprise Value...................................... 467,871
Less stockholders' equity (adjusted for deferred taxes) (see
note (c))................................................. (185,606)
---------
Excess of recapitalization value over historic tax basis of
the net assets acquired................................... 282,265
Estimated corporate tax rate................................ 40.0%
---------
Deferred income tax asset arising out of Code Section
338h(10) election*........................................ $ 112,906
---------
</TABLE>
- -------------------------
* A valuation reserve has not been established against the deferred income
tax asset calculated above on the assumption that it is more likely than
not the deferred income tax asset will be fully utilized in future years.
(e) Reflects estimated debt issuance costs for the Secured Credit Facilities,
the Old Notes and the New Notes.
(f) Reflects the Revolving Credit Facility of which $50.0 million is currently
available.
(g) Reflects current portion of term loans.
45
<PAGE> 47
(h) Reflects borrowings under the term loans excluding current portion.
(i) Reflects the New Notes (assuming 100% of the outstanding aggregate principal
amount of Old Notes is exchanged for New Notes in the Exchange Offer).
(j) In connection with the Recapitalization, the historical equity will be
recapitalized into stockholders' equity and preferred stock.
The net proceeds from the Senior Subordinated Increasing Rate Notes, and
the borrowings under the Term A loan and Term B loan, were used by the
Company to repay a demand note in the amount of $307.7 million that was
used to repurchase a portion of the recapitalized common stock of the
Company from Hershey. New World LLC then acquired common stock and
preferred stock of the Company directly from Hershey for $142.3 million as
part of the Recapitalization.
The total amount paid to Hershey for the redemption and purchase of common
stock and preferred stock was $450.0 million. The Company issued common and
preferred stock to Miller LLC for $18.2 million.
Hershey's retained interest consists of $3.0 million of common stock of the
Company based on the implied value.
The implied equity investments in the Company following the
Recapitalization by the constituent stockholders are expected to be as
follows (in thousands):
<TABLE>
<CAPTION>
PREFERRED COMMON EQUITY
STOCK STOCK INVESTMENTS
--------- ------- -----------
<S> <C> <C> <C>
New World Pasta L.L.C. (common stock at
implied value).......................... $100,636 $41,679 $142,315
Miller LLC................................ 12,849 5,321 18,170
Hershey retained interest (implied
value).................................. -- 3,000 3,000
-------- ------- --------
$113,485 $50,000 $163,485
======== ======= ========
</TABLE>
Proceeds from the offering of the Old Notes were used to repay the Term A
Loan and to refinance the Senior Subordinated Increasing Rate Notes.
The pro forma adjustments to reflect these transactions are as follows (in
thousands):
<TABLE>
<CAPTION>
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Historical book value....................................... $ 166,944
---------
Recapitalization transactions
Recapitalization of certain historical equity into
preferred stock........................................ (100,636)
Repurchase from Hershey of common stock................... (307,685)
Issuance of common stock to Miller LLC.................... 5,321
Adjustments to establish new deferred tax balances under
Code Section 338h(10):
Elimination of historical deferred income tax liability... 21,937
Elimination of historical deferred income tax asset....... (3,275)
Deferred income tax asset arising out of Code Section
338h(10) election (see note (d) above)................. 112,906
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Estimated transaction fees, expenses and adjustments
Estimated fees and expenses incurred in connection with
the Recapitalization................................... (9,487)
Interest and fees relating to Term A loan that was repaid
and to the Senior Subordinated Increasing Rate Notes
that were refinanced with the proceeds from the
offering of the Old Notes.............................. (5,384)
Reimbursement of certain fees by Hershey.................. 1,925
---------
$(284,378)
Pro forma book value........................................ $(117,434)
=========
</TABLE>
47
<PAGE> 49
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA(a)
---------- ----------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Net Sales................................ $373,096 $ -- $373,096
Cost of sales............................ 205,773 -- 205,773
-------- -------- --------
Gross profit................... 167,323 -- 167,323
Marketing expenses....................... 92,081 -- 92,081
Selling, General and Administrative
expenses............................... 33,374 2,163(b) 35,537
-------- -------- --------
Operating Income before provision for
income taxes........................... 41,868 (2,163) 39,705
Interest Expense......................... -- (28,211)(c) (28,211)
-------- -------- --------
Income before income taxes..... 41,868 (30,374) 11,494
Provision for income taxes............... 15,954 (11,357)(d) 4,597
-------- -------- --------
Net Income..................... 25,914 (19,017) 6,897
Dividends on preferred stock............. -- (13,618)(e) (13,618)
-------- -------- --------
Net income (loss) attributable to common
stock.................................. $ 25,914 $(32,635) $ (6,721)
======== ======== ========
</TABLE>
See accompanying notes to the Unaudited Pro Forma Combined Statement of
Operations.
48
<PAGE> 50
NOTES TO THE UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PRO FORMA FOR
THE YEAR ENDED
12/31/98
--------------
<C> <S> <C>
(a) Pro forma gives effect to the Recapitalization and the
issuance of the Notes as if they had occurred on January 1,
1998.
(b) Reflects the following (in thousands):
Estimated incremental legal, audit, tax and other
administration
costs attributable to independent operations................ $ 1,200
Estimated incremental executive compensation attributable to
new
management team............................................. 963
--------
$ 2,163
========
(c) Reflects the following (in thousands):
Estimated cash interest expense associated with new debt.... $(27,479)
Estimated amortization of new debt financing costs.......... (732)
--------
$(28,211)
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST COST
--------- -------------
<C> <S> <C> <C>
Annual interest on new debt structure (in
thousands)
Revolving Credit Facility at LIBOR plus 2.75%.... $ -- $ 58
Unused revolver commitment fee (.50%)............ 246
Term Loan B at LIBOR plus 3.25%.................. 150,000 12,375
Notes (9.25%).................................... 160,000 14,800
-------
$27,479
=======
</TABLE>
For the purposes of the above, LIBOR is estimated to be 5.0%.
The fees and accrued interest related to the Senior Subordinated
Increasing Rate Notes and the Term A loan of $5.3 million are considered
nonrecurring and hence are excluded from the pro forma presentation.
A 0.25% increase or decrease in the assumed average interest rate on the
variable rate debt incurred in connection with the Recapitalization would
change the pro forma interest expense for the year ended December 31,
1998 by approximately $377,000 and the pro forma net income for the year
ended December 31, 1998 by approximately $226,000.
The deferred financing costs are amortized on the interest method over
the term of the associated debt.
(d) The tax effect of the pro forma adjustment is based on the estimated
applicable effective tax rate of 40% for the periods presented.
49
<PAGE> 51
(e) The holders of the Company's preferred stock are entitled to receive
cumulative preferred dividends, in a per share amount equal to 12% of the
liquidation preference of such preferred stock, payable semi-annually in
cash in arrears, when, as and if declared by the Company's Board of
Directors.
The cumulative preferred dividends are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
COUPON LIQUIDATION PREFERENCE DECEMBER 31, 1998
------ ---------------------- -----------------
<S> <C> <C> <C>
12.00%............................ $113,485 $13,618
</TABLE>
50
<PAGE> 52
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The following table sets forth selected financial data for New World Pasta.
The selected financial data for the years ended December 31, 1998, 1997 and 1996
has been derived from the audited combined financial statements of New World
Pasta appearing elsewhere in this Prospectus. The selected financial data for
the year ended December 31, 1995 has been derived from the unaudited combined
financial statements of New World Pasta which have not been included in this
Prospectus. The selected financial data for the year ended December 31, 1994 has
been derived from the unaudited internal records of New World Pasta. In the
opinion of management, the unaudited data for 1995 and 1994 reflects all
adjustments necessary for a fair presentation of the information included
therein for these periods. The data set forth in the following table should be
read in conjunction with our audited combined financial statements and notes
thereto appearing elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales......................... $397,770 $419,090 $407,370 $386,218 $373,096
Cost of Sales..................... 237,485 241,464 235,025 210,003 205,773
-------- -------- -------- -------- --------
Gross Profit............. 160,285 177,626 172,345 176,215 167,323
Marketing expenses................ 93,146 109,123 106,121 101,731 92,081
Selling, general and
administrative expenses......... 36,543 36,878 35,080 32,764 33,374
-------- -------- -------- -------- --------
Operating income before
provision for income
taxes.................. 30,596 31,625 31,144 41,720 41,868
Income before provision
for income taxes....... 30,596 31,625 31,144 41,720 41,868
Provision for income taxes........ 13,470 13,188 12,451 16,563 15,954
-------- -------- -------- -------- --------
Net income............... 17,126 18,437 18,693 25,157 25,914
-------- -------- -------- -------- --------
Net income attributable
to common stock........ $ 17,126 $ 18,437 $ 18,693 $ 25,157 $ 25,914
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD
END):
Working capital................... $ 19,621 $ 14,739 $ 15,084 $ 8,183 $ 20,798
Total assets...................... 293,678 259,731 246,563 231,920 225,017
Long-term debt (including current
portion)(1)..................... -- -- -- -- --
Stockholders' equity.............. 234,450 194,155 183,698 162,777 166,944
OTHER DATA:
EBITDA(2)......................... $ 46,466 $ 47,558 $ 47,136 $ 57,157 $ 56,515
EBITDA as a percentage of net
sales........................... 11.7% 11.3% 11.6% 14.8% 15.1%
Depreciation and amortization
expense......................... $ 15,870 $ 15,933 $ 15,992 $ 15,437 $ 14,647
Capital expenditures.............. 9,097 5,952 8,906 1,850 4,660
Ratio of earnings to combined
fixed charges(3)................ -- -- -- -- --
</TABLE>
51
<PAGE> 53
- -------------------------
(1) Historically, New World Pasta has not incurred indebtedness or related
interest expense as a division of Hershey. As an independent company, New
World Pasta is required to service the interest expense on any borrowings
incurred by it including the debt associated with the Recapitalization.
(2) EBITDA represents earnings before interest, taxes, depreciation and
amortization. We believe that EBITDA provides useful information regarding
our ability to service our debt. EBITDA is not a measure of operating
performance computed in accordance with GAAP and should not be considered as
a substitute for operating income, net income, cash flows from operations,
or other statement of operations or cash flow data prepared in conformity
with GAAP, or as a measure of profitability or liquidity. In addition,
EBITDA may not be comparable to similarly titled measures of other
companies. EBITDA may not be indicative of the historical operating results
of New World Pasta, and is not meant to be predictive of future results of
operation or cash flows. You should also see the audited statement of cash
flows contained within the audited combined financial statements appearing
elsewhere in this Prospectus. During 1998, the Company incurred certain
legal expenses and paid retention bonuses related to the Recapitalization.
EBITDA on an adjusted basis without the effect of these non-recurring
charges would have been $59.0 million for the year ended December 31, 1998.
(3) Historically, New World Pasta has not incurred indebtedness or related
interest expense as a division of Hershey. On a pro forma basis, combined
fixed charges exceed earnings before income taxes for 1998 by $2.1 million.
52
<PAGE> 54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the financial statements of the
Company, the notes thereto, and the other financial information appearing
elsewhere in this Prospectus. This discussion contains, in addition to
historical information, forward-looking statements that are subject to risks and
other uncertainties. The Company's actual results may differ materially from
those anticipated in these forward-looking statements. See "Forward-Looking
Statements."
GENERAL
New World Pasta is the leading manufacturer and distributor of retail
branded pasta in the United States, and a supplier of dry pasta to the U.S.
private label, industrial and foodservice sectors. The Company's primary
business is the production of dry pasta, which is marketed and sold under
regional brands through supermarkets and foodstores. The Company believes that
these brands are among the oldest and most prominent in the industry. Moreover,
we believe the Company's singular focus on pasta, historically proven regional
branding strategy, advantageous raw material sourcing and flexible manufacturing
capacity provide opportunities to expand both revenues and operating margins.
New World Pasta's operations are a continuation of the operations of
Hershey Pasta, which began as a division of Hershey in 1966. In a series of
transactions that were completed prior to the Recapitalization, all of Hershey's
pasta-related operations were combined into Hershey Pasta Manufacturing Company
and its subsidiaries and Hershey Pasta Manufacturing Company's name was changed
to New World Pasta Company.
While part of Hershey, Hershey Pasta utilized various shared services,
including distribution, procurement, quality assurance, information technology
and finance, for which costs were allocated to Hershey Pasta. Certain other
general and administrative costs for treasury, legal, tax, risk management and
human resources departments have been excluded from the combined statements of
income of Hershey Pasta. As a result of the consummation of the
Recapitalization, the Company operates independently. Therefore, the Company's
historical performance may not be indicative of future results.
In mid-1996, Hershey's senior management decided to operate Hershey Pasta
with a strategy focused on short-term return on investment at the expense of
growth and long-term potential by, among other things, curtailing trade
promotional spending. Primarily as a result of this lower promotional spending,
Hershey Pasta's sales declined 2.8% in 1996, 5.2% in 1997 and 3.4% in 1998.
Management believes there is an opportunity to grow sales and market share and,
as a result increase profitability, through increased promotional spending and,
to a lesser extent, expansion into new markets and product areas resulting in
increased utilization and efficiency.
NET SALES
Revenues are generated from the sale in the United States of retail branded
dry pasta and egg noodle products, private label pasta products and pasta and
other products to the foodservice and industrial sectors. These products can be
separated into five broad categories: branded pasta, branded noodles,
foodservice products, industrial and other miscellaneous products and private
label products. Approximately 85% of our 1998 net sales was derived from branded
pasta and noodles with 5.1% coming from foodservice
53
<PAGE> 55
products, 5.7% from industrial and other miscellaneous products and 4.2% from
private label products. The Company occasionally increases its product prices to
reflect increases in raw material costs. The last significant price increase was
in 1994.
Net sales consists of revenues from pasta sales reduced by payment
discounts and returns of unsaleable product.
OPERATING EXPENSES
COST OF SALES. Cost of sales consists primarily of raw material,
packaging, manufacturing labor and manufacturing overhead (including
depreciation) and freight and warehousing costs. Semolina, a flour derived from
durum wheat, accounts for approximately 35% to 40% of our cost of sales. Prior
to the Recapitalization, Hershey Pasta sourced up to 67% of its durum/semolina
through Miller Milling Company ("Miller Milling"). Miller Milling has agreed to
procure 100% of New World Pasta's durum/ semolina requirements. The prices paid
for durum/semolina under arrangements with Miller Milling are based upon
prevailing market prices. Over the last few years, high market prices for
durum/semolina have caused durum/semolina costs as a percentage of cost of sales
to be higher than historical averages. From 1993 to 1997, the average durum
price was $5.97 per bushel versus an average of $4.45 per bushel from 1980 to
1992. The Company has entered into agreements for the purchase of over 90% of
the Company's anticipated volume for 1999, which are expected to produce a cost
savings of $10.0 to $11.0 million compared to 1998 costs. Durum wheat cost risk
is managed by Miller Milling primarily through forward purchasing and, when
appropriate, futures contracts. See "Business -- Raw Materials."
The other components of cost of sales generally increase with sales volume
and therefore comprise a relatively consistent percentage of sales except for
overhead and freight and warehousing costs, which have a fixed cost component
that can be leveraged with increasing volume. Freight and warehousing savings
from increased volume, however, are expected to be offset by an increase in
outbound product freight rates in 1999. Therefore, as a percent of sales,
freight and warehousing expenditures are likely to be consistent with historical
levels. Of the total cost of sales in 1998, raw materials represented 40.9%,
manufacturing labor and manufacturing overhead costs (including depreciation)
represented 29.7%, packaging represented 17.7% and freight and warehousing
represented 11.7%.
MARKETING EXPENSES. Marketing expenses represent trade promotions,
advertising and other marketing costs. Trade promotions are critical to
generating revenue growth and establishing a prominent position on retailers'
shelves. Management anticipates a significant increase in trade promotional and
other marketing spending over the next several years as the Company
reestablishes brand awareness, creates new programs, improves customer
relationships and enters new markets. For 1999, management expects to increase
trade promotional spending by approximately 15% over 1998 levels. The Company's
growth strategy thereafter is to maintain a level of trade promotional and other
marketing spending that will support growth and long-term profitability.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. As an independent operation,
management expects to incur an additional $2.2 million of costs over 1998
levels. Of this amount, $1.2 million is for functions such as legal, tax, audit
and other administration, and $963,000 is for incremental executive compensation
for the new management team. As a result, management expects selling, general
and administrative expenses to increase as a
54
<PAGE> 56
percentage of sales in 1999 and decline over the next several years as
management believes it will have a cost structure in place to support continued
growth in the business.
COST SAVINGS. In addition to our expected durum/semolina cost savings, our
management team has identified a number of manufacturing initiatives, which are
expected to save $2.0 to $2.5 million per year on an ongoing basis after initial
capital investments of $6.2 million in 1999 and $2.1 million in 2000. We have
also identified a number of synergies and cost saving initiatives which we
expect will save an additional $3.0 to $4.0 million per year, with minimal
up-front cost. These initiatives include shifting of production between plants,
other staffing and shift adjustments, line upgrades and packaging procurement.
Finally, management believes significant efficiencies and savings can be
realized by having an independent, focused and coordinated organization
dedicated to pasta, and continuing efforts are being made to identify and to
evaluate cost saving opportunities. Other initiatives to utilize excess
manufacturing capacity, which will increase efficiency and improve margins, are
under way.
INTEREST EXPENSE
Historically, the Company has not incurred indebtedness or related interest
expense as a division of Hershey. As an independent company, New World Pasta is
required to service the interest expense on any borrowings incurred by it
including the debt associated with the Recapitalization. On an adjusted pro
forma basis, the Company would have incurred interest expense of $28.2 million
for the year ended December 31, 1998.
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1995 1996 1997 1998
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................................. 100% 100% 100% 100%
Cost of Sales............................. 57.6 57.7 54.4 55.2
Gross Profit.............................. 42.4 42.3 45.6 44.8
Marketing Expense......................... 26.1 26.1 26.3 24.7
Selling, general and administrative
expense................................. 8.8 8.6 8.5 8.9
Operating Income before provision for
income taxes............................ 7.5 7.6 10.8 11.2
Interest expense.......................... 0.0 0.0 0.0 0.0
Income before provision for income
taxes................................... 7.5 7.6 10.8 11.2
Provision for income taxes................ 3.1 3.0 4.3 4.3
Net income................................ 4.4% 4.6% 6.5% 6.9%
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Net sales declined by $13.1 million, or 3.4% in 1998 versus 1997. Sales
were negatively impacted by the continuation of Hershey's strategy to maximize
short-term return on investment as implemented in mid-1996. This strategy
resulted in a sales volume
55
<PAGE> 57
reduction of 3.3%, which equated to an $11.2 million decline in net sales for
all of the Company's businesses. The decrease was also the result of unfavorable
sales mix in our retail business and price reductions in our industrial
business, both combining for $1.9 million of the decline in net sales.
Cost of sales decreased by $4.2 million or 2.0% during 1998 versus 1997.
This decrease includes $6.9 million attributable to the reduction in sales
volume. Offsetting this decrease was an increase in the average purchase price
of semolina, which increased from $.1460 per pound in 1997 to $.1462 per pound
in 1998. The increased average semolina price is primarily attributable to
purchases in early 1998 at higher market rates. In addition, labor and overhead
costs also increased by $1.5 million and packaging material costs increased by
$1.4 million, despite the volume reduction. These increases were partially
offset by a $1.4 million decrease in freight and distribution costs resulting
from reduced volume and favorable rates. Gross margin decreased from 45.6% to
44.8%.
Marketing expenses decreased $9.7 million or 9.5% in 1998 from 1997. Trade
promotion spending decreased by $12 million versus the prior year which was
in-line with the marketing strategy to reduce promotional spending on lower
margin products and shift the sales mix toward higher margin items. In addition,
prior-year promotion fund reversals increased by $2.6 million in 1998, which had
a favorable effect on trade promotion costs. Increased advertising, consumer
promotion support, and other marketing costs had modest offsetting increases.
Selling, general and administrative expenses increased by $610,000, or 1.9%
compared to 1997. This increase is attributable to an increase in allocated
corporate and shared service costs from Hershey offset by other selling and
administrative efficiencies.
Operating income increased $148,000 or .4% in 1998 compared to 1997 as a
decrease in net sales was offset by greater reductions in cost of sales and
marketing expenses.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net sales declined by $21.2 million, or 5.2%, in 1997 versus 1996. Sales
were negatively impacted by Hershey's strategy to maximize short-term return on
investment that was implemented in mid-1996. The implementation of this new
strategy had a positive impact on product mix increasing net sales $2.1 million
during the year. However, the overall result of this strategy was a sales volume
reduction of 5.7%, which equated to a $23.3 million decline in net sales.
Branded net sales declined by $14.6 million, or 4.3%, versus 1996. The
promotional strategy of focusing on higher margin items had a negative impact on
branded sales volume, which declined $17.3 million, or 5.1%, from the previous
year. This volume decline was partially offset by a small improvement in product
mix. The decrease in sales volume corresponds with an adverse trend in the
retail dry pasta sector, which showed a volume decline of approximately 4% as
measured by IRI.
Increased competition within the industry impacted 1997 foodservice and
private label sales. The Company lost its largest foodservice account and a
significant private label account as the result of its decision not to match
competitors' pricing pursuant to Hershey's directive to maximize short-term
return on investment.
Cost of sales decreased $25.0 million, or 10.6%, during 1997 compared to
1996. More than half of this decrease was attributable to the reduced sales
volume. A decrease in our semolina costs from $.1683 to $.1460, or 13.3%, also
had a significant impact. Reductions in packaging costs reflected the volume
decrease. Increases in freight and warehousing
56
<PAGE> 58
rates resulting from the volume reduction were partially offset by the Company
benefitting from economies of scale from Hershey combining shipping volume for
all its divisions. Manufacturing depreciation also was lower in 1997 due to the
continuing trend of the Company reducing capital spending to maximize cash flow.
As a result of these factors, gross margin improved from 42.3% in 1996 to 45.6%
in 1997.
Marketing expenses in 1997 decreased by $4.4 million, or 4.1%, from 1996.
Volume sensitive trade promotions were reduced while trade spending in core
markets was marginally increased resulting in a net decrease in trade
promotional spending of $4.6 million, or 4.7%, compared to 1996. Advertising
spending was also reduced by $700,000, or 23.3%, as advertising was not
considered integral to a strategy focused on short-term profitability. These
decreases were offset by an increase of $900,000 in other marketing expenses.
Selling, general and administrative expenses in 1997 decreased by $2.3
million, or 6.6%, from 1996. This decrease is attributable to field sales
expense reductions related to the consolidation of the pasta and grocery sales
forces of Hershey and the start of broker commission rate reductions negotiated
in 1997.
Operating income increased by $10.6 million, or 34.0%, in 1997 compared to
1996. As noted above, decreased net sales were offset by decreases in costs of
sales and marketing. The decrease in raw material costs was the primary driver
in the improved operating margin of 10.8% versus 7.6% in the previous year.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net sales declined by $11.7 million, or 2.8%, in 1996 compared to 1995.
This decline can be attributed to Hershey's senior management decision to have
Hershey Pasta focus on short-term return on investment, as well as a lower level
of promotional activity during the fourth quarter of 1996. An improvement in
product mix had a positive $4.4 million impact on net sales. The increase in
sales from the product mix improvement was outweighed by a substantial decrease
in branded and private label sales volume. In particular, private label net
sales decreased $5.8 million primarily as the result of the loss of a large
private label account due to a decision not to match competitive pricing.
Net sales declined in our retail branded dry pasta business in 1996 by $7.5
million, or 2.2%, from the prior year. Part of this decline can be attributed to
a 1.1% volume decline in the retail dry pasta sector, as defined by IRI. Skinner
and American Beauty brands were the only brands to have net sales increases
between 1995 and 1996. The remaining decrease in net sales was attributable to a
reduction in promotional spending in the fourth quarter of 1996 as well as the
loss of a sales force focused exclusively on pasta and a decrease in the number
of field sales personnel resulting from the transition to a combined pasta and
grocery sales force for Hershey. Our industrial business showed a net increase
in net sales of $1.7 million, consisting of a $2.8 million increase associated
with one customer account, partially offset by lower net sales from other
accounts resulting from the reduced emphasis on this business.
Cost of sales decreased $6.4 million, or 2.7%, during 1996 compared to 1995
despite an increase in semolina prices from $0.1644 per pound to $0.1683 per
pound during this period. This 2.3% increase in semolina costs was offset
partially by a 5.6% decrease in packaging material costs due to favorable case
and polyethylene costs. The increase in semolina procurement costs was further
offset by a 6.6% decrease in freight and warehousing costs due primarily to
consolidated rate and truckload rate efficiencies, as well
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as to the decrease in volume. The decrease in net sales was essentially offset
by the net effect of these changes, resulting in a gross margin decline in 1996
of only 0.1% to 42.3%.
Marketing expenses decreased by $3.0 million, or 2.8%, in 1996 from 1995.
Lower promotional spending of $1.1 million resulting from reduced retail trade
participation contributed to this decrease. Advertising spending was reduced by
$500,000. Consumer and other marketing expenses declined by $1.4 million,
primarily related to reductions on discretionary point of sale materials,
couponing and packaging development expenses.
Selling, general and administrative expenses decreased by $1.8 million, or
4.9%, in 1996 from 1995. This decrease was due to a $1.0 million reduction in
field sales personnel expenses, primarily as a result of fourth quarter
personnel reductions. The remainder was attributable to minor fluctuations in
several other general and administrative expenses.
Operating income declined slightly by $500,000, or 1.5%, in 1996 compared
to 1995. Operating margin improved 0.1% to 7.6% resulting from a decrease in
gross margin of 0.1% offset by reduced selling, general and administrative
expenses of 0.2%.
QUARTERLY DATA
The following table sets forth financial data for the quarters indicated
(in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER(1) SECOND QUARTER(2) THIRD QUARTER(3) FOURTH QUARTER
------------------ ----------------- ----------------- ------------------
1997 1998 1997 1998 1997 1998 1997 1998
------- -------- ------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............ $95,803 $108,647 $90,468 $84,263 $96,677 $89,242 $103,270 $90,944
Operating Income..... 10,715 12,157 10,053 8,833 10,514 11,924 10,438 8,954
EBITDA(4)............ 14,489 15,939 13,817 12,382 14,556 15,620 14,295 12,574
EBITDA as a
percentage of net
sales.............. 15.1% 14.7% 15.3% 14.7% 15.1% 17.5% 13.8% 13.8%
</TABLE>
- -------------------------
(1) The first quarter of 1997 ended on March 30, while the first quarter of 1998
ended on April 5.
(2) The second quarter of 1997 ended on June 30, while the second quarter of
1998 ended on July 5.
(3) The third quarter of 1997 ended on September 28, while the third quarter of
1998 ended on October 4.
(4) Please see note (2) to the Selected Historical Combined Financial Data on
page 52 of this Prospectus.
The Company experiences slight seasonality, with sales being the slowest in
the summer and highest in the fall and winter. In addition, the first quarter
ended March 30, 1997 was negatively impacted by the sales force consolidation,
and the first quarter ended April 5, 1998 was positively impacted by an
effective first quarter sales promotion and the Company's capitalizing on
competitive opportunities. Net sales and operating income in the fourth quarter
of 1998 were negatively impacted by reduced promotional spending.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's major source of financing has been cash
generated from operations and funds provided by Hershey. The Company maintained
zero cash balances as cash was swept daily by Hershey. The Company's income and
consequently cash
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provided by operations during the year were primarily affected by promotional
spending and raw material costs. Following the Recapitalization, the Company is
independent. Therefore, historical cash flows may not be indicative of future
liquidity. Ongoing operations will require the availability of sufficient funds
to service debt, fund working capital, perform maintenance and expansion capital
expenditures on plants and facilities and support trade and promotional
programs. Management intends to finance these activities through cash flows from
our operating activities and from amounts available under the Revolving Credit
Facility.
Net cash flow provided by operations was $26.8 million, $46.5 million and
$36.3 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The decrease in 1998 was largely attributable to an increase in
working capital requirements and an acceleration of payment terms for semolina
purchases during 1998.
Net cash used by investing activities was $5.0 million, $437,000 and $7.2
million for the years ended December 31, 1998, 1997 and 1996, respectively. 1997
was unusually low due to two factors. First, a significant cost savings project,
the rationalization of the Mrs. Weiss manufacturing facility in Cleveland, was
accelerated and completed in 1996. Second, the decision of Hershey Foods
management to suspend capital spending in 1997 deferred a $2.6 million cost
savings project at our Omaha plant into 1998.
Net cash flow used by financing activities was $21.7 million, $46.1 million
and $29.2 million for the years ended December 31, 1998, 1997 and 1996
respectively. Net cash used by financing activities represents the net of cash
advances to, and cash withdrawals from, Hershey's cash management system in
which Hershey Pasta participated and accordingly does not provide a meaningful
indication of the Company's financing activities.
During the period 1990 to 1998, Hershey funded $145.0 million of capital
expenditures to modernize and update Hershey Pasta's plants and to construct
Hershey Pasta's Winchester facility. Since Hershey Pasta was a division of
Hershey, none of these capital expenditures were funded by Hershey Pasta. As a
result of the high quality of the Company's facilities and the nature of the
manufacturing process, the Company has had minimal maintenance capital
expenditure requirements. Capital expenditures were $1.9 million in 1997 and
$4.6 million in 1998. Management expects capital expenditures to be $15.0
million in 1999, including $6.2 million to facilitate cost savings initiatives,
and $3.8 million of one-time expenditures required as an independent entity.
These one-time items include costs for relocation, information technology
systems, Year 2000 compliance, office furnishings and human resources
administrative setup. In 2000, capital expenditure requirements are expected to
fall to $7.1 million, consisting of $5.0 million of maintenance expenditures and
$2.1 million of additional costs related to cost savings initiatives.
As part of the Recapitalization, the Company entered into the $250.0
million Senior Credit Facilities, consisting of a $50.0 million Revolving Credit
Facility, $49.2 million of which was available after the Recapitalization, a
$50.0 million Term A Loan and a $150.0 million Term B Loan. In addition to the
Senior Credit Facilities, the Recapitalization included a $142.3 million stock
purchase by New World LLC, an equity investment of $18.2 million by Miller LLC,
and the issuance of $110.0 million in Senior Subordinated Increasing Rate Notes.
The $50.0 million Term A Loan was repaid, and the $110.0 million in Senior
Subordinated Increasing Rate Notes were refinanced.
The yearly term loan principal payments under the Term B Loan will be as
follows: (1) $1,125,000 in 1999, (2) $1,500,000 per annum in each of the years
2000 through 2004 and (3) $141,375,000 in 2005 and beyond. Management believes
that the Company will be
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capable of generating cash flow which, together with funds available under the
Revolving Credit Facility, will be sufficient to pay such principal and other
debt service and to finance capital expenditures.
The Company must use a percentage of any Excess Cash Flow (as defined in
the Senior Credit Facilities) to prepay outstanding term loans under the Senior
Credit Facilities. Such percentage will equal:
- 75% if the Debt to EBITDA Ratio (as defined in the Senior Credit
Facilities) is greater than or equal to 4.0 to 1.0;
- 50% if the Debt to EBITDA Ratio is greater than or equal to 2.5 to 1.0
but less than 4.0 to 1.0; and
- 0% if the Debt to EBITDA Ratio is less than 2.5 to 1.0.
The Company manages through Miller Milling the risk of durum price
fluctuations through a procurement strategy that includes expanded sourcing of
durum from a diversified geographic area, the use of forward purchasing and,
where appropriate, futures contracts, and Miller Milling's prominence in the
durum market.
YEAR 2000 COMPLIANCE
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the Year 2000 as "00." This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. The Company utilizes software and related computer technologies essential
to its operations that will be affected by the Year 2000 Problem. The Company
recognizes the critical role that our products and services play in the day to
day operations of our direct and indirect customers, business partners and
potential related parties. The Company's effort to address the Year 2000 Problem
has been divided into five phases.
ASSESSMENT. The first phase is the assessment of the Company's hardware
and software systems, and the embedded systems contained in the Company's
buildings, plant, equipment and other infrastructure. Efforts are underway to
identify and prioritize those areas of the business operations affected by the
Year 2000 Problem. The Company is also developing a comprehensive program and
timetable for resolution of the Year 2000 Problem. The program will outline,
among other things, (1) kind and amount of necessary resources, such as money
and labor, (2) validation strategies and testing plans on a system-wide basis,
and (3) contingency plans, particularly for core business processes. The Company
is currently completing its Year 2000 assessment.
RENOVATION. The second phase involves making software and hardware
changes, developing replacement systems, and eliminating non-functional
applications or system components. We have entered into a contract with a vendor
to perform the remediation of the mission critical software on the AS/400. The
project is on schedule and is expected to be completed by August 1999. We have
done significant testing of embedded systems and hardware in the plants and have
found our exposure to be minimal. We have also engaged an independent third
party to review our Year 2000 remediation plans, and actions taken to date,
during the second quarter of 1999.
VALIDATION. As the Company makes changes to applications and components of
its systems, its intention is to validate and test those changes for Year 2000
compliance. The Company plans to perform validation and testing on a system-wide
basis to ensure that the
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changes are compatible with other aspects of its systems. The Company may also
conduct acceptance testing, where it deems necessary. The Company anticipates
completing this phase by the third quarter of 1999.
IMPLEMENTATION. This phase involves integrating the changes made to the
Company's system. As the Company implements and integrates the changes, it may
discover that its systems may include both Year 2000 compliant and non-compliant
applications and components. The Company does not expect this combination to
have any significant adverse effect upon its operations but will develop
appropriate contingency and disaster recovery plans to reduce the risk of such
effects. The Company anticipates completing implementation of Year 2000
applications for our mission-critical systems by the fourth quarter of 1999.
CONTINGENCY PLANS. The Company is in the process of determining its
contingency plans, which are expected to include the identification of the
Company's most reasonably likely worst-case scenarios.
While costs incurred to date to address the Year 2000 Problem have not been
material, the Company expects to incur incremental expenses of approximately
$1.0 million through the end of 1999 to resolve any known Year 2000 Problems
that relate to mission critical systems.
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BUSINESS
OVERVIEW
New World Pasta is a corporation organized under the laws of the State of
Delaware. The principals of New World Pasta acquired control of Hershey Pasta in
the Recapitalization which was completed on January 28, 1999. Prior to the
Recapitalization, Hershey Pasta, which was founded in 1966, was a wholly owned
division of Hershey. Following a unique regional brand strategy, Hershey made
several opportunistic acquisitions that rounded out its regional portfolio and
formed the basis of New World Pasta's current business and operations. Those key
acquisitions included:
- RONZONI. The Ronzoni brand is the largest selling brand in the New York
City metropolitan area. Ronzoni is also a popular brand in the New
England, Mid-Atlantic and Florida markets. Hershey acquired Ronzoni from
Kraft/General Foods in 1990.
- SAN GIORGIO. San Giorgio is the sixth most popular brand in the U.S.
with a strong market position on the East Coast and, in particular, in
the Mid-Atlantic market, including Ohio, Pennsylvania and Virginia.
Hershey acquired San Giorgio from the Guerrisi family in 1966.
- AMERICAN BEAUTY. American Beauty was acquired from Pillsbury by Hershey
in 1984 and is the leading brand west of the Mississippi River.
- SKINNER. Hershey acquired the Skinner Macaroni Company in 1979. Skinner
has its strongest market share in the Midwestern, Southwestern and
Southeastern regions of the United States.
Additional acquisitions have included several brands which are leaders in
particular markets such as P&R (based in Auburn, New York; acquired in 1978) and
Ideal and Mrs. Weiss (based in Cleveland, Ohio; acquired in 1993).
As a result of these acquisitions and internal growth, management believes
the Company is the leading manufacturer and distributor of retail branded dry
pasta in the United States, and a supplier of pasta to the U.S. private label,
industrial and foodservice sectors. Our primary business is the production of
dry pasta which is marketed and sold under regional brands through supermarkets
and foodstores. We believe our brands are among the oldest and most prominent
brands in the industry. They include such leading regional brands as Ronzoni,
San Giorgio, American Beauty, Skinner, Ideal and P&R. On a combined basis, these
brands give us the industry-leading national market share of approximately 27%,
which is about 45% larger than our closest competitor. With approximately a 19%
share of the national retail egg noodle market, our noodle products currently
have the #1 share position in the U.S. market and include such famous brand
names as Light 'N Fluffy, American Beauty, Skinner, Mrs. Weiss, P&R, Ideal and
San Giorgio. Our leading national market share is supported by very strong
regional share positions. In the 64 geographic market areas for pasta measured
by Information Resources, Inc. ("IRI"), as of February 28, 1999, New World Pasta
held the #1 brand position in 22 market areas, the #2 brand position in an
additional 25 areas and the #3 brand position in 18 areas. We also held
leadership positions in 15 market areas for egg noodles as of February 28, 1999.
For the year ended December 31, 1998, we generated net sales of $373.1 million
and Pro Forma EBITDA of $54.4 million.
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Despite Hershey Pasta's industry-leading position in the production and
marketing of retail branded dry pasta products, it remained a non-core division
of Hershey. After operating the division with a strategy focused on short-term
return on investment at the expense of growth and long-term potential since
mid-1996, Hershey decided to divest the division and focus exclusively on its
core chocolate and confectionery business. New World Pasta reunites the key
management who were largely responsible for engineering Hershey Pasta's ascent
within the industry and who are eager to capitalize on the Company's unrealized
potential. The principals of New World Pasta include Mickey Skinner (the
President and Chief Executive Officer of Hershey Pasta from 1984 to 1997), John
Miller and Michael Snow of Miller Milling, which has been the Company's largest
durum/semolina supplier for over 11 years, and JLL, a private equity partnership
specializing in corporate divestitures and recapitalizations.
We categorize pasta into three broad groupings or "tiers" that vary in
consumer familiarity and price elasticity. Tier I constitutes 50% of the
category and consists of spaghetti, thin spaghetti, elbow macaroni, ziti (in the
New York City market) and vermicelli (in western markets). Tier II constitutes
30% of the category and consists principally of Italian-style "short-cut" items,
such as rotini, rotelle, mostaccioli, and "long cuts", such as linguine,
capellini and lasagne. Finally, Tier III, constituting 20% of the category,
consists of manicotti, jumbo shells, fettuccine, fortified products, flavored
products, "soup" shapes and a range of specialty items. While the Tier I items
are principally sold through discounted pricing and display, the remaining items
are purchased more for planned recipe use than through price impulse. The leader
in any given market enjoys a broader range of item distribution and can
capitalize on its ability to sell higher margin Tier II and Tier III items. It
has been the history of our Company to enjoy an increasing range of item
distribution as a result of new product innovation and skillful market
expansion.
COMPETITIVE STRENGTHS
We believe we are well-positioned to increase our market share, sales and
profitability due to the following competitive strengths:
- NATIONAL MARKET LEADER IN BRANDED PASTA. We are the largest U.S.
manufacturer and distributor of retail branded dry pasta and hold three
of the top six brand positions in the United States. We have been able to
achieve such high national market share due to our portfolio of
attractive regional pasta brands, including Ronzoni, San Giorgio,
American Beauty, Skinner, Ideal and P&R. Our national leadership position
also enables us to better coordinate our regional sales efforts with
central brokers and national category managers, particularly in light of
increasing food brokerage and grocery chain consolidation.
- STRONG REGIONAL PASTA BRANDS. According to IRI, as of February 28, 1999,
we held the #1 brand position in 22 of the 64 IRI-measured pasta market
areas, with typical market shares of 30% to 40%. We also held the #2
brand position in 25 areas and the #3 brand position in another 18 areas.
We have focused our sales and marketing efforts on those areas with the
greatest consumption of pasta. As a result, our brands hold the #1
position in 12 of the 20 largest dollar volume pasta markets. Established
brand awareness and a broad product line are critical to a brand's
profitability. Typically, a brand's high consumer awareness and consumer
satisfaction in terms of quality and consistency earn it additional shelf
space for the more profitable Tier II and Tier III products. We also
derive additional benefits from our
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combined regional strengths including economies of scale in distribution,
sales, marketing and manufacturing.
- LOW-COST AND EFFICIENT MANUFACTURING AND DISTRIBUTION SYSTEM. We are a
low-cost producer. Between 1990 and 1997, Hershey invested $140.0 million
to update our manufacturing facilities with more modern pasta-making
technology and process controls, including the construction of our
flagship facility at Winchester, Virginia. Our six manufacturing plants
and five distribution facilities are located near both our major
durum/semolina millers as well as our major customers, significantly
reducing our freight costs relative to our competitors' costs. We believe
that this provides us with a significant advantage as our cost
efficiencies can be directly applied to promotions designed to increase
our market share and to the reduction of final product prices for our
customers. Our network of strategically located distribution centers
allows us to deliver over 95% of our volume in full truckload shipments
resulting in significant freight cost savings.
- CONSISTENT, LOW-COST DURUM/SEMOLINA SUPPLY. Durum/semolina accounts for
35% to 40% of our cost of sales. Hershey Pasta historically sourced up to
67% of its durum/semolina requirements from Miller Milling. Due to Miller
Milling's purchasing expertise, nationally diversified sources of
durum/semolina and near or on-site milling, we estimate that Hershey
Pasta has saved approximately $6.0 to $7.0 million per year in raw
materials costs versus spot buying. Miller Milling has agreed to procure
100% of our future durum/semolina requirements. See "Certain
Relationships and Related Transactions" for a further discussion of the
terms of these arrangements. We believe our savings will increase
commensurately as a result of the expansion of this relationship. This
expansion should make Miller Milling the largest buyer of durum/semolina
products in North America. As a result, Miller Milling should be able to
obtain more favorable terms and improve its buying through larger
contracts, increased market leverage and lower freight rates, all of
which should benefit New World Pasta. With Miller Milling's assistance,
we have already secured more than 90% of our 1999 durum/semolina
requirements for an expected savings of $10.0 to $11.0 million over our
1998 costs.
- FOCUSED, VERTICALLY-INTEGRATED PASTA COMPANY. In contrast to most of our
branded competitors, New World Pasta is an independent company, focused
exclusively on the pasta business. We believe this autonomy and focus
will allow us to better execute our growth strategy than Hershey Pasta
had historically been able to do and better than many of our competitors
are currently able to do. For example, in mid-1996, Hershey combined its
longstanding dedicated pasta broker sales force with its general grocery
sales force. We believe this combination lowered Hershey Pasta's sales.
As the dynamics of pasta promotion and sales differ from those of other
grocery items, personnel not experienced in pasta sales were unable to
effectively promote our pasta products. In addition, Hershey Pasta's
sales personnel were less inclined to sell pasta because it was less
labor-intensive to sell Hershey's higher margin branded grocery products.
We believe our singular focus on pasta, combined with contractual control
of our raw material procurement, exclusive brokerage sales arrangements
and the vertical integration of our manufacturing, distribution and
marketing functions, will promote our flexibility and responsiveness to
our customers and further differentiate us from our competitors.
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- EXPERIENCED OWNER-MANAGERS. We benefit from a highly incentivized
management team with in-depth knowledge who are now exclusively focused
on the pasta business. New World Pasta will reunite the key management
who were largely responsible for engineering Hershey Pasta's ascent
within the industry and who are eager to capitalize on the Company's
unrealized potential. Our team of current and former Hershey Pasta
executives has significant experience in the pasta industry. Our top ten
executive officers combined have over 200 years of experience in the
pasta business with Hershey Pasta and its affiliated brands. We believe
the experience of our management team and their continuity with Hershey
Pasta provide us with an advantage over our key competitors. In addition,
our management team is highly incentivized and will have stock options to
purchase up to 15.4% of the Company's common stock on a fully diluted
basis.
GROWTH STRATEGY
In mid-1996, Hershey decided to operate its pasta division with a strategy
focused on short-term return on investment at the expense of growth and
long-term potential by, among other things, curtailing trade and other
promotional spending. Prior to this decision Hershey Pasta was successful in
increasing revenue and generating market share gains. Excluding the Ideal
Macaroni Company and Mrs. Weiss Noodle Company acquisitions, the compound annual
growth rate ("CAGR") of the Company's net sales from the time of the Ronzoni
acquisition in 1990 to 1995 was 6.4%. Excluding acquisitions, the Company's net
sales CAGR from 1985 to 1995 was 7.0%.
We have developed a growth strategy that leverages and builds upon our
competitive strengths and the historical advantages that have enabled Hershey
Pasta to generate consistent levels of cash flow and remain one of the leading
pasta companies in the United States. We expect to achieve consistent revenue
growth through highly-developed marketing and promotional programs,
opportunistic private label and industrial collaborations, the introduction of
innovative new products and geographic expansion of our strong regional brands.
We can utilize our 29% excess production capacity to support increased sales
volumes and generate higher incremental profit margins. We believe that our
refocused sales strategy, our reunited experienced management team, favorable
consumption trends and changes in the competitive environment in our key
business -- retail branded dry pasta -- provide significant opportunities for
New World Pasta to expand market share in the branded pasta business, grow
revenues and improve profitability. The principal elements of our strategy to
maximize these opportunities include the following:
- INCREASE BRANDED SALES THROUGH PROMOTIONAL SPENDING. Primarily as a
result of the lower promotional spending, Hershey Pasta's sales declined
2.8% in 1996, 5.2% in 1997 and 3.4% in 1998. As the category leader, we
believe that we have a substantial opportunity to expand our sales and
market share by increasing promotional spending. We intend to increase
trade promotional spending in 1999 by approximately 15% over 1998 levels,
which will be primarily directed at increasing sales in those markets
where we have the #1 brand position. By increasing sales of lower priced
Tier I products such as spaghetti and elbow macaroni, we believe we can
earn more shelf space for our higher-priced, higher-margin Tier II and
Tier III products and, therefore, increase overall category sales and
improve the profitability of our brands. In addition, in the 29 markets
where we have the #2 or #3, but not the #1, brand positions, effective
trade promotional spending could strengthen our share position, enabling
us to improve our product mix and thereby generate higher margins.
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- PURSUE STRATEGIC PRIVATE LABEL PARTNERSHIPS. Private label sales account
for approximately 17% of the U.S. retail dry pasta market; however,
private label sales represent only 4% of our net sales due mainly to
Hershey's focus on branded products. In 1997, the former category leader,
Borden Food Holdings Corporation ("Borden"), withdrew from the private
label sector, providing an opportunity for other pasta companies to
increase their private label market shares. We believe we can
successfully expand into the private label sector given our historically
limited participation and this favorable market development. While some
of the recent growth in the private label sector is attributable to the
underpromotion of branded pasta by key industry players, we believe there
is a group of price-sensitive consumers who prefer private label pasta.
As private label pasta appeals to a different consumer than branded
pasta, we believe incremental sales can be gained without category
cannibalization. Our strategy is to partner with key strategic wholesale
and retail accounts. We believe our relationships with leading retail
food stores and outlets, our low delivered cost position and economies to
be gained through the use of our excess capacity and similar distribution
and delivery channels make private label an attractive niche.
- GROW PASTA SALES OPPORTUNISTICALLY IN INDUSTRIAL AND FOODSERVICE
SECTORS. In 1997, we estimate the industrial and foodservice sectors
accounted for approximately 50% of U.S. pasta dollar sales volume, but
only approximately 12% of New World Pasta net sales. Therefore, we
believe we have significant growth opportunities in these sectors. We
intend to selectively pursue large contracts with industrial and, to a
lesser extent, foodservice companies. Hershey's margin maximization
strategy prevented the active pursuit of contracts in these sectors. In
contrast, we believe competitively-priced industrial and foodservice
contracts will naturally augment our core product sales and provide
significant incremental volume to improve our operating leverage and cash
flow. In addition, as a low-cost producer, we believe we can establish
accounts within these sectors without relinquishing profitability. We
believe that increased outsourcing among industrial food processors,
fragmentation within the foodservice industry and consistent compound
annual growth rates within both sectors of approximately 3% further
support our participation in these markets.
- DISTRIBUTE LIGHT 'N FLUFFY BRAND NATIONALLY. With approximately a 19%
share of the national egg noodle market, we are the leading producer of
egg noodle products in the United States. We believe substantial growth
opportunities remain in this product category. One of our internally
developed brands, Light 'N Fluffy, has risen to become the third leading
noodle brand in the country. Unlike pasta, which benefits from regional
name recognition and acceptance, we believe egg noodle products can be
marketed on a national basis. As the highly successful Light 'N Fluffy
brand is distributed in only 50% of the country, we believe significant
potential exists for U.S. expansion.
- CAPITALIZE ON CATEGORY MANAGEMENT CAPABILITIES. As a market leader in
the branded pasta sector and with a renewed emphasis on private label, we
have an opportunity to expand our category management activities for our
largest customers and exploit our proprietary technology in this area.
Hershey Pasta pioneered the analysis and utilization of scanner data
through its internally developed and proprietary Pasta Experts(R)
software program. We use this tool to analyze the price elasticity,
display effectiveness and volume potential of our promotional programs to
improve our profitability. By combining this tool with shelf management
programs
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and manufacturer-initiated ordering, we can maximize category
profitability for our customers while minimizing the resources required
by either party.
- EXPAND INTO NEW MARKETS AND INTRODUCE NEW PRODUCTS. We intend to expand
the Ronzoni brand into other large markets to take advantage of its
growing familiarity. We also intend to opportunistically enter markets
currently occupied by weakening brands of our largest competitors. In
addition, new products, such as fortified, flavored and specialty-cut
pasta, have updated and modernized our brand images and increased our
market share. More importantly, they have helped to transition consumers
from lower-margin Tier I items to higher-margin Tier II and Tier III
items.
SYNERGIES AND COST SAVING OPPORTUNITIES
In addition to our expected durum/semolina cost savings, our management
team has identified a number of manufacturing cost saving initiatives. We expect
to save $2.0 to $2.5 million per year on an ongoing basis after an initial
capital investment of $8.3 million at our Lebanon and Fresno plants. We have
also identified a number of synergies and cost saving initiatives which we
expect will save an additional $3.0 to $4.0 million per year, with minimal
up-front cost. These initiatives include shifting of production between plants,
staffing and other shift adjustments, line upgrades and changes in packaging
procurement. Finally, we believe significant efficiencies and savings can be
realized by having an independent, focused and coordinated organization
dedicated to pasta. We expect to continue to identify and to evaluate such
opportunities.
PASTA INDUSTRY
OVERVIEW. We believe the U.S. dry pasta industry is a $2.6 billion
non-cyclical industry that is both stable and growing. We estimate that total
U.S. pasta consumption has grown about 3% to 4% per year over the last ten years
reaching approximately 5.0 billion pounds in 1997. We believe this growth has
been primarily driven by U.S. per capita consumption, which has, according to
the U.S. Department of Commerce, increased at a compound annual growth rate of
3.9% for the period from 1986 to 1996. Based on industry and trade sources and
our own analysis, we expect national pasta consumption to continue to grow,
driven largely by pasta's attractive product attributes. According to the
American Pasta Report, Americans are eating more pasta today than they did five
years ago. Approximately 77% of Americans eat pasta at least once a week, and
almost one-third consume pasta three or more times a week. Industry analysts
attribute pasta's universal appeal to four main factors: taste, convenience,
nutrition and value. The broad appetite appeal of pasta and its variety of forms
and shapes have made it a favorite diet staple among U.S. consumers. As
consumers have demonstrated a desire for food categories that are easy and quick
to prepare, pasta has held its position as one of the most convenient at-home
food choices, surpassing even restaurant take-out and home delivery. The
increase in pasta consumption can also be explained by its nutritional value and
the increased focus on healthy eating in the 1990s. The low-fat nature of pasta
combined with its content of complex carbohydrates, proteins, vitamins and
minerals is a major attraction and benefit to health-conscious consumers.
Finally, consumers cite pasta's economic value as an important factor in their
purchase decision. Increased pasta consumption has also been spurred by its
recent addition to the base of the food pyramid by the U.S. Department of
Agriculture, acknowledging pasta as a core food product and a healthy source of
daily nutrition.
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ANNUAL PRODUCTION CAPACITY. The Company's competitive environment depends
to a significant extent on the aggregate industry capacity relative to aggregate
demand for pasta products. Our management estimates that the total U.S.
production capacity was 4.0 billion pounds in 1998 and will increase to 4.3
billion pounds in 1999. This increase can be attributed to the recent facility
expansions which we understand were undertaken or completed by several domestic
pasta producers which have increased domestic production capacity. Specifically,
American Italian Pasta Company ("AIPC") is rapidly expanding its production
capacity with the completion of its new facility in Kenosha, Wisconsin, and
additions to its Columbia, South Carolina and Excelsior Springs, Missouri plants
expected to be completed in 1999. As a result, AIPC will increase its production
capacity by approximately 260 million pounds. Similarly, Dakota Growers Pasta
Company ("Dakota Growers") increased the capacity of its durum/semolina milling
operations in December 1996 and has completed a pasta production capacity
expansion which increased its total annual pasta production capacity to
approximately 270 million pounds. Dakota Growers also recently acquired Primo
Piatta, a Minnesota-based pasta producer with annual production capacity of
approximately 200 million pounds. Part of the increase in production capacity
can also be attributed to foreign producers establishing production facilities
in the United States. Barilla G.ER.F. LLI S.p.A. ("Barilla") built a pasta
production plant in late 1998 near Ames, Iowa with an annual capacity of
approximately 200 million pounds. On the other hand, two major pasta producers
have also reduced their pasta production capacity. Borden closed or sold six of
its ten North American pasta plants in 1997 and 1998, and Bestfoods Inc.
("Bestfoods") decreased its capacity by approximately 180 million pounds when it
closed its New Jersey facility and began sourcing its production through AIPC.
Management believes that the net effect of these changes represents an increase
of more than 200 million pounds in annual production capacity. The Company does
not, however, expect this increase to have a significant impact on the Company's
competitive position.
CUSTOMER MARKETS. The pasta industry consists of two primary customer
markets, retail, which includes both branded and private label sales, and
institutional, which is jointly comprised of industrial and foodservice
companies.
- RETAIL. The retail sector includes domestic and imported branded pasta
and private label pasta sold to grocery stores, club stores and mass
merchants, who in turn sell to consumers. In 1997, the retail dry pasta
sector accounted for approximately $1.3 billion, or approximately 50%, of
dry pasta sold in the United States. Hershey Pasta, Borden and Bestfoods
together account for a majority of the retail branded sales, while AIPC
and Dakota Growers manufacture most of the pasta sold under private label
brands. For the 52-week period ending February 28, 1999, Hershey Pasta,
Borden and Bestfoods represented 26.7%, 18.3% and 9.6%, respectively, of
the total dollars of retail dry pasta. Barilla was the leading imported
brand with a 7.3% market share as of February 28, 1999.
- INDUSTRIAL AND FOODSERVICE. The industrial and foodservice sectors
include food processors that use pasta as a food ingredient as well as
foodservice distributors that supply restaurants, hotels, schools and
hospitals. Opportunities in the industrial sector are affected by the
number of food processors that elect to produce pasta internally rather
than outsource their production. Historically, most pasta used by food
processors has been manufactured internally for use in food processors'
own products. However, an increasing number of food processors are
expected to discontinue the internal production of their own pasta and
outsource their production to more efficient producers, which should
produce growth in our
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industrial business. Large food processors that use pasta as a food
ingredient include Kraft Foods, International Home Foods, Stouffers
Corporation, Campbell Soup Company, ConAgra, Inc., Pillsbury, Lipton and
General Mills. The foodservice sector, which is served by numerous
regional and local food distributors, is highly fragmented and includes
both traditional foodservice customers and chain restaurant customers.
Management believes that in 1997, the industrial and foodservice pasta
sectors accounted for approximately $1.3 billion, or 50% of dry pasta
sold in the United States.
PRODUCTS
OVERVIEW. New World Pasta is the leading manufacturer and distributor of
retail branded dry pasta in the United States and is a supplier of pasta
products to the U.S. private label, industrial and foodservice sectors. We
provide a full range of pasta products to our customers. Our products can be
separated into five broad categories for selling and marketing purposes: branded
pasta, branded noodles, foodservice products, industrial and miscellaneous
products and private label products. In 1998, approximately 85% of our net sales
was derived from branded pasta and noodles, 5% from foodservice products, 6%
from industrial and miscellaneous products, and 4% from private label products.
BRANDED PASTA. Branded pasta accounts for the bulk of our revenue and
includes numerous well-known brands such as Ronzoni, San Giorgio, American
Beauty, Skinner, Ideal and P&R. We believe these brands are among the oldest and
most prominent in the pasta industry. Three of these brands are among the
nation's top six brands. Due to our ability to offer a wide selection of pasta
items and well-known brands, we enjoy the highest national share of retail dry
pasta sales. As of February 28, 1999, we led the retail dry pasta market with a
26.7% share as measured by IRI. New World Pasta's regional brands and
representative brand leadership positions as of February 28, 1999 are detailed
below:
- RONZONI. The Ronzoni brand is one of the most established pasta brands
in the U.S. with its origins dating back to 1915. Ronzoni is the largest
selling brand in the New York City metropolitan area, the largest
pasta-consumption area in the United States, with a 31% market share.
Aside from New York City, Ronzoni is also popular in the New England,
Mid-Atlantic and Florida markets, and is recognized west of the
Mississippi as a premium brand. Ronzoni also holds brand leadership
positions in the Miami/Ft. Lauderdale and Hartford/Springfield
metropolitan areas, and holds the number two position in Philadelphia.
- SAN GIORGIO. San Giorgio was the first pasta brand acquired by Hershey
and is presently the sixth most popular pasta brand in the U.S. San
Giorgio is a well-established brand, with its origins dating back to
1914. The brand has a strong market position on the East Coast with
products primarily being distributed in New York, New Jersey,
Pennsylvania, Maryland, Delaware, Connecticut, Indiana, Illinois,
Michigan, Virginia and Ohio. San Giorgio holds the #1 brand position in
Philadelphia, Baltimore/Washington, Harrisburg/Scranton, Columbus,
Pittsburgh and Cincinnati/Dayton.
- AMERICAN BEAUTY. Acquired by Hershey in 1984 from Pillsbury and
originally founded in 1916, American Beauty is the leading brand in
states west of the Mississippi River. American Beauty pasta's regions of
particular strength include Phoenix/Tucson, Wichita and Kansas City
(regions in which American Beauty leads its closest competitors by over
20 points), and Denver and Salt Lake City.
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American Beauty also holds strong number two positions in the Oklahoma
City and San Antonio/Corpus Christi markets with 26.1% and 15.5% market
shares, respectively.
- SKINNER. Skinner is a leading pasta brand in the Midwestern,
Southwestern and Southeastern parts of the United States. The Skinner
brand has a rich heritage in these areas, having started its operations
in Omaha, Nebraska in 1911. Hershey Pasta acquired the Skinner brand in
1979 and since gaining this foothold has been able to fortify its
leadership position through targeted promotions and advertising in
metropolitan areas such as Dallas, Oklahoma City, Houston and San
Antonio/ Corpus Christi, where it has market-leading shares of 36.0%,
36.6%, 34.6% and 24.7%, respectively.
- OTHER BRANDS. Other branded pastas produced by New World Pasta include
Ideal, which holds the number one position in Cleveland with 30.2% market
share, and P&R, with a leading market position in the Syracuse market
(29.1%). In addition, P&R also holds the number one branded position in
the Albany, New York market with a 22.2% share.
A summary of our branded pasta product tiers is illustrated below:
PRODUCT TIERS
<TABLE>
<CAPTION>
RELATIVE
PROFIT
TIER PRODUCT LEVEL
---- ------- --------
<S> <C> <C> <C>
I Pantry Restock Items Spaghetti, Thin Spaghetti, Elbow Low
(50% of Category) Macaroni, Ziti (in the New York
market), Vermicelli (in western
markets)
II Transition/Continuing Rotini, Rotelle, Mostaccioli, Linguine, Medium
Items (30% of Category) Capellini, Lasagne
III Occasion Items (20% of Manicotti, Jumbo Shells, Fettuccine, High
Category) "Soup" Shapes
</TABLE>
During the last few years, we have increasingly been identifying products
which promote the transition of historical Tier I to Tier II and Tier III
positions. New products enhance brand equity and profitability and help to
maintain retail shelf space. Examples of successful new products developed by
the Company include:
- FORTIFIED PASTA. We were the first branded pasta manufacturer to market
pasta fortified with calcium. The incremental profit provided by
fortified Tier I products allows us to increase the profitability of
otherwise discounted Tier I products.
- FLAVORED PASTA. Responding to trends in home cooking and the foodservice
industry, we introduced flavored pasta to its consumers in the
IRI-defined areas where our brands have leadership positions. Our pasta
flavors include roasted garlic, herb and garlic, lemon pepper, and
roasted garlic and red bell pepper.
- ADDITIONAL CUTS/SHAPES. New product developments in this area maintain
excitement in the category and often drive industry growth.
These new products provide the Company with multiple benefits including
increasing the profitability of Tier I products, updating and modernizing brand
images, and addressing important consumer and industrial trends.
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EGG NOODLE PRODUCTS. We also manufacture egg noodle products for sale
alongside our pasta brands. The Company's egg noodle brands have the largest
collective market share in the United States and include such famous brand names
as Light 'N Fluffy, American Beauty, Skinner, Ronzoni, Mrs. Weiss and P&R. We
account for approximately 19% of all retail egg noodle sales in the United
States, hold brand leadership positions in 15 market areas and produce seven of
the top 30 brands in the country.
PRIVATE LABEL PRODUCTS. While we have historically sold private label
pasta only to selected accounts in conjunction with a full-line of our branded
products, we believe that there are significant profitable opportunities for
expansion of this activity. We compete with other private label suppliers based
on the ability to provide a broad line of products at a low cost. With our
existing retail relationships and our strategically located plants, we believe
we have a significant competitive advantage.
INDUSTRIAL AND FOODSERVICE PRODUCTS. We also sell products to various
industrial and foodservice clients. In the foodservice sector, the business
dynamics are controlled by a handful of large food distributors that buy on the
basis of price and service reliability.
MISCELLANEOUS PRODUCTS. We sell a range of miscellaneous dry grocery
products as a result of the 1984 acquisition of American Beauty. These items
include instant mashed potatoes, spaghetti sauce mix, dry beans, popcorn and
rice and are generally sold in a very limited geographic area on a very
profitable basis. This activity is virtually self-supporting with little
management attention required. For accounting purposes, miscellaneous products,
which account for less than 1% of the Company's sales, are grouped with
industrial sales.
MARKETING
Over its 32 year history, Hershey Pasta, through a series of strategic
geographic acquisitions, was successful in executing a business strategy of
maintaining and/or establishing its brands in market leading positions in high
pasta consumption areas. We believe that our planned marketing strategy
leverages and builds upon our competitive strengths and the historical
advantages that have enabled Hershey Pasta brands to produce consistent levels
of cash flow and remain one of the country's leading pasta companies.
We expect to achieve consistent revenue growth through highly-developed
marketing and promotional programs, the introduction of innovative new products
and geographic expansion of our strong regional brands. We believe that we have
a substantial opportunity to expand our sales and market share by increasing
promotional spending. We intend to increase trade promotional spending in 1999
by approximately 15% over 1998 levels, which will be primarily directed at
increasing sales in those markets where we have the #1 position. By increasing
sales of lower priced Tier I products such as spaghetti and elbow macaroni, we
believe we can earn more shelf space for our higher-priced, higher-margin Tier
II and Tier III products and, therefore, increase overall category sales and the
profitability of our brands. Specialty products including new shapes and cuts
also have a strong correlation to increased product sales. Finally, we intend to
use innovative marketing, advertising and merchandising programs to enhance
brand awareness in regions where we do not have as strong a presence and to
build market share.
Even with a declining marketing budget, Hershey Pasta has been able to
maintain its share position due to the strength of its brands. As a result, we
believe there exists significant opportunity to generate both revenue growth and
increased profitability through
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a refocused sales and marketing strategy that emphasizes our regional brand
names. Key elements of our strategy include:
- refocusing the sales force;
- increasing promotional intensity;
- pursuing private label sales;
- growing industrial and foodservice sales;
- capitalizing on category management capabilities;
- distributing Light 'N Fluffy brand nationally;
- introducing new products; and
- expanding into new markets.
The combination of these growth opportunities, our industry marketing expertise
and available production capacity gives us an opportunity to generate
incremental margins through increased volume, thereby generating additional cash
flow. For further discussion of our growth strategy, see "-- Growth Strategy."
SALES
- We have a dedicated and focused sales and marketing staff to serve both
our customers and our consumers. Many of the sales and marketing
personnel who were responsible for directing Hershey Pasta's earlier
growth will once again be employed exclusively in the interest of our
Company's products. We believe this focused sales team with our network
of food brokers and long-standing trade relationships will provide the
resources to increase sales volume and market share. The sales staff
devoted exclusively to branded pasta consists of a National Sales
Director, 8 Zone Sales Managers, 22 Regional Sales Managers, 13 District
Managers and numerous support staff at the Company's headquarters. In
addition, there are 7 sales professionals responsible for our private
label, foodservice and industrial sales. The overall sales organization
is headed by a vice-president with 23 years of pasta sales management
experience. The marketing staff consists of 12 professionals, most of
whom have advanced degrees as well as a number of professionals and
administrative personnel who provide marketing and sales support. The
Company believes that it has both the largest sales staff and the largest
marketing staff in the industry. Our branded products are marketed by 48
retail brokers. In addition to our retail brokers, we have a national
network of 28 foodservice brokers. All of these brokers work exclusively
for the Company with respect to pasta products.
Our experienced sales organization understands each sector of the industry
in which we participate. Our sales force knows how to work with and train
brokers. Broker training maximizes profitable product sales, promotes excellent
trade relations and results in better retail execution. For example, our sales
force has an excellent track record for launching new items and achieving
above-average distribution levels. Furthermore, our sales force uses the
highly-efficient EDI (electronic data interchange) order system for
approximately 87% of its orders and 56% of invoices, resulting in what we
believe to be some of the highest service levels in the industry.
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CUSTOMERS
Our branded and private label products are sold primarily through grocery
store chains and grocery wholesalers. In addition, we sell our products through
wholesale clubs, mass merchandisers, chain drug stores, convenience stores and
food distributors. Mass merchandisers, wholesale clubs and chain drug stores are
growing distribution channels and represent significant revenue enhancement
opportunities for the Company. Our ten largest customers accounted for
approximately 43.4% of 1998 net sales, with no single customer accounting for
more than 7.1%.
PRODUCTION
PASTA PRODUCTION. Semolina and water are the two main ingredients used to
produce a quality pasta product. Egg is the main additional ingredient included
in noodles. Each variety of durum, which is milled into semolina, has its own
unique set of protein, gluten content, moisture, density, color and other
attributes which affect the quality and character of the semolina. In order to
produce pasta, we mix semolina with water and other ingredients and then extrude
or roll the mixture into the desired shapes. Subsequently, it travels through a
series of state-of-the-art dryers before being stabilized at room temperature.
After the stabilization process, the pasta is packaged in a variety of packaging
configurations and forwarded through an automated palletizing and distribution
system. The finished product is then loaded on to trucks for transport to our
distribution centers and/or shipment directly to customers.
PRODUCTION FACILITIES. New World Pasta has a flexible, vertically
integrated manufacturing organization with regional facilities to support our
low delivered-cost strategy. Our suppliers supply semolina from their mills to
our six manufacturing plants strategically located throughout the United States.
The finished products are then shipped to regionally located distribution
centers which allows us to minimize our freight costs and enhance our ability to
efficiently match our raw material supply to our production and delivery
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demands. A map of our nationwide network of plants, distribution centers and our
suppliers' mills appears below:
[MAP]
Our six modern manufacturing plants, all of which we own, have an annual
aggregate production capacity of 688 million pounds of pasta. With the exception
of the Winchester plant, these plants were acquired as part of the assets
purchased during Hershey Pasta's acquisition of regional pasta brands over the
past 32 years. Between 1990-1997, Hershey spent $140.0 million to modernize and
update these plants and construct the Winchester plant. As a result, each of our
plants is equipped with modern pasta making technology and process controls.
Each plant plays a unique role in our processing and distribution system.
Management believes that the Winchester plant, constructed in 1993 at a cost of
approximately $60.0 million, is a state-of-the-art facility and one of the most
cost-efficient pasta plants in North America. The other plants have been
repeatedly refurbished and their infrastructure upgraded to ensure their cost
competitiveness and ability to meet Hershey Pasta's high product-quality
standards. Overall plant utilization is approximately 71%, with utilization
being highest at the Winchester, Virginia plant (95% utilization) and
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lowest at the Lebanon, Pennsylvania plant (47% utilization). A detailed summary
of key plant statistics appears below:
MANUFACTURING FACILITY SUMMARY
<TABLE>
<CAPTION>
PRODUCTION PRODUCTION SQUARE UTILIZATION
FACILITY LOCATION LINES CAPACITY(1) FEET (%)(2)
- ----------------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Winchester, VA....................... 7 208,000 180,000 95%
Lebanon, PA.......................... 13 152,000 256,000 47%
Omaha, NE............................ 8 138,000 114,000 72%
Fresno, CA........................... 7 96,000 130,000 62%
Louisville, KY....................... 8 73,000 207,415 68%
Kansas City, KS...................... 5 21,000 130,000 71%
-- ------- --------- --
Total...................... 48 688,000 1,017,415 71%
</TABLE>
- -------------------------
(1) Measured in thousands of pounds, based on 320 operating days per year.
(2) Based upon 1998 actual production.
In addition, the Winchester plant currently operates seven production lines and
could add two more within its existing facility, which would increase production
capacity by up to approximately 150 million pounds.
COST-SAVINGS OPPORTUNITIES. We believe there exist numerous opportunities
to improve efficiencies or rationalize capacity. Our management team has
identified a number of manufacturing initiatives, primarily at our Lebanon and
Fresno plants, which are expected to save $2.0 to $2.5 million per year after
approximately $8.3 million of capital expenditures. We have also identified a
number of synergies and cost-saving initiatives which we expect will save a
further $3.0 to $4.0 million per year with minimal up-front cost. These
initiatives include shifting of production between plants, staffing and other
shift adjustments, line upgrades and changes in packaging procurement. We expect
to realize the full benefits of these savings beginning in the year 2000.
TRANSPORTATION AND DISTRIBUTION
Our distribution network is an important factor in maintaining New World
Pasta's low delivered-cost structure. In general, it is more cost-efficient to
ship durum wheat than to ship semolina flour, and to ship semolina flour than to
ship finished goods. For this reason, the location of mills, factories and
warehouses relative to the customer base is a critical factor in achieving low
delivered costs to market.
Durum wheat is shipped to milling sites by rail or truck. Semolina flour is
shipped from the mill to our plants by either rail, truck or pneumatic tube
based on location and financial considerations. Finished goods are shipped from
plant sites to distribution centers or customers in truckload quantities. Over
95% of shipments from distribution centers to final customers are shipped in
full truckload quantities. Truck shipments are handled by contract carriers with
annual transportation contracts.
For finished products, New World Pasta utilizes three primary distribution
centers located in Fresno, California, Omaha, Nebraska, and New Kingston,
Pennsylvania, and two secondary warehouses located in Portland, Oregon and
Louisville, Kentucky. With the
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exception of the Louisville warehouse which is housed in a portion of the
manufacturing facility, the distribution centers and warehouses are leased
facilities, run by professional warehousing companies under multi-year
contracts.
QUALITY
New World Pasta and its predecessors have an 85-year tradition of producing
high quality products for customers and consumers. We strive to use the finest
raw materials, processed in our modern manufacturing facilities, by an
experienced and highly-trained workforce in order to meet and exceed our
customers' expectations. New World Pasta's quality has been consistently
recognized by leading consumer publications.
New World Pasta's history reflects a commitment to quality. New World Pasta
was one of the first companies to work with the FDA in establishing a
Cooperative Quality Assurance Program. This program, later a model for other
industries, called for New World Pasta to establish stringent quality and safety
controls and be self-policing in their enforcement. Today, all products are
manufactured using a comprehensive Hazard Analysis Critical Control Point
(HACCP) program to ensure food safety. This program calls for strict monitoring
and control activities in every facet of the manufacturing operations.
New World Pasta also uses a toll-free number to maintain direct contact
with the public. Printed on all packaging, this direct link to our final
consumers keeps New World Pasta in touch with their concerns and comments.
RAW MATERIALS
Pasta's primary ingredient is semolina flour, which is extracted from durum
wheat through a milling process. Semolina is currently delivered to our
manufacturing plants directly from milling operations. These mills source their
durum directly from farmers and grower-owned co-operatives in North Dakota,
Montana, Arizona, California and Canada. We now source 100% of our
durum/semolina needs through Miller Milling, to ensure the availability of
semolina in the quantity and quality required to fulfill our production
requirements.
The cost of semolina over the last five years has typically represented 35%
to 40% of the Company's total cost of sales. This percentage is high relative to
historical trends as average durum prices have been at historically high levels
since 1993. From 1993 to 1997 the average durum price was $5.97 per bushel
versus an average of $4.45 per bushel from 1980 to 1992. The Company expects to
benefit from a drop in durum prices toward historical norms in 1999 and 2000.
The U.S. Department of Agriculture recently released its 1998 U.S. durum harvest
estimates, which amounted to 141 million bushels, a 60% increase over 1997.
Although durum consumption is also on the rise, ending stocks for 1998 are
expected to have increased by a similar amount, from approximately 26 million to
approximately 69 million bushels. Durum cash prices currently reflect this and
were $4.30 per bushel as of August 1998, far below the August 1997 prices of
$7.25 to $7.75 per bushel. We expect lower durum prices to continue in the near
future as evidenced by current March 1999 futures contracts at $3.97 per bushel
as of January 14, 1999. We believe that the industry in general will not be
subject to the same volatility as it had historically experienced due to
diversified sourcing of durum from different regions, government policies such
as the "freedom to farm" initiative and various incentives under NAFTA. For
example, the industry has had success in developing and growing durum
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varieties suitable for regions where durum was not previously grown, such as
Virginia, central California, and Oregon.
Packaging materials represent another significant portion of the cost of
sales. We expect the costs of these materials to remain constant as a percentage
of sales.
DURUM WHEAT PRICES(1)
(1980-1997)
(1) Cash grain prices for hard amber durum on the Minneapolis Grain Exchange.
MILLER MILLING
OVERVIEW. Miller Milling was founded in 1985 in response to consolidation
in the pasta industry, rail deregulation and the failure of various competitors
to take advantage of technological innovations. Miller Milling then grew from
one mill dedicated to serving Hershey Pasta's Lebanon, Pennsylvania facility
into what is now the largest durum/semolina supplier in North America.
Miller Milling provides numerous services beyond those of a wheat buyer or
semolina miller. By providing cost-efficient buying opportunities in addition to
milling, storage and transportation services, Miller Milling effectively manages
the entire sourcing process for its customers. Miller Milling maintains
fixed-margin contracts with its customers deriving its profitability from the
volume of the durum/semolina supplied.
Miller Milling owns a substantial interest in Miller LLC after investing in
excess of $6 million and, as a result, owns indirectly a 10.6% interest in the
Company.
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RELATIONSHIP WITH NEW WORLD PASTA. In addition to lower durum/semolina
prices, the Company will benefit from the shifting of all procurement
responsibilities from Hershey to New World Pasta and Miller Milling. While
Hershey had sugar and cocoa traders sourcing its durum/semolina requirements, in
the future, John Miller, Chairman, President and Chief Executive Officer of
Miller Milling and President and Director of the Company, and Mickey Skinner,
Chairman and Chief Executive Officer of the Company who together have over 60
years experience in the sourcing of durum/semolina, will jointly head this
function for the Company. Prior to the Recapitalization, Hershey Pasta sourced
up to 67% of its durum/semolina through Miller Milling. Due to Miller Milling's
purchasing expertise, diversified sources of durum/semolina, our advantageous
milling arrangement and low durum/semolina freight costs, we estimate Miller
Milling currently saves us approximately $6.0 to $7.0 million annually versus
spot buying. We believe that we will save a commensurate amount by expanding the
Miller Milling purchasing and milling arrangements to procure 100% of our
durum/semolina requirements. New World Pasta is Miller Milling's largest
customer. Miller Milling is a supplier of durum/semolina to a number of
manufacturers of pasta. The advantages Miller Milling brings include:
- MULTINATIONAL PURCHASING. By procuring all of our durum/semolina needs,
Miller Milling will be able to expand its multinational purchasing of
durum/semolina as it will control or source approximately 25% of the
durum/semolina consumed in the United States, which should make it the
largest buyer of durum/semolina in North America. Multinational
purchasing will enable Miller Milling to obtain more favorable terms and
improve its buying through larger contracts, increased leverage and
improved freight rates.
- NEAR OR ON-SITE MILLING. Miller Milling has built on-site or near-site
milling operations to support three of the Company's largest facilities,
enabling us to lower our durum/semolina costs, improve quality standards,
lower our durum/semolina freight costs and our delivered cost of finished
product.
- MULTIPLE SOURCES OF SUPPLY. Miller Milling can purchase and supply
durum/semolina from multiple locations including North Dakota, Canada,
California, Virginia and from its new mill in Mexico which became
operational in March 1999. This dispersion of production allows the
Company to obtain the best pricing and buying opportunities. The ability
to draw durum/semolina from three countries in North America gives the
Company a unique advantage in both pricing and availability of its
primary raw material.
- INCREASED FLEXIBILITY. As the sole procurer of durum/semolina for the
Company, Miller Milling can use its capabilities to shift durum/semolina
needs from plant to plant and source from a variety of locations. These
capabilities limit the Company's exposure to changes in a particular
market and improve its lead times, thus, lowering the amount of inventory
the Company may require at any given time and increase its production
flexibility.
Since the cost of durum/semolina represents a significant share of our
overall cost of production, its price is inversely related to our gross margin.
New World Pasta's management believes that the expertise and capabilities of
Miller Milling, the emergence of a futures market for durum/semolina and the
availability of new alternative durum/ semolina sources should reduce the price
volatility of the Company's main raw material. We believe that our arrangements
with Miller Milling provide us with many benefits. For a more detailed
description of the arrangements between the Company and Miller Milling, see
"Certain Relationships and Related Transactions."
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COMPETITION
We operate in a highly competitive environment and compete against numerous
well-established national, regional and foreign companies, and many smaller
companies. New World Pasta competes with these companies on a regional and
national basis in the sale and marketing of pasta products. Our competitors
include both independent pasta producers and pasta divisions and subsidiaries of
large food products companies. Of these, the largest competitors are AIPC,
Barilla, Bestfoods, Borden and Dakota Growers. The competitive dynamics in the
pasta industry have undergone significant change over the last several years as
the corporate parents of the leading brands have underinvested and underpromoted
their labels or shifted out of private label and industrial sectors. Management
believes the current environment leaves substantial opportunity for New World
Pasta to increase its branded market share and its private label business. For
example, over the past five years Borden and Bestfoods have lost market share of
8 points and 1.5 points, respectively, which has been picked up by imported
pasta makers and private label producers.
We compete primarily in the branded sector of the retail consumer market.
Competition in this market generally is based upon product quality and taste,
pricing, packaging and customer service and logistics capabilities. Our branded
competitors include Borden (Creamette), Bestfoods (Muellers), and Barilla whose
respective national market shares as of February 28, 1999 were 18.3%, 9.6% and
7.3%. Branded pasta sales represented 85% of our net sales in 1998. Given the
current market dynamics, we are optimistic that we can increase our national
market share with our renewed emphasis on promotional pricing.
Our private label competitors include AIPC and Dakota Growers. Competition
in this market is based predominantly on price. Private label sales represented
4.0% of our net sales in 1998.
On a more limited basis, we compete in the foodservice and industrial
sectors. In 1998, these sales represented approximately 11.0% of net sales.
Competition in this market is based primarily on price and secondarily on
reliability. Our main competitor in this market is AIPC.
TRADEMARKS AND DOMAIN NAMES
We consider our branded specialty products to be of considerable value and
importance to our business, and therefore own many registered trademarks in the
United States and abroad. Our marks that are registered with the United States
Patent and Trademark Office include American Beauty, Light & Fluffy, Mrs. Weiss,
Ronzoni, San Giorgio, Skinner and others. We also own several U.S. Internet
domain names that incorporate certain of our trademarks, such as RONZONI.COM and
SANGIORGIO.COM.
REGULATION
We are subject to various laws and regulations administered by federal,
state and other governmental agencies, relating to the operation of our
production facilities, and the production, packaging, labeling and marketing of
our products and pollution control, including air emissions. The Company's
facilities are subject to inspections by the U.S. Food and Drug Administration,
U.S. Occupational Safety and Health Administration and various state regulatory
agencies. The Company believes that it is in material compliance with all
federal, state and local laws and regulations governing our products and
facilities.
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Various federal, state and local laws and regulations impose liability on
current or previous real property owners or operators for the cost of
investigating, cleaning up or removing contamination caused by hazardous or
toxic substances at the property. In addition such laws impose liability for
such costs on persons who disposed of or arranged for the disposal of hazardous
substances at third-party sites. Such liability may be imposed without regard to
the legality of the original actions and without regard to whether the person
knew of, or was responsible for, the presence of such hazardous or toxic
substances, and such liability may be joint and several with other parties. If
the liability is joint and several, the person could be responsible for payment
of the full amount of the liability, whether or not any other responsible party
is also liable.
A number of current and former Hershey Pasta facilities have been operated
as manufacturing facilities for some time. Although the Company does not believe
that it will incur significant liability for environmental matters from such
historical operations, there can be no assurance that the Company will not incur
such liability in the future if evidence of environmental problems is
subsequently discovered.
In addition, the Company's operations are subject to extensive
environmental laws and regulations concerning, among other things, emissions to
air, discharges to water, and the generation, treatment, and disposal of wastes
and other materials. Potential costs and expenses may also be incurred in
connection with the repair or upgrade of facilities to meet existing or new
requirements under environmental laws. In many instances, the ultimate costs and
the time period during which such costs are likely to be incurred are difficult
to predict.
EMPLOYEES
The Company has approximately 900 employees in its facilities throughout
the United States. Most of the Company's hourly employees are represented by
unions, with the exception of those at the Winchester plant. The Company's
employees at the Winchester plant are currently engaged in union organizing
activities with The Bakery, Confectionery, Tobacco Workers and Grain Millers
International Union and are expected to vote on recognition of the Union on May
5 and 6, 1999. In total, approximately 56% of the Company's employees are
currently unionized. The following unions represent Company employees: The
Bakery, Confectionery, Tobacco Workers International Union of America, United
Foods and Commercial Workers International Union, International Union of
Operating Engineers, and the Teamsters. Employment contracts with the unions are
generally renegotiated every three years. The only collective bargaining
agreement scheduled for renegotiation in 1999 is with the United Foods and
Commercial Workers International Union, Local 271 at the Omaha, Nebraska
facility. Our management anticipates renegotiating this agreement on similar
terms and conditions as the current agreement, however, there is no assurance
that a satisfactory renegotiation will be obtained. The Company considers its
relationship with both its union and non-union employees to be good.
LEGAL PROCEEDINGS
In ordinary course of its business, the Company is a party to litigation
involving its operations and employees. Our management believes that the outcome
of this litigation will not have a material adverse effect upon our business or
financial condition.
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MANAGEMENT
Set forth below is information concerning the executive officers and
directors of New World Pasta.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
C. Mickey Skinner............ 65 Chairman, Chief Executive Officer and Director
John C. Miller............... 48 President and Director
Michael L. Snow.............. 47 Executive Vice President and Director
Clifford K. Larsen........... 59 Executive Vice President, Marketing and Sales
Cecil A. Archbold............ 57 Vice President, Human Resources
James A. Bohenick............ 41 Vice President, Finance and Chief Financial
Officer
Vito M.J. Castelgrande....... 48 Vice President, Sales
Burton R. Freeman............ 50 Vice President, Manufacturing
Mark E. Kimmel............... 40 Vice President, Administration and Development
and General Counsel
Glenn A. Zearfoss............ 44 Vice President, Logistics
Paul S. Levy................. 51 Director
Jeffrey C. Lightcap.......... 40 Director
Brett N. Milgrim............. 30 Director
David Y. Ying................ 44 Director
</TABLE>
MR. SKINNER is Chairman, Chief Executive Officer and a Director of New
World Pasta. Mr. Skinner was President of Hershey Pasta from 1984 to 1997. Mr.
Skinner then served as Vice Chairman of Hershey's Pasta and Grocery Group from
1997 to 1998. Mr. Skinner currently serves on the boards of directors of Streck
Laboratories and Coleman Natural Products, Inc.
MR. MILLER is President and a Director of New World Pasta. He also serves,
and during the last five years has served, as Chairman, President and Chief
Executive Officer of Miller Milling which is responsible for all of the
Company's durum/semolina purchasing functions. Mr. Miller is also a founder,
Director and President of TABLEX-MILLER SA de C.V., a Mexican durum milling
company. He currently serves on the Board of Directors of the Minneapolis Grain
Exchange, where he is Vice Chairman, and on the executive committee of the North
American Millers' Association (an industry trade organization).
MR. SNOW is Executive Vice President and a Director of New World Pasta and,
during the last five years, also has served as Executive Vice President,
Secretary, Treasurer and a Director of Miller Milling. Mr. Snow is of counsel
to, and was a former partner of, the commercial law firm of Maslon Edelman
Borman & Brand LLP. Mr. Snow is also a founder, Director and officer of
TABLEX-MILLER SA de C.V., a Mexican durum milling company. Mr. Snow currently
acts as counsel to and Director of Osmonics, Inc., Navarre Corporation,
QuikPages, Inc. and Artesian Management, Inc.
MR. LARSEN is Executive Vice President, Marketing and Sales of New World
Pasta. From mid-1996 through 1998, Mr. Larsen was retired. Mr. Larsen was Vice
President, Marketing for Hershey Pasta from 1979 until his retirement in
mid-1996.
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MR. ARCHBOLD is Vice President, Human Resources of New World Pasta. He was
previously Vice President, Human Resources of Hershey's Pasta and Grocery Group
since 1997 and Vice President, Human Resources of Hershey Pasta since 1990.
MR. BOHENICK is Vice President, Finance and Chief Financial Officer of New
World Pasta. He was previously Vice President, Finance of Hershey Pasta and
Grocery Group since 1996. From 1993 to 1996, he was Director of Corporate
Development at Hershey.
MR. CASTELGRANDE is Vice President, Sales of New World Pasta. He was
previously Director of Field Sales of Hershey's Pasta and Grocery Group, a
position he held since 1998, and was also Director of Pasta Sales for Hershey
Pasta since 1997. Within Hershey Pasta, Mr. Castelgrande held the position of
Eastern Sales Director from 1989 to 1997.
MR. FREEMAN is Vice President, Manufacturing of New World Pasta. He was
previously Vice President, Manufacturing of Hershey Pasta since 1991. Mr.
Freeman joined Hershey in 1988 as Director of Engineering.
MR. KIMMEL is Vice President, Administration and Development and General
Counsel of New World Pasta. He was previously Senior Counsel of Hershey since
October 1994.
MR. ZEARFOSS is Vice President, Logistics of New World Pasta. Mr. Zearfoss
was Manager of Application Consulting at Hershey from 1997 to 1999, and was Vice
President of Technical Services and Quality Assurance at Hershey Pasta from 1991
to 1997.
MR. LEVY is a Director of New World Pasta. Mr. Levy has been a Partner of
JLL since its formation in May 1988. Mr. Levy serves on the boards of directors
of Hayes Lemmerz International Inc., BSL Holdings, Inc., Jackson Automotive
Group, Inc. and Fairfield Manufacturing Company, Inc.
MR. LIGHTCAP is a Director of New World Pasta and a Partner of JLL, which
he joined in 1997. From 1993 to 1997, he was a Managing Director and head of
leveraged buyout firm coverage for the mergers and acquisitions group at Merrill
Lynch & Co., Inc. ("Merrill Lynch"). Mr. Lightcap serves on the boards of
directors of Hayes Lemmerz International Inc. and Jackson Automotive Group, Inc.
MR. MILGRIM is a Director of New World Pasta and a Vice President of JLL,
which he joined in 1997. From 1996 through 1997, he was an Associate in the
investment banking group at Donaldson, Lufkin & Jenrette, Inc. ("DLJ") where he
worked on a variety of transactions including high yield and merchant banking
projects. From 1993 to 1994, Mr. Milgrim was a financial analyst with Vrolyk &
Company, an investment banking boutique specializing in mergers and acquisitions
and private financings. From 1991 to 1993, Mr. Milgrim was a Financial Analyst
at PaineWebber Incorporated.
MR. YING is a Director of New World Pasta and a Partner of JLL, which he
joined in 1997. He was previously a Managing Director at DLJ, which he joined in
January 1993, and the head of its restructuring department. Mr. Ying serves on
the boards of directors of Hayes Lemmerz International Inc. and BSL Holdings,
Inc.
EXECUTIVE COMPENSATION
The current principals of New World Pasta acquired control of the Company
from Hershey in the Recapitalization which was completed on January 28, 1999.
Prior to that time, the Company was a wholly owned division of Hershey which was
operated by a management team comprised of Hershey appointees. None of the
executive officers of New World Pasta received any compensation from New World
Pasta relating to any period prior to January 28, 1999.
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EMPLOYMENT AGREEMENTS
On January 28, 1999, the Company entered into employment agreements with
each of Mr. Skinner, Mr. Miller and Mr. Snow. The employment agreement with Mr.
Skinner provides for his full-time employment as Chairman of the Board of
Directors and Chief Executive Officer of the Company for an initial term of
three years, with an option to renew the term for an additional two years on
either a full-time basis, in which case Mr. Skinner will remain Chairman and CEO
during the renewal term, or on a part time basis, in which case Mr. Skinner will
function as Chairman during the renewal term. Mr. Skinner's agreement provides
for a base salary of $400,000 to be paid during the term (unless Mr. Skinner
elects to work on a part-time basis during the renewal term, in which case his
base salary during the renewal term will be $250,000) and a maximum annual bonus
opportunity equal to 50% of his base salary. In addition, the Skinner agreement
provides for a grant of options to purchase an aggregate of 170,213 shares of
common stock under the 1999 Stock Option Plan described below. The exercise
price of options to purchase 111,111 shares is equal to $10 per share and the
exercise price of options to purchase 59,102 shares is equal to $73.50 per
share. Pursuant to Mr. Skinner's agreement, Mr. Skinner is also entitled to
health, welfare and pension benefits no less favorable in the aggregate than
those provided to senior executives of the Hershey Pasta Group, and is entitled
to the reimbursement of expenses incurred for country club membership (up to
$12,000 per year), income tax return preparation (up to $2,000 per year), car
allowance (up to $1,200 per month) and business expenses (including first class
travel for Mr. Skinner and, where appropriate, travel expenses for his spouse).
In the event Mr. Skinner's employment is terminated by the Company without
cause (as defined in Mr. Skinner's agreement) or by Mr. Skinner with good reason
(as defined in Mr. Skinner's agreement), Mr. Skinner will be entitled to receive
his then-current base salary and benefits under his agreement for the remainder
of the term. However, if the termination occurs during the initial term, Mr.
Skinner will be entitled to receive his then-current base salary during the
remainder of the initial term and $250,000 per year for the two-year period
following the end of the initial term. Upon the occurrence of a change in
control of the Company (as defined in Mr. Skinner's agreement), Mr. Skinner's
agreement will automatically terminate, unless Mr. Skinner does not have the
right to receive cash or marketable securities with respect to his equity
investment in the Company or with respect to the options then held by him, in
which event, his agreement will not automatically terminate, but will become
terminable by Mr. Skinner at any time during the 60-day period following the
change in control of the Company.
Mr. Skinner's agreement provides that he will be subject to certain
non-competition and non-solicitation provisions following the termination of his
employment during any period that he is receiving payments from the Company
thereunder. However, upon the termination of Mr. Skinner's employment following
a change in control of the Company, the non-competition and non-solicitation
provisions will remain in effect for two years following the termination of his
employment.
The employment agreement with Mr. Miller provides for his part-time
employment as Co-Chairman of the Board of Directors and President of the Company
for an initial term of three years, with an option to renew the term for an
additional two years. Mr. Miller's agreement provides for a base salary of
$200,000 to be paid during the term (increased annually by an amount equal to
the percentage increase in the Consumer Price Index for the Minneapolis area)
and a maximum annual bonus opportunity equal to 50% of his base salary. In
addition, Mr. Miller's agreement provides for a grant of options to purchase an
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aggregate of 200,936 shares of common stock under the Company's 1999 Stock
Option Plan. The exercise price of options to purchase 92,778 shares is equal to
$10 per share and the exercise price of options to purchase 108,158 shares is
equal to $73.50 per share. Pursuant to Mr. Miller's agreement, Mr. Miller is
also entitled to receive the welfare and pension benefits generally available to
senior executives of the Company.
In the event Mr. Miller's employment is terminated by the Company without
cause (as defined in Mr. Miller's agreement) or by Mr. Miller with good reason
(as defined in Mr. Miller's agreement), Mr. Miller will be entitled to receive
his then-current base salary and benefits under his agreement for the remainder
of the term. However, if the termination occurs during the initial term, Mr.
Miller will be entitled to receive his then-current base salary during the
remainder of the term. Upon the occurrence of a change in control of the Company
(as defined in Mr. Miller's agreement), Mr. Miller's agreement will
automatically terminate, unless Mr. Miller does not have the right to receive
cash or marketable securities with respect to his equity investment in the
Company or with respect to the options then held by him, in which event, his
agreement will not automatically terminate, but will become terminable by Mr.
Miller at any time during the 60-day period following the change in control of
the Company.
Mr. Miller's agreement provides that he will be subject to certain
non-competition and non-solicitation provisions following the termination of his
employment during any period that he is receiving payments from the Company
thereunder. However, upon the termination of Mr. Miller's employment following a
change in control of the Company, the non-competition and non-solicitation
provisions will remain in effect for two years following the termination of his
employment.
The employment agreement with Mr. Snow provides for his part-time
employment as Executive Vice President of the Company for an initial term of
three years, with an option to renew the term for an additional two years. Mr.
Snow's agreement provides for a base salary of $100,000 to be paid during the
term (increased annually by an amount equal to the percentage increase in the
Consumer Price Index for the Minneapolis area) and a maximum annual bonus
opportunity equal to 50% of his base salary. In addition, Mr. Snow's agreement
provides for a grant of options to purchase an aggregate of 141,832 shares of
common stock under the Company's 1999 Stock Option Plan. The exercise price of
options to purchase 92,778 shares is equal to $10 per share and the exercise
price of options to purchase 49,054 shares is equal to $73.50 per share.
Pursuant to Mr. Snow's agreement, Mr. Snow is also entitled to receive the
welfare and pension benefits generally available to senior executives of the
Company.
In the event Mr. Snow's employment is terminated by the Company without
cause (as defined in Mr. Snow's agreement) or by Mr. Snow with good reason (as
defined in Mr. Snow's agreement), Mr. Snow will be entitled to receive his
then-current base salary and benefits under his agreement for the remainder of
the term. However, if the termination occurs during the initial term, Mr. Snow
will be entitled to receive his then-current base salary during the remainder of
the term. Upon the occurrence of a change in control of the Company (as defined
in Mr. Snow's agreement), Mr. Snow's agreement will automatically terminate,
unless Mr. Snow does not have the right to receive cash or marketable securities
with respect to his equity investment in the Company or with respect to the
options then held by him, in which event, his agreement will not automatically
terminate, but will become terminable by Mr. Snow at any time during the 60-day
period following the change in control of the Company.
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Mr. Snow's agreement provides that he will be subject to certain
non-competition and non-solicitation provisions following the termination of his
employment during any period that he is receiving payments from the Company
thereunder. However, upon the termination of Mr. Snow's employment following a
change in control of the Company, the non-competition and non-solicitation
provisions will remain in effect for two years following the termination of his
employment.
THE 1999 STOCK OPTION PLAN AND OTHER INCENTIVE ARRANGEMENTS
The Company adopted the 1999 Stock Option Plan (the "Plan") providing for
the grant to key employees and consultants of the Company of incentive stock
options and nonqualified stock options, in either case, to acquire shares of
common stock, par value $.01 per share, of the Company ("Common Stock"). The
Plan provides for the issuance of options to acquire up to an aggregate of
910,166 shares of Common Stock, or 15.4% of the Common Stock on a fully-diluted
basis, of which options to purchase 170,213 shares, 200,936 shares, 141,832
shares, 70,934 shares, 42,553 shares and 838,948 shares have been granted to
Messrs. Skinner, Miller, Snow, Bohenick and Larsen and all executive officers as
a group, respectively. Approximately two-thirds of the options granted to the
executives have an exercise price of $10 per share, which is the per share price
paid by New World LLC and Miller LLC in connection with the Recapitalization,
and the exercise price of the balance of the options is $73.50 per share. Each
of New World LLC and Miller LLC has entered into agreements with each
optionholder providing for certain payments to the optionholders based upon the
value of the Company's equity. The Plan and the arrangements described in the
preceding sentence are intended to assist the Company in attracting and
retaining employees of outstanding ability.
DIRECTOR COMPENSATION
Directors of New World Pasta do not receive any compensation for their
services. They are, however, reimbursed for travel expenses and other
out-of-pocket costs incurred in connection with attendance at Board and
Committee meetings. None of the directors of New World Pasta received any
compensation from New World Pasta relating to any period prior to January 28,
1999.
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STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding ownership of shares of
the Company's Common Stock and the Company's Preferred Stock, par value $.01 per
share (the "Preferred Stock"), as of April [16], 1999 by each person known to be
the owner of 5% or more of the Common Stock, by each person who is a director or
executive officer of the Company and by all directors and executive officers of
the Company as a group. Unless otherwise indicated, the address of each person
listed below is 100 Crystal A Drive, Hershey, Pennsylvania 17033.
<TABLE>
<CAPTION>
COMMON STOCK OF PREFERRED STOCK OF
NEW WORLD PASTA(1) NEW WORLD PASTA(1)
---------------------- -----------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
OF SHARES OF CLASS OF SHARES OF CLASS
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
New World LLC(2).................. 4,167,869 83.4% 100,636.31 88.7%
Miller LLC(3)..................... 532,131 10.6 12,848.69 11.3
Hershey........................... 300,000 6.0 -- --
C. Mickey Skinner(4).............. 532,131 10.6 12,848.69 11.3
John C. Miller(4)................. 532,131 10.6 12,848.69 11.3
Michael L. Snow(4)................ 532,131 10.6 12,848.69 11.3
Clifford K. Larsen................ -- -- -- --
Cecil A. Archbold................. -- -- -- --
James A. Bohenick................. -- -- -- --
Vito M.J. Castelgrande............ -- -- -- --
Burton R. Freeman................. -- -- -- --
Mark E. Kimmel.................... -- -- -- --
Glenn A. Zearfoss................. -- -- -- --
Paul S. Levy(5)................... 4,167,869 83.4 100,636.31 88.7
Jeffrey C. Lightcap(5)............ 4,167,869 83.4 100,636.31 88.7
Brett N. Milgrim.................. -- -- -- --
David Y. Ying(5).................. 4,167,869 83.4 100,636.31 88.7
All directors and executive
officers as a group (14
persons)(4)(5).................. 4,700,000 94.0 113,485 100.0
</TABLE>
- -------------------------
(1) The amounts and percentages of the Company's Common Stock and Preferred
Stock beneficially owned are reported on the basis of regulations of the
Commission governing the determination of beneficial ownership of
securities. Under the rules of the Commission, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of such
security, or "investment power," which includes the power to dispose of or
to direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has a right to
acquire beneficial ownership within 60 days. Under these rules, more than
one person may be deemed a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities as to which that
person has no economic interest.
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(2) Through its interest in New World LLC, JLL Fund III is deemed to
beneficially own all of the shares of Common Stock and Preferred Stock owned
by New World LLC.
(3) Miller LLC is owned by a group of investors, including Messrs. Skinner,
Miller and Snow. Through their interests in Miller LLC, Messrs. Skinner,
Miller and Snow are deemed to beneficially own all of the shares of Common
Stock and Preferred Stock owned by Miller LLC.
(4) Messrs. Skinner, Miller and Snow all own membership interests in Miller LLC,
which owns 10.6% of the Common Stock and 11.3% of the Preferred Stock.
Through their interests in Miller LLC, Messrs. Skinner, Miller and Snow are
deemed to beneficially own all of the shares of Common Stock and Preferred
Stock owned by Miller LLC.
(5) Messrs. Levy, Lightcap and Ying are general partners of JLL Associates III,
LLC, the general partner of JLL Fund III, which owns membership interests in
New World LLC. As a result, each may be deemed to beneficially own all of
the shares of Common Stock and Preferred Stock owned by New World LLC.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
New World LLC, which beneficially owns 83.4% of the Company's Common Stock,
is controlled by JLL Fund III, which is controlled by JLL. Miller LLC, which
beneficially owns 10.6% of our Common Stock, is controlled by a group of
investors, including Mickey Skinner, John Miller, Michael Snow and Miller
Milling. Messrs. Skinner, Miller and Snow are executive officers and directors
of New World Pasta, and Messrs. Miller and Snow are principals of Miller
Milling. Some of these entities and individuals are parties to material
agreements with the Company, as described below. See also "Management."
STOCKHOLDERS AGREEMENT
In connection with the Recapitalization, the Company, New World LLC, Miller
LLC, Hershey and certain members of Miller LLC entered into a Stockholders'
Agreement dated January 28, 1999 (the "Stockholders Agreement"), which provides
among other things that New World LLC and Miller LLC will vote their shares of
Common Stock so that the Board of Directors will be comprised of seven directors
consisting of the Chief Executive Officer (currently, Mr. Skinner), four
designees of New World LLC (currently, Messrs. Levy, Lightcap, Milgrim and Ying)
and two designees of Miller Milling (currently, Messrs. Miller and Snow). Under
the Stockholders' Agreement, Mr. Skinner has the right to continue to serve on
the Board of Directors through January 28, 2004 and New World LLC has, at all
times, the right to elect a majority of the Board of Directors.
Pursuant to the Stockholders Agreement, Miller LLC and Hershey agreed not
to transfer any securities of the Company, except to certain Permitted
Transferees (as defined therein), and the members of Miller LLC agreed not to
transfer any of their interests in Miller LLC, except that securities of the
Company held by Miller LLC and Hershey are subject to certain "tag along" and
"drag along" rights upon the transfer of any securities of the Company by New
World LLC. After 180 days following the consummation of an initial public
offering of Common Stock (the "Sale Date"), (1) Hershey and all of the members
of Miller LLC (other than Miller Milling and Messrs. Skinner, Miller and Snow)
will be able to sell their shares of Common Stock without restriction and (2)
Miller Milling and Messrs. Skinner, Miller and Snow will be able to sell up to
75% of their shares of Common Stock during various time periods following the
Sale Date.
Each of New World LLC and Miller LLC will have the right after the Sale
Date, under certain circumstances and subject to certain conditions, to require
the Company to register under the Securities Act shares of Common Stock held by
it pursuant to the Stockholders Agreement. The Stockholders Agreement provides,
among other things, that the Company will pay all expenses in connection with
the first three demand registrations requested by each of New World LLC and
Miller LLC and in connection with any registration commenced by the Company as a
primary offering in which New World LLC and Miller LLC participate through
piggyback registration rights granted under that agreement. The Company will
also be required to pay all expenses in connection with any registration
commenced by the Company as a primary offering in which Hershey participates
through piggyback registration rights granted to Hershey under the Stockholders
Agreement. New World LLC, Miller LLC and Hershey also are granted certain
preemptive rights under the Stockholders Agreement to participate in future
private equity offerings. Certain rights under the Stockholders Agreement
terminate when either New World LLC or Miller LLC cease to own at least 25% of
their initial investment in the
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Company. Unless terminated earlier pursuant to its terms, the Stockholders
Agreement will terminate on January 28, 2009.
PROCUREMENT AGREEMENT
The Company is a party to a long-term Procurement Agreement, dated January
28, 1999 (the "Procurement Agreement"), with Miller Milling, pursuant to which
Miller Milling has agreed to procure (x) all of the Company's requirements for
semolina and certain other products (such products, collectively, "Contract
Goods") and (y) contracts for the milling of durum and other related services,
including quality testing, execution of futures and hedging contracts,
transportation and storage (such services, collectively, "Contract Services"),
other than those Contract Goods and Contract Services supplied pursuant to the
Fresno Mill Agreement and the Winchester Mill Agreement (each as defined below).
Miller Milling has agreed to use reasonable commercial efforts to procure the
Contract Goods and Contract Services under the Procurement Agreement on terms
the Company believes are commercially favorable. In return for its services
under the Procurement Agreement, Miller Milling is entitled to a minimum fee per
year, subject to adjustment. The Procurement Agreement may be terminated by
either party if the other defaults and such default is not cured within a
specified period of its receiving written notice thereof. The Company has the
right under the Procurement Agreement to inspect Miller Milling's purchase and
manufacturing records. In addition, the Procurement Contract contains customary
indemnification provisions for both parties.
FRESNO MILL AGREEMENT
Pursuant to a multi-year Amended and Restated Mill Agreement dated March 1,
1998 (the "Fresno Mill Agreement"), as amended, between Miller Milling and the
Company, the Company has agreed to purchase from Miller Milling a substantial
portion of the semolina needs of its Fresno, California plant. The Company will
purchase semolina milled at Miller Milling's Fresno, California mill (the
"Fresno Mill") at a price which the Company believes is commercially favorable.
The Fresno Mill Agreement may be terminated by either party if the other
defaults and such default is not cured within a specified period. In addition,
the Company has the right to inspect the Fresno Mill.
WINCHESTER MILL AGREEMENT
Pursuant to a multi-year Mill Agreement dated January 28, 1999 (the
"Winchester Mill Agreement"), among Miller Milling, Winchester Pasta, L.L.C., a
wholly owned subsidiary of the Company ("Winchester LLC"), and the Company, the
Company has agreed to purchase from Miller Milling substantially all of the
semolina needs of its Winchester, Virginia plant (the "Winchester Plant"). Under
certain circumstances, the Company will purchase from Miller Milling a
significant portion of the Company's semolina requirements for its Lebanon,
Pennsylvania plant (the "Lebanon Plant"). The Company will purchase semolina
from Miller Milling's Winchester mill (the "Winchester Mill") at a price which
the Company believes is commercially favorable.
The Company may inspect the Winchester Mill and Miller Milling's books and
records on request. The Winchester Mill Agreement may be terminated by either
party if the other defaults and such default is not cured within a specified
period.
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WINCHESTER LEASE
The Winchester Mill is located on real property owned by Winchester LLC and
leased to Miller Milling pursuant to an Amended and Restated Ground Lease, dated
July 29, 1998 (the "Winchester Ground Lease"), between Winchester LLC f/k/a
Hershey Pasta Group Winchester, Inc. and Miller Milling. The rent under the
Winchester Ground Lease has been prepaid in full through the end of the term,
including the extension terms. In consideration of this prepayment, the Company
has agreed to transfer the land underlying the Winchester Mill to Miller Milling
for nominal consideration.
TRANSITIONAL SERVICES AGREEMENT
The Company is a party to a Transitional Services Agreement, dated as of
January 28, 1999, with Hershey, pursuant to which, for a period generally not to
exceed six months from January 28, 1999, Hershey has agreed to provide certain
services, including leased office space and office services, systems technology
services, transition support for open positions, telephone, copier and fax
services, consumer relations services, benefits administration and international
pasta sales to the Company, and the Company has agreed to provide crisp rice
manufacturing services to Hershey, in each case approximately at the service
provider's cost plus a nominal profit.
EMPLOYMENT AGREEMENTS
The Company is party to employment agreements with Messrs. Skinner, Miller
and Snow, each of whom is an executive officer and director of the Company. See
"Management -- Employment Agreements."
TAX SHARING AGREEMENT
The Company and its current subsidiaries are included in New World LLC's
consolidated group (the "Consolidated Group") for U.S. federal income tax
purposes as well as in certain consolidated, combined or unitary groups which
include New World LLC (a "Combined Group") for state, local and foreign income
tax purposes. The Company and New World LLC have entered into a tax sharing
agreement (the "Tax Sharing Agreement") in connection with the Recapitalization.
Pursuant to the Tax Sharing Agreement, the Company generally will make payments
to New World LLC such that, with respect to tax returns for any taxable period
in which the Company or any of its subsidiaries is included in the Consolidated
Group or any Combined Group, the amount of taxes to be paid by the Company will
be determined, subject to certain adjustments, as if the Company and each of its
subsidiaries included in the Consolidated Group or Combined Group filed their
own consolidated, combined or unitary tax return. The Company and New World LLC
will prepare pro forma tax returns with respect to any tax return filed with
respect to the Consolidated Group or any Combined Group in order to determine
the amount of tax sharing payments under the Tax Sharing Agreement. The Tax
Sharing Agreement does not alter the Company's general responsibility for any
taxes with respect to tax returns that include only the Company and its
subsidiaries.
New World LLC will be responsible for filing any tax return with respect to
the Consolidated Group or any Combined Group. Pursuant to the Tax Sharing
Agreement, the Company will be responsible for preparing such tax returns. The
Tax Sharing Agreement does not alter the Company's general responsibility for
preparing and filing any tax returns that include only the Company and its
subsidiaries.
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New World LLC will be primarily responsible for controlling and contesting
any audit or other tax proceeding with respect to the Consolidated Group or any
Combined Group. Pursuant to the Tax Sharing Agreement, the Company will conduct
the contest of any audit or tax proceeding that relates to any tax return which
the Company is responsible for preparing; provided, that the entering into of
any settlement or agreement or any decision in connection with any judicial or
administrative tax proceeding will be subject to the control of New World LLC.
Each member of a consolidated group for U.S. federal income tax purposes is
jointly and severally liable for the federal income tax liability of each other
member of the consolidated group. Accordingly, although the Tax Sharing
Agreement allocates tax liabilities between the Company and New World LLC, for
any period in which the Company was included in the Consolidated Group, the
Company could be liable in the event that any federal tax liability was
incurred, but not discharged, by any other member of the Consolidated Group.
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DESCRIPTION OF THE NOTES
The Old Notes were issued and the New Notes will be issued under the
Indenture, dated as of February 19, 1999, by and among New World Pasta, New
World Pasta's wholly owned subsidiaries, Pasta LLC and Winchester LLC (the
Guarantors), and The Bank of New York, as Trustee. The following summary of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Trust Indenture Act and to all of the
provisions of the Indenture, including the definitions of certain terms in the
Indenture and those terms made a part of the Indenture by reference to the Trust
Indenture Act as in effect on the date of the Indenture. The Indenture is
attached as an exhibit to the Registration Statement of which this Prospectus
forms a part and is incorporated by reference in this Prospectus in its
entirety. A copy of the Indenture may be obtained from the Company by any holder
of the Notes upon request. The definitions of capitalized terms used in the
following summary are set forth below under "-- Certain Definitions." For
purposes of this description, references to the "Company" include only New World
Pasta Company and not its subsidiaries.
GENERAL
The Notes are general unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Indebtedness of the Company, pari
passu in right of payment with all senior subordinated Indebtedness of the
Company and senior in right of payment to all junior subordinated Indebtedness
of the Company. The Notes are effectively subordinated to all Indebtedness of
the Company's Subsidiaries (other than Restricted Subsidiaries that are parties
to the Subsidiary Guarantees described below).
The Notes are guaranteed by (x) each Subsidiary of the Company on the Issue
Date and (y) each Restricted Subsidiary of the Company which becomes a Guarantor
after the Issue Date in accordance with the provisions of the Indenture as
described below. The Subsidiary Guarantees of the Notes are general unsecured
obligations of the respective Guarantor, ranking subordinate in right of payment
to all Guarantor Senior Indebtedness of the respective Guarantor, pari passu in
right of payment with all senior subordinated Indebtedness of the respective
Guarantor and senior in right of payment to all junior subordinated Indebtedness
of the respective Guarantor. Not all Subsidiaries of the Company will be
required to guarantee the Notes. Furthermore, if a Subsidiary of the Company is,
or becomes, a Guarantor, such Guarantor may be released from its obligations
pursuant to the respective Subsidiary Guarantee as described below under
"-- Covenants -- Limitation of Guarantees by Restricted Subsidiaries."
At the date of this Prospectus, all Subsidiaries of the Company are
Restricted Subsidiaries. However, in accordance with the definition of
Unrestricted Subsidiary, certain Subsidiaries of the Company may in the future
be designated as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not
be subject to many of the restrictive covenants contained in the Indenture.
Unrestricted Subsidiaries will not guarantee the Notes.
The Old Notes were, and the New 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 Notes. The New 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 office. The Company may change any Paying Agent and Registrar
without notice to holders of the Notes (the "Holders"). The Company will pay
principal (and premium, if any) on the Notes at the Trustee's corporate trust
office in New York, New York. At the Company's option, interest may be paid at
the
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Trustee's principal corporate trust office or by check mailed to the registered
address of Holders. Any Old Notes that remain outstanding after the completion
of the Exchange Offer, together with the New Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes in an aggregate principal amount of $160.0 million will mature on
February 15, 2009. Additional Notes may be issued from time to time, subject to
the limitations set forth under "-- Certain Covenants -- Limitation on
Incurrence of Indebtedness." Interest on the Notes will accrue at the rate of
9 1/4% per annum and will be payable semiannually in cash on each August 15 and
February 15, commencing on August 15, 1999, to the persons who are registered
Holders at the close of business on the August 1 and February 1 immediately
preceding the applicable interest payment date. Interest on the 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. In addition to
interest payable as described above, certain additional amounts may be payable
from time to time as Liquidated Damages (as defined above under the caption
"Exchange Offer -- Registration Rights") in the amounts, and in the
circumstances, described above under the caption "Exchange Offer -- Registration
Rights."
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payment with respect to the Notes.
OPTIONAL REDEMPTION
GENERAL. The Notes are redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after February 15, 2004, 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 February 15 of the year set forth below,
plus, in each case, accrued and unpaid interest thereon and Liquidated Damages,
if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004................................................ 104.6250%
2005................................................ 103.0833%
2006................................................ 101.5417%
2007 and thereafter................................. 100.0000%
</TABLE>
OPTIONAL REDEMPTION UPON EQUITY OFFERINGS. At any time, or from time to
time, on or prior to February 15, 2002, the Company may, at its option, use the
net cash proceeds of one or more Equity Offerings (as defined below) to redeem
up to 35% of the sum of (i) the initial aggregate principal amount of Old Notes
issued in this Offering and (ii) the respective initial aggregate principal
amounts of Notes issued under the Indenture after the Issue Date, at a
redemption price equal to 109.25% of the principal amount thereof plus accrued
and unpaid interest thereon and Liquidated Damages, if any, to the date of
redemption; provided that at least 65% of the sum of (i) the initial aggregate
principal amount of Notes issued in this Offering and (ii) the respective
initial aggregate principal amounts of Notes issued under the Indenture after
the Issue Date remains outstanding immediately after any such redemption. In
order to effect the foregoing redemption with
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the proceeds of any Equity Offering, the Company shall make such redemption not
more than 120 days after the consummation of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means any issuance or
sale after the Issue Date by the Company of Qualified Capital Stock.
SELECTION AND NOTICE OF REDEMPTION. In the event that less than all of the
Notes are to be redeemed at any time, selection of such 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 Notes are listed or, if such
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 Notes of a principal amount of $1,000 or less shall
be redeemed in part. 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
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on 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
Indenture.
REPURCHASES AT THE OPTION OF HOLDERS
In the circumstances, and to the extent, provided below under:
(1) "-- Repurchase of Notes upon a Change of Control;" and
(2) "-- Covenants -- Limitation on Asset Sales;"
Notes or portions thereof may be required to be purchased by the Company at
the option of the Holders of the Notes.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Indebtedness, whether outstanding on the Issue Date or
thereafter incurred, including, without limitation, the Company's obligations
under the New Credit Facility. Except with respect to the money, securities or
proceeds held under any defeasance trust established in accordance with the
Indenture, upon any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to creditors upon any
total or partial liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Indebtedness
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Indebtedness, whether or not such interest is
an allowed claim in such proceeding) shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Indebtedness, before any payment or distribution of any kind
or character is made on account of any Obligations on the Notes, or for the
acquisition of any of the Notes for cash or property or otherwise. If any
default occurs and is continuing in the payment when due, whether at
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maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Designated Senior Indebtedness, no
payment of any kind or character (other than with the money, securities or
proceeds held under any defeasance trust established in accordance with the
Indenture) shall be made by or on behalf of the Company or any other Person on
its or their behalf with respect to any obligations on the Notes or to acquire
any of the Notes for cash or property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Indebtedness, as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness, permitting the holders (without any notice or lapse of time,
except any required notice of acceleration) of such Designated Senior
Indebtedness then outstanding to accelerate the maturity thereof and if the
Representative for the respective issue of Designated Senior Indebtedness gives
written notice of the event of default to the Trustee (a "Default Notice"),
then, unless and until all events of default specified in the Default Notice
have been cured or waived or have ceased to exist or the Trustee receives notice
from the Representative for the respective issue of Designated Senior
Indebtedness terminating the Blockage Period (as defined below), during the 179
days after the delivery of such Default Notice (the "Blockage Period"), neither
the Company nor any other Person on its behalf shall (other than with the money,
securities or proceeds held under any defeasance trust established in accordance
with the Indenture) (x) make any payment of any kind or character with respect
to any Obligations on the Notes or (y) acquire any of the Notes for cash or
property or otherwise. Notwithstanding anything herein to the contrary, in no
event will a Blockage Period extend beyond 179 days from the date the payment on
the Notes was due, and only one such Blockage Period may be commenced within any
360 consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Indebtedness shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Indebtedness
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Indebtedness,
including the Holders of the Notes, may recover less, ratably, than holders of
Senior Indebtedness.
As of December 31, 1998, on a pro forma basis after giving effect to the
offering of the Old Notes and the Recapitalization, the Company would have had
approximately $150.7 million of Senior Indebtedness outstanding, and unused and
available commitments of $50.0 million under the New Credit Facility, and the
Guarantors would have had no Guarantor Senior Indebtedness outstanding (other
than guarantees of Senior Indebtedness).
SUBSIDIARY GUARANTEES
Each Guarantor unconditionally guarantees, on an unsecured senior
subordinated basis, jointly and severally, to each Holder and the Trustee, the
full and prompt
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performance of the Company's obligations under the Indenture and the Notes,
including the payment of principal of and interest on (and Liquidated Damages
with respect to) the Notes. The Subsidiary Guarantees will be subordinated to
Guarantor Senior Indebtedness on the same basis as the Notes are subordinated to
Senior Indebtedness.
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 Subsidiary Guarantee or pursuant to its contribution
obligations under the Indenture, will result in the obligations of such
Guarantor under the Subsidiary Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law. See "Risk
Factors -- Subsidiary Guarantees Could Be Deemed To Be Fraudulent Conveyances."
Each Guarantor that makes a payment or distribution under a Subsidiary 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 Restricted Subsidiary of the Company
without limitation, or with other Persons upon the terms and conditions set
forth in the Indenture. Please refer to the section of this Prospectus entitled
"-- Covenants -- Merger, Consolidation and Sale of Assets." In certain
circumstances a Guarantor's Subsidiary Guarantee will be released. Please refer
to the section of this Prospectus entitled "-- Covenants -- Limitation of
Guarantees by Restricted Subsidiaries."
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 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. However, summarized financial information of the Guarantors
has been included in note 9 to the historical combined financial statements of
the Company included elsewhere in this Prospectus.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest and Liquidated Damages, if any, to the Payment Date.
There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other Indebtedness of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless consents are obtained, require the Company to repay all
Indebtedness then outstanding which by its terms would prohibit such Note
repurchase (including, without limitation, the New Credit Facility), either
prior to or concurrently with such Note repurchase.
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COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INCURRENCE OF INDEBTEDNESS. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur
any Indebtedness; provided, however, that the Company may Incur Indebtedness
(including, without limitation, Acquired Indebtedness incurred by the Company),
if in each case on the date of the Incurrence of such Indebtedness and after
giving effect thereto, the Consolidated Fixed Charge Coverage Ratio is greater
than 2.0 to 1.0.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted
Indebtedness"):
(1) Indebtedness under the Old Notes issued in the Initial Offering
and the New Notes issued in exchange therefor in an aggregate principal
amount of $160,000,000 and the related Subsidiary Guarantees;
(2) Indebtedness of the Company incurred pursuant to one or more
Credit Facilities in an aggregate principal amount at any time outstanding
not to exceed the sum of (a) $200,000,000 and (b) the greater of (x)
$50,000,000 and (y) 60% of inventory plus 85% of accounts receivable (each
as determined in accordance with GAAP, but excluding accounts receivable
that are past due by more than 60 days) of the Company and its Restricted
Subsidiaries determined on a consolidated basis as of the end of the last
fiscal quarter for which financial statements have been prepared (with the
amount of all principal payments and commitment reductions under one or
more Credit Facilities made with the Net Cash Proceeds of one or more Asset
Sales pursuant to the covenant described under the caption "-- Certain
Covenants -- Limitation on Asset Sales" to be applied, at the option of the
Company, to reduce the amounts specified in clause (a) and/or (b) above
(and in the case of any application to reduce clause (b) above, the amount
so applied shall reduce both the amounts specified in sub-clauses (x) and
(y) thereof) so long as the aggregate amount so applied to the amounts of
Indebtedness permitted pursuant to preceding clauses (a) and (b) equals the
amount of the principal payments and commitment reductions so made to the
Credit Facilities (until such time as the aggregate amount of Indebtedness
permitted under this clause (2) has been reduced to $0);
(3) Indebtedness arising from any agreement entered into by the
Company or any of its Restricted Subsidiaries providing for
indemnification, purchase price adjustment or similar obligations (other
than Guarantees of Indebtedness incurred by any Person acquiring all or any
portion of the assets disposed of pursuant to the respective Asset Sale),
in each case incurred or assumed in connection with any Asset Sale;
(4) Indebtedness under Interest Rate Agreements of the Company or any
of its Restricted Subsidiaries; provided, however, that such Interest Rate
Agreements 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 Indebtedness under Interest Rate Agreements does not exceed
the principal amount of the Indebtedness to which such Interest Rate
Agreements relate;
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(5) Indebtedness under Currency Agreements designed to protect the
Company or its Restricted Subsidiaries against fluctuations in foreign
currency exchange rates and not for speculative purposes;
(6) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company, a Wholly Owned Restricted
Subsidiary of the Company or the lenders or collateral agent under one or
more Credit Facilities in each case subject to no Lien held by a Person
other than the Company, a Wholly Owned Restricted Subsidiary of the Company
or such other lenders or collateral agent; provided that if as of any date
any Person other than the Company, a Wholly Owned Restricted Subsidiary of
the Company or the lenders or collateral agent under one or more Credit
Facilities 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 pursuant to this clause (6);
(7) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company or the lenders or
collateral agent under the Credit Facilities, in each case subject to no
Lien held by a Person other than a Wholly Owned Restricted Subsidiary or
such other lenders or collateral agent; provided that (a) any Indebtedness
of the Company to any Wholly Owned Restricted Subsidiary of the Company
which is not a Guarantor is unsecured and subordinated (on substantially
the same terms as the Company's obligations under the Indenture and the
Notes are subordinated to the Senior Indebtedness), pursuant to a written
agreement, to the Company's obligations under the Indenture and the Notes
and (b) if as of any date any Person other than a Wholly Owned Restricted
Subsidiary of the Company or such lenders or collateral agent 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 Permitted Indebtedness by the Company pursuant to this clause
(7);
(8) 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 ten business days of incurrence;
(9) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, issued in the ordinary course of
business of the Company or such Restricted Subsidiary, including, without
limitation, in order to provide security for workers' compensation claims
or payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business and other Indebtedness with
respect to workers' compensation claims, self-insurance obligations,
performance, surety and similar bonds and completion guarantees provided by
the Company or any Restricted Subsidiary in the ordinary course of
business;
(10) Indebtedness (A) consisting of Capitalized Lease Obligations and
(B) consisting of Purchase Money Indebtedness of the Company and its
Restricted Subsidiaries or under purchase money mortgages or secured by
purchase money
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security interests, in the case of (A) or (B) incurred for the purpose of
leasing or financing or refinancing all or any part of the purchase price
or cost of construction or improvement of any property (real or personal)
or other assets that are used or useful in the business of the Company or
such Restricted Subsidiary (whether through the direct purchase of assets
or the Capital Stock of any Person owning such assets and whether such
Indebtedness is owed to the seller or Person carrying out such construction
or improvement or to any third party), so long as (x) such Indebtedness is
not secured by any property or assets of the Company or any Restricted
Subsidiary other than the property or assets so leased, acquired (directly
or indirectly), constructed or improved and (y) such Indebtedness is
created within 90 days of the acquisition or completion of construction or
improvement of the related property or asset; provided that the aggregate
principal amount of Indebtedness at any time outstanding pursuant to this
clause (10), when added to the aggregate principal amount of any
Refinancing Indebtedness incurred in respect of Indebtedness originally
incurred pursuant to this clause (10) or subsequent refinancings thereof,
shall at no time exceed the greater of (x) $25,000,000 and (y) 10% of Total
Assets, at the time of any incurrence thereof;
(11) Refinancing Indebtedness;
(12) Guarantees of Indebtedness otherwise permitted under the
Indenture; provided that the Guarantee of such Indebtedness is permitted by
and made in accordance with the "Limitation of Guarantees by Restricted
Subsidiaries" covenant described below;
(13) Acquired Indebtedness of Restricted Subsidiaries acquired by the
Company after the Issue Date, or resulting from the merger of one or more
Persons into one or more Restricted Subsidiaries of the Company after the
Issue Date; provided that the respective Acquired Indebtedness is not
incurred in contemplation of the respective acquisition or merger; and,
provided further, that after giving effect to any Indebtedness Incurred,
acquired or assumed pursuant to this clause (13), the Company would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the first paragraph of this "Limitation of Incurrence of Indebtedness"
covenant;
(14) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
(15) Indebtedness consisting of deferred payment obligations under
Section 2.7 of the Recapitalization Agreement; and
(16) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $40,000,000 at
any one time outstanding (which amount may, but need not, be incurred in
whole or in part under the New Credit Facility).
Notwithstanding any other provision of this "Limitation on Incurrence of
Indebtedness" covenant, (x) all Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date shall be deemed Incurred on the Issue
Date (and shall only be permitted to be outstanding on such date if same would
be permitted to be Incurred on such date pursuant to the provisions of this
covenant) and (y) the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this "Limitation on Incurrence of
Indebtedness" covenant shall not be deemed to be exceeded,
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with respect to any outstanding Indebtedness, due solely to the result of
fluctuations in the exchange rates of currencies. For the purposes of
determining compliance with this covenant, (x) Indebtedness Incurred under the
New Credit Facility on or prior to the Issue Date shall be treated as Incurred
pursuant to clause (2) of the immediately preceding paragraph and (y) subject to
the provisions of preceding clause (x), in the event that an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Indebtedness or is otherwise entitled to be incurred pursuant to this covenant,
the Company shall, in its sole discretion, classify (or reclassify) such item of
Indebtedness in any manner that complies with this covenant and such items of
Indebtedness will be treated as having been Incurred pursuant to only one of
such clauses or pursuant to the first paragraph hereof. Accrual of interest or
accretion of accreted value will not be deemed to be an Incurrence of
Indebtedness for purposes of this covenant. Accruals of dividends or the payment
of dividends through the issuance of additional shares of the same class of
Capital Stock in accordance with the provisions thereof permitting such pay-
in-kind dividends will not be deemed an issuance of Capital Stock for purposes
of this covenant.
PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT. Neither the Company
nor the Guarantors will incur or suffer to exist Indebtedness that is senior in
right of payment to the Notes or the Subsidiary Guarantees, as the case may be,
and subordinate in right of payment to any other Indebtedness of the Company or
the Guarantors, as the case may be.
LIMITATION ON LIENS. Neither the Company nor any Guarantor shall Incur or
suffer to exist any Indebtedness secured by a Lien ("Secured Indebtedness")
which is not Senior Indebtedness or Guarantor Senior Indebtedness, as the case
may be, unless contemporaneously therewith effective provision is made to secure
the Notes or the Subsidiary Guarantee, as the case may be, equally and ratably
with (or, if the Secured Indebtedness is subordinated in right of payment to the
Notes, or the Subsidiary Guarantee, as the case may be, prior to) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay
any dividend or make any distribution on or with respect to its Capital Stock
held by Persons other than the Company or any of its Restricted Subsidiaries
(other than (x) dividends or distributions payable solely in shares of its
Qualified Capital Stock or in options, warrants or other rights to acquire
shares of such Qualified Capital Stock (so long as, in the case of any
Restricted Subsidiary, the Qualified Capital Stock is issued in accordance with
the other relevant requirements of the Indenture) and (y) pro rata dividends or
distributions on Common Stock of Restricted Subsidiaries held by minority
stockholders), (ii) purchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock of (A) the Company or an Unrestricted Subsidiary
(including options, warrants or other rights to acquire such shares of Capital
Stock) held by any Person (other than the Company or a Wholly Owned Restricted
Subsidiary) or (B) a Restricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Affiliate of the
Company (other than a Wholly Owned Restricted Subsidiary) or any holder (or any
Affiliate of such holder) of 5% or more of the Capital Stock of the Company,
(iii) make any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
value, of Indebtedness of the Company or any Guarantor that is subordinated in
right of payment to the Notes or a Subsidiary Guarantee or (iv) make any
Investment (including, without limitation, any
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Investment deemed made upon (x) the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary or (y) any Restricted Subsidiary ceasing to constitute a
Restricted Subsidiary, in each case in accordance with the definition of
Investment contained herein), other than a Permitted Investment, in any Person
(such payments or any other actions described in clauses (i) through (iv) above
being collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing,
(B) the Company could not Incur at least $1.00 of Indebtedness under
the first paragraph of the "Limitation on Incurrence of Indebtedness"
covenant or
(C) the aggregate amount of all Restricted Payments (the amount, if
other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) made after the Closing Date shall exceed the sum of:
(1) 50% of the aggregate amount of the Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss, minus
100% of the amount of such loss) (determined by excluding income
resulting from transfers of assets by the Company or a Restricted
Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis
during the period (taken as one accounting period) beginning on the
Issue Date and ending on the last day of the last fiscal quarter
preceding the date of the respective Restricted Payment for which annual
or quarterly financial statements, as the case may be, are available;
plus
(2) the aggregate Net Cash Proceeds received by the Company after
the Issue Date from the issuance and sale permitted by the Indenture of
its Qualified Capital Stock to (or, without duplication, from the
receipt of capital contributions (so long as the equity in respect of
which the capital contributions are made constitutes Qualified Capital
Stock of the Company) from) a Person who is not a Subsidiary of the
Company, including an issuance or sale permitted by the Indenture of
Indebtedness of the Company for cash subsequent to the Issue Date upon
the conversion of such Indebtedness into Qualified Capital Stock of the
Company and including any additional proceeds received by the Company
upon such conversion, or from the issuance to a Person who is not a
Subsidiary of the Company of any options, warrants or other rights to
acquire Qualified Capital Stock of the Company (in each case, exclusive
of any options, warrants or other rights that are redeemable at the
option of the holder, or are required to be redeemed, prior to the
Stated Maturity of the Notes); provided that there shall not be included
pursuant to this clause (2) any Net Cash Proceeds (x) of any issuance of
Designated Preferred Stock (or options, warrants or other rights to
acquire same), (y) which are, or will be, used to make Permitted
Investments pursuant to clause (xiii) of the definition of Permitted
Investment contained herein; plus
(3) an amount equal to the net reduction in Investments made after
the Issue Date (other than reductions in Permitted Investments) in any
Person resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each
case to the Company or any Restricted Subsidiary or from the Net Cash
Proceeds from the sale of any such Investment (except, in each case, to
the extent any such payment or
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proceeds are included in the calculation of Adjusted Consolidated Net
Income), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the
definition of "Investments"), not to exceed, in each case, the amount of
Investments previously made by the Company or any Restricted Subsidiary
in such Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would
comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the Notes including premium, if any, and accrued and unpaid
interest, with the proceeds of, or in exchange for, subordinated
Refinancing Indebtedness Incurred under clause (11) of the second paragraph
of the "Limitation on Incurrence of Indebtedness" covenant;
(iii) the repurchase, redemption or other acquisition of Capital Stock
of the Company, an Unrestricted Subsidiary or a Restricted Subsidiary (or
options, warrants or other rights to acquire such Capital Stock) in
exchange for, or out of the proceeds of, a substantially concurrent
offering of, shares of Qualified Capital Stock of the Company (or options,
warrants or other rights to acquire such Qualified Capital Stock);
(iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to
the Notes in exchange for, or out of the proceeds of, a substantially
concurrent offering of, shares of the Qualified Capital Stock of the
Company (or options, warrants or other rights to acquire such Qualified
Capital Stock);
(v) distributions made by the Company on the Issue Date that are
utilized solely to consummate the Recapitalization and distributions made
subsequent to the Issue Date in order to make payments pursuant to the
Recapitalization Agreement, as in effect on the Issue Date and as amended
from time to time so long as any such amendment or modification is, in the
good faith judgment of the Board of Directors, not more disadvantageous to
the Holders of Notes in any material respect than the Recapitalization
Agreement as in effect on the Issue Date;
(vi) repurchases by the Company of Qualified Capital Stock (or options
therefor) of the Company from directors, officers or employees of the
Company or any of its Restricted Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of
such officers or employees, in an aggregate amount not to exceed, in any
calendar year, $2,000,000; provided that unused amounts in any calendar
year (beginning with calendar year 1999) may be carried forward and used to
make repurchases as described above in this clause (vi) in any succeeding
calendar year; provided further that the aggregate amount spent pursuant to
this clause (vi) in any calendar year (both pursuant to the immediately
preceding proviso and the portion of this clause (vi) which precedes said
proviso) does not exceed $4,000,000 in any calendar year;
(vii) the declaration and payment of regularly accruing dividends to
holders of any class or series of Disqualified Capital Stock of the Company
or its Restricted
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Subsidiaries or the declaration and payment of regularly accruing dividends
to holders of Preferred Stock of Restricted Subsidiaries, in each case,
issued after the Issue Date in accordance with the "Limitation on
Incurrence of Indebtedness" covenant;
(viii) the declaration and payment of regularly accruing dividends to
holders of any class or series of Designated Preferred Stock of the Company
issued after the Issue Date; provided that at the time of such issuance,
and after giving effect to such issuance on a pro forma basis (for purposes
of making determinations on a pro forma basis pursuant to this clause
(viii), treating all dividends which will accrue on such Designated
Preferred Stock, as well as all other Designated Preferred Stock then
outstanding, as if same will in fact be, or have in fact been, paid in
cash), the Company would have been able to incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of the "Limitation
on Incurrence of Indebtedness" covenant; and
(ix) Restricted Payments in aggregate amount not to exceed
$15,000,000;
provided that, except in the case of clauses (i), (iii) and (v), no Default or
Event of Default shall have occurred and be continuing or occur as a consequence
of the actions or payments set forth therein.
Except as set forth in the next sentence, each Restricted Payment and
issuance of Capital Stock described in the preceding paragraph shall be included
in calculating whether the conditions of clause (C) of the first paragraph of
this "Limitation on Restricted Payments" covenant have been met with respect to
any subsequent Restricted Payments. The following Restricted Payments described
in the preceding paragraph shall not be included in such calculation:
(x) Restricted Payments described in clauses (ii), (v), (viii) and
(ix); and
(y) an exchange of Capital Stock for Capital Stock or Indebtedness
described in clause (iii) or (iv).
In the event the proceeds of an issuance of Capital Stock of the Company
are used for the redemption, repurchase or other acquisition of the Notes, or
Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of
such issuance shall be included in clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant only to the extent such proceeds
are not used for such redemption, repurchase or other acquisition of
Indebtedness. For purposes of determining compliance with this "Limitation on
Restricted Payments" covenant, in the event that a Restricted Payment meets the
criteria of more than one of the types of Restricted Payments described in the
above clauses, the Company, in its sole discretion, may order and classify, and
from time to time may reclassify, such Restricted Payment if it would have been
permitted at the time such Restricted Payment was made and at the time of such
reclassification.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by
the Company or any other Restricted Subsidiary;
(2) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary;
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(3) make loans or advances to the Company or any other Restricted
Subsidiary; or
(4) transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
However, the foregoing provisions shall not restrict any encumbrances or
restrictions:
(1) existing on the Issue Date in the New Credit Facility, the
Indenture or any other agreements in effect on the Issue Date, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced, renewed or
replaced;
(2) existing under or by reason of applicable law;
(3) existing with respect to any Person or the property or assets of
such Person acquired by the Company or any Restricted Subsidiary, existing
at the time of such acquisition and not incurred in contemplation thereof,
which encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property or
assets of such Person so acquired;
(4) in the case of clause (4) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant, (A) that restrict in a customary manner the
subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or
any Restricted Subsidiary not otherwise prohibited by the Indenture or (C)
arising or agreed to in the ordinary course of business, not relating to
any Indebtedness, and that do not, individually or in the aggregate,
detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any
Restricted Subsidiary;
(5) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary, pending such sale or disposition;
(6) existing under purchase money obligations for property acquired in
the ordinary course of business that impose restrictions of the nature
discussed in clause (4) above on the property so acquired;
(7) existing under applicable law or any applicable rule, regulation
or order;
(8) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Subsidiary pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary;
(9) existing under Secured Indebtedness otherwise permitted to be
incurred pursuant to the "Limitation on Incurrence of Indebtedness" and
"Limitation on Liens" covenants that limit the right of the debtor to
dispose of the assets securing such Indebtedness;
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(10) restrictions on cash or other deposits or net worth imposed by
customers under contracts (not evidencing or relating to Indebtedness)
entered into the ordinary course of business; and
(11) existing under customary provisions in joint venture agreements
and other similar agreements (in each case relating solely to the
respective joint venture or similar entity or the equity interests therein)
entered into in the ordinary course of business.
Nothing contained in this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in the "Limitation on Liens"
covenant or (2) restricting the sale or other disposition of property or assets
of the Company or any of its Restricted Subsidiaries that secure Indebtedness of
the Company or any of its Restricted Subsidiaries.
LIMITATION OF GUARANTEES BY RESTRICTED SUBSIDIARIES. The Company will not
permit any of its Restricted Subsidiaries directly or indirectly to Guarantee
any Indebtedness of the Company or any other Restricted Subsidiary (excluding
any Guarantee of a Restricted Subsidiary which constitutes Acquired Indebtedness
of such Subsidiary, so long as such Guarantee does not apply to Indebtedness
pursuant to the New Credit Facility or any other Indebtedness of the Company and
its Restricted Subsidiaries not acquired pursuant to the respective acquisition
or merger) unless, in any such case, (a) such Restricted Subsidiary executes and
delivers a supplemental indenture to the Indenture providing a Subsidiary
Guarantee by such Restricted Subsidiary and (b) if any such guarantee of such
Restricted Subsidiary is provided in respect of Indebtedness that is expressly
subordinated to the Notes, such guarantee or other instrument provided by such
Restricted Subsidiary in respect of such subordinated Indebtedness shall be
subordinated to the Subsidiary Guarantee pursuant to subordination provisions no
less favorable to the Holders of the Notes than those contained in the
Indenture.
Notwithstanding the foregoing, any such Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be automatically
and unconditionally released and discharged, without any further action required
on the part of the Trustee or any Holder, upon:
(1) the release and discharge of the Guarantee which resulted in the
creation of such Subsidiary Guarantee (as well as the release or discharge
of any subsequently created Guarantees which would have resulted in the
creation of such Subsidiary Guarantee if same did not already exist), in
each case except a discharge or release by or as a result of payment under
such Guarantee;
(2) any sale or other disposition (by merger or otherwise) to any
Person which is not a Restricted Subsidiary of the Company of all of the
Company's and its other Restricted Subsidiaries' Capital Stock in such
Restricted Subsidiary; provided that such sale or disposition of such
Capital Stock or assets is otherwise in compliance with the terms of the
Indenture;
(3) the designation of such Subsidiary as an Unrestricted Subsidiary
in accordance with the provisions of the Indenture; or
(4) the sale or other disposition of shares of Capital Stock of such
Subsidiary to a Person other than the Company or a Restricted Subsidiary
such that such
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Subsidiary ceases to constitute a Subsidiary of the Company, provided such
disposition is otherwise in accordance with the provisions of the
Indenture.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. The Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or the
rendering of any service) with any holder (or any Affiliate of such holder) of
5% or more of any class of Capital Stock of the Company or with any Affiliate of
the Company or any Restricted Subsidiary, except upon fair and reasonable terms
no less favorable to the Company or such Restricted Subsidiary than could be
obtained, at the time of such transaction or, if such transaction is pursuant to
a written agreement, at the time of the execution of the agreement providing
therefor, in a comparable arm's length transaction with a Person that is not
such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(1) transactions (A) approved by a majority of the disinterested
members of the Board of Directors or (B) for which the Company or a
Restricted Subsidiary delivers to the Trustee a written opinion of a
nationally recognized accounting, valuation or investment banking firm
stating that the transaction is fair to the Company or such Restricted
Subsidiary from a financial point of view;
(2) any transaction solely between the Company and any of its Wholly
Owned Restricted Subsidiaries or solely between Wholly Owned Restricted
Subsidiaries;
(3) management and administrative services provided by the Company or
any Restricted Subsidiary to any Restricted Subsidiary or any Person in
which the Company or any Restricted Subsidiary has an Investment;
(4) the payment of reasonable and customary regular fees to directors
of the Company;
(5) any Restricted Payments not prohibited by the "Limitation on
Restricted Payments" covenant;
(6) issuances of Qualified Capital Stock of the Company, to the extent
otherwise permitted under the Indenture, to the Principals and the
Management Investor and its equity holders;
(7) customary investment banking, underwriting, placement agent or
financial advisory fees paid in connection with services rendered to the
Company or its Subsidiaries;
(8) management fees (x) paid to the Management Investor in amounts not
to exceed $400,000 in any calendar year and (y) to JLL Fund III in amounts
not to exceed $500,000 in any calendar year;
(9) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, employee stock options and employee stock ownership plans
approved by the Board of Directors;
(10) loans or advances to employees in the ordinary course of business
of the Company or any of its Restricted Subsidiaries consistent with past
practices;
(11) the existence of, or the performance by the Company or any of its
Restricted Subsidiaries of its obligations under the terms of, any
stockholders
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agreement (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the Issue Date and
any similar agreements which it may enter into thereafter, in each case
subject to compliance with the other provisions of this Indenture;
provided, however, that the existence, or the performance by the Company or
any of its Restricted Subsidiaries of obligations under any future
amendment to any such existing agreement or under any similar agreement
entered into after the Issue Date shall only be permitted by this clause
(11) to the extent that the terms (taken as a whole) of any such amendment
or new agreement are not otherwise disadvantageous to the Holders in any
material respect;
(12) arrangements with Miller Milling relating to the procurement of
raw materials on behalf of the Company and its Restricted Subsidiaries, so
long as the respective arrangements are pursuant to terms which have been
approved by the majority of the disinterested members of the Board of
Directors;
(13) any Permitted Investment made pursuant to clause (xii) of the
definition of Permitted Investment contained herein;
(14) Mr. Miller Real Property Transactions;
(15) the entering into of agreements with lenders to Miller Milling,
pursuant to which the Company and its Subsidiaries (a) consent to such
lenders' liens on Miller Milling's assets, and (b) agree to subordinate any
rights of first refusal they may have against such assets; and
(16) payments made pursuant to the following conditions: if the Issuer
is to file consolidated federal income tax returns with New World LLC or
combined or unitary state income tax returns with New World LLC, the Issuer
may enter into a tax sharing agreement with New World LLC and may pay to
New World LLC amounts when due and payable pursuant to such tax sharing
agreement in respect of amounts of tax due with respect to such
consolidated, combined or unitary returns, as the case may be, in each case
in an amount not to exceed the amount of tax that the Issuer would have
been obligated to pay to the appropriate taxing authority if the Issuer and
its subsidiaries had filed a hypothetical separate consolidated, combined
or unitary return for the then current year and all prior years ending
after the Issue Date.
Notwithstanding the foregoing, any transaction or series of related
transactions covered by the first paragraph of this "Limitation on Transactions
with Shareholders and Affiliates" covenant and not covered by clauses (2)
through (16) of this paragraph, (a) the aggregate amount of which exceeds
$5,000,000 in value, must be approved or determined to be fair in the manner
provided for in clause (1)(A) or (B) above and (b) the aggregate amount of which
exceeds $10,000,000 in value, must be determined to be fair in the manner
provided for in clause (1)(B) above.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any
Restricted Subsidiary to, consummate any Asset Sale, unless (i) the
consideration received by the Company or such Restricted Subsidiary is at least
equal to the fair market value (as determined in good faith by the Board of
Directors) of the assets sold or disposed of and (ii) at least 75% of the
consideration received consists of cash or Cash Equivalents; provided that for
purposes of preceding clause (ii) each of the following shall be deemed to
constitute cash;
(a) the outstanding principal amount of Indebtedness of the Company or
any Restricted Subsidiary (other than (x) Capital Stock which constitutes
Indebtedness
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and (y) Indebtedness to the Company or any Restricted Subsidiary) assumed
by the transferee (which shall not constitute the Company or a Restricted
Subsidiary) pursuant to the respective Asset Sale, so long as the Company
or such Restricted Subsidiary is irrevocably and unconditionally released
from all liability under such Indebtedness;
(b) any notes or other obligations received by the Company or any
Restricted Subsidiary from such transferee that are, within 180 days after
the date of the respective Asset Sale, converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received in that
conversion); and
(c) any Designated Noncash Consideration received by the Company or
any of its Restricted Subsidiaries in such Asset Sale having an aggregate
fair market value, taken together with all other Designated Noncash
Consideration received since the date of the Indenture pursuant to this
clause (c) that is at that time outstanding, not to exceed the greater of
(x) $30,000,000 and (y) 10% of Total Assets at the time of the receipt of
such Designated Noncash Consideration (with the fair market value of each
item of Designated Noncash Consideration being measured at the time
received and without giving effect to any subsequent changes in value).
Within 365 days after the receipt of any Net Cash Proceeds from an
Asset Sale, the Company shall or shall cause the relevant Restricted
Subsidiary to:
(i) (A) apply an amount equal to 100% of such Net Cash Proceeds to
permanently repay Senior Indebtedness of the Company, or Guarantor
Senior Indebtedness of any Restricted Subsidiary providing a Subsidiary
Guarantee or Indebtedness of any other Restricted Subsidiary, in each
case owing to a Person other than the Company or any of its Restricted
Subsidiaries; or
(B) invest an equal amount, or the amount not so applied pursuant
to clause (A) (or enter into a definitive agreement committing to so
invest within 365 days after the date of such agreement), in property or
assets (other than current assets) of a nature or type or that are used
in a business (or in the Capital Stock of a company (which company shall
become a Restricted Subsidiary upon the making of such investment)
having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and
assets of, or the business of, the Company and its Restricted
Subsidiaries existing on the date of such investment; and
(ii) apply (no later than the end of the 365-day period following
the receipt of such Net Cash Proceeds) such excess Net Cash Proceeds (to
the extent not applied pursuant to clause (i)) as provided in the
following paragraph of this "Limitation on Asset Sales" covenant.
The amount of such excess Net Cash Proceeds required to be applied (or to
be committed to be applied) during a 365-day period as set forth in clause (i)
of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $10,000,000, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess
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Proceeds on such date, at a purchase price equal to 100% of the principal amount
of the Notes, plus, in each case, accrued interest and Liquidated Damages (if
any) to the Payment Date.
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 of the Company 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:
(1) either (i) the Company shall be the surviving or continuing
corporation or (ii) 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 Notes and the performance of every covenant
of the Notes, the Indenture and the Registration Rights Agreement on the
part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(ii) 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 Indebtedness" covenant;
(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(ii) 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
(4) 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,
complies with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have
been satisfied.
Notwithstanding the foregoing clauses (2), (3) and (4), (a) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
property and assets to the Company or any other Restricted Subsidiary and (b)
the Company may
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merge with an Affiliate incorporated solely for the purpose of reincorporating
the Company in another jurisdiction.
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 Indenture provides 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 for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Subsidiary Guarantee is to
be released in accordance with the terms of the Guarantee and the 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:
(1) the entity formed by or surviving any such consolidation or merger
(if other than the Guarantor) is a corporation organized and existing under
the laws of the United States or any State thereof or the District of
Columbia;
(2) such entity assumes by supplemental indenture all of the
obligations of the Guarantor on the Subsidiary Guarantee;
(3) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
(4) 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 (2) of the first paragraph of this covenant.
Notwithstanding the foregoing clause (4), (a) any Guarantor may consolidate
with, merge into or transfer all or part of its property and assets to the
Company or any other Guarantor and (b) any Guarantor formed solely for the
purpose of merging with and into any other Person, may merge with or into such
Person.
CONDUCT OF BUSINESS. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or reasonably related
or complementary to the businesses in which the Company and its Restricted
Subsidiaries are engaged on the Issue Date (as determined in good faith by the
Board of Directors of the Company).
REPORTS TO HOLDERS. Whether or not required by the Commission, so long as
any Notes are outstanding, the Company will furnish to the Holders of Notes,
within the time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual
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information only, a report on the annual financial statements by the
Company's certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports.
If the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company.
In addition, whether or not required by the Commission, the Company will
file a copy of all of the information and reports referred to in clauses (1) and
(2) above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. Moreover, the Company has
agreed, and each Guarantor will agree, that, for so long as any Notes remain
outstanding, it will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT
Each of the following is an Event of Default:
(1) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise (including the failure to make a
payment to purchase Notes tendered pursuant to an Offer to Purchase),
whether or not such payment is prohibited by the subordination provisions
of the Indenture;
(2) default in the payment of interest on, or Liquidated Damages with
respect to, any Note when the same becomes due and payable, and such
default continues for a period of 30 days, whether or not such payment is
prohibited by the subordination provisions of the Indenture;
(3) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the Notes
(other than a default specified in clause (1) or (2) above) and such
default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
outstanding principal amount of the Notes;
(4) there occurs with respect to any issue or issues of Indebtedness
of the Company or any Restricted Subsidiary having an outstanding principal
amount of $10,000,000 or more in the aggregate for all such issues of all
such Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 10 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 10 days of such payment
default;
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(5) there shall be any period of 60 consecutive days following entry
of one or more final judgments or orders (not covered by insurance) for the
payment of money in excess of $10,000,000 in the aggregate (treating any
deductibles, self-insurance or retention as not so covered) against the
Company and/or one or more Significant Restricted Subsidiaries, during
which a stay of enforcement of such final judgment or order, by reason of
pending appeal or otherwise shall not be in effect or such judgments or
orders shall not be paid;
(6) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant
Restricted Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Restricted Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Restricted Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any Significant
Restricted Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days;
(7) the Company or any Significant Restricted Subsidiary (A) commences
a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B) consents to
the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Company or any Significant Restricted Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Restricted Subsidiary or (C) effects any general assignment for
the benefit of creditors; or
(8) any Subsidiary Guarantee of any Guarantor that is a Significant
Restricted Subsidiary ceases to be in full force and effect or any such
Subsidiary Guarantee is declared to be null, void or unenforceable or any
such Subsidiary Guarantee is found to be invalid or any such Guarantor
denies its liability under its Subsidiary Guarantee (other than by reason
of a release of a Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(6) or (7) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if any,
and accrued interest shall be immediately due and payable. If an Event of
Default specified in clause (6) or (7) above occurs with respect to the Company,
the principal of, premium, if any, and accrued interest on the Notes then
outstanding 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
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to the Company and to the Trustee, may waive all past defaults
and rescind and annul a declaration of acceleration and its consequences if (i)
all existing Events of Default, other than the nonpayment of the principal of,
premium, if any, and interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (ii) the rescission
would
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not conflict with any judgment or decree of a court of competent jurisdiction.
For information as to the waiver of defaults, see "-- Amendments, Modifications
and Waivers."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes 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 the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may subject the Trustee
to personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless:
(1) the Holder gives the Trustee written notice of a continuing Event
of Default;
(2) the Holders of at least 25% in aggregate principal amount of
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer the Trustee indemnity satisfactory to
the Trustee against any costs, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request.
However, such limitations do not apply to the right of any Holder of a Note
to receive payment of the principal of, premium, if any, or interest on, such
Note or to bring suit for the enforcement of any such payment, on or after the
due date expressed in the Notes, which right shall not be impaired or affected
without the consent of the Holder.
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company is also obligated to notify the Trustee of any default or defaults in
the performance of any covenants or agreements under the Indenture.
DEFEASANCE
LEGAL DEFEASANCE. The Company may, at its option and at any time, elect to
have its obligations and the obligations of the Guarantors (except as described
below) discharged with respect to the outstanding Notes, the Indenture and the
Subsidiary Guarantees ("Legal Defeasance"). Such Legal Defeasance means that the
Company and, if it so elects, each of the Guarantors, shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding Notes
and cured all then existing Defaults and Events of Default, except for (i) the
rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest on the Notes when such payments are due, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes, and the
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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 Indenture.
Any such Legal Defeasances will be effective on the 91st day after the deposit
referred to below, if, among other things:
(A) the Company has deposited with the Trustee, in trust, money and/or
U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes,
(B) the Company has delivered to the Trustee (i) either (x) an Opinion
of Counsel to the effect that Holders will not recognize income, gain or
loss for federal income tax purposes as a result of the Company's exercise
of its option under this "Defeasance" provision and will be subject to
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must be based upon
(and accompanied by a copy of) a ruling of the Internal Revenue Service to
the same effect unless there has been a change in applicable federal income
tax law after the Closing Date such that a ruling is no longer required or
(y) a ruling directed to the Trustee received from the Internal Revenue
Service to the same effect as the aforementioned Opinion of Counsel and
(ii) an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and
after the passage of 91 days following the deposit, the trust fund will not
be subject to the effect of Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law,
(C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending
on the 91st day after the date of such deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound,
(D) the Company is not prohibited from making payments in respect of
the Notes by the provisions described under "-- Subordination", and
(E) if at such time the Notes are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to clause (2) under the first paragraph, and clause
(4) of the last paragraph, of the "Merger, Consolidation and Sale of Assets"
covenant and all other covenants described herein under " -- Covenants," clause
(3) under "-- Events of Default" with respect to such other covenants (or
portions thereof) and clauses (4) and (5) under "-- Events of Default" shall be
deemed not to be Events of Default upon, among other things, the deposit with
the Trustee, in trust, of money and/or U.S. Government Obligations that through
the payment of interest and principal in respect thereof in accordance with
their terms will provide money in an amount sufficient to pay the principal of,
premium, if any,
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and accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes, the satisfaction of
the provisions described in clauses (B)(ii), (C), (D) and (E) of the preceding
paragraph and the delivery by the Company to the Trustee of an Opinion of
Counsel to the effect that, among other things, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance of certain covenants and Events of Default and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Notes as described in the immediately
preceding paragraph and the Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Notes at the time of the
acceleration resulting from such Event of Default. However, the Company will
remain liable for such payments.
AMENDMENTS, MODIFICATIONS AND WAIVERS
Except as provided in the two succeeding paragraphs, the Indenture and the
Notes may be amended or supplemented with the consent of the Holders of at least
the majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes) and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with the purchase of, or tender or exchange offer for, Notes).
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for any of the following
purposes:
(1) to evidence the succession of another person to the Company or any
Guarantor and the assumption by any such successor of the covenants of the
Company or any Guarantor in the Indenture and in the Notes; or
(2) to add to the covenants of the Company or any Guarantor for the
benefit of the Holders, or to surrender any right or power herein conferred
upon the Company or any Guarantor; or
(3) to add additional Events of Default; or
(4) to provide for uncertificated Notes in addition to or in place of
the certificated Notes; or
(5) to evidence and provide for the acceptance of appointment under
the Indenture by a successor Trustee; or
(6) to secure the Notes or any Subsidiary Guarantee; or
(7) to cure any ambiguity, to correct or supplement any provision in
the Indenture that may be defective or inconsistent with any other
provisions in the Indenture or to make any other provisions with respect to
matters or questions arising under the Indenture, provided that such
actions taken pursuant to this clause (7) do
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not, in the opinion of the Trustee, adversely affect the interests of the
Holders in any material respect; or
(8) to comply with any requirements of the Commission in order to
effect and maintain the qualification of the Indenture under the TIA; or
(9) to add any Subsidiary as a Guarantor in accordance with the
provisions of the Indenture; or
(10) to release any Guarantor from its Guarantee in accordance with
the provisions of the Indenture (including in connection with a sale of all
of the Capital Stock or all or substantially all of the assets of such
Guarantor).
In formulating its opinion on the matters in clause (7), the Trustee will
be entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an opinion of counsel.
Notwithstanding anything to the contrary contained above, without the
consent of each Holder affected thereby, no amendment, modification or waiver
may:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Notes;
(3) reduce the principal of or change the fixed maturity of any Notes,
or change the scheduled date on which any Notes may be subject to
redemption or repurchase, or reduce the redemption or repurchase price
therefor;
(4) make any Notes payable in money other than that stated in the
Notes;
(5) make any change in the express provisions of the 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 Notes to waive Defaults or Events of Default;
(6) amend, change or modify in any material respect the obligation of
the Company to make and consummate an Offer to Purchase in the event of a
Change of Control or make and consummate an Offer to Purchase with respect
to any Asset Sale, or modify any of the provisions or definitions with
respect thereto;
(7) modify or change any provision of the Indenture or the related
definitions affecting the ranking or subordination of the Notes; or
(8) release any Guarantor from any of its obligations under its
Guarantee or the Indenture otherwise than in accordance with the terms of
the Indenture.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS,
DIRECTORS, OR EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company or of any successor Person thereof. Each
Holder, by accepting the Notes, waives and releases all such liability.
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CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will not be liable except for the performance of such
duties as are specifically set forth in such Indenture. If an Event of Default
has occurred and is continuing, the Trustee will use the same degree of care and
skill in its exercise of the rights and powers vested in it under the Indenture
as a prudent person would exercise under the circumstances in the conduct of
such person's own affairs.
The Indenture and provisions of the TIA incorporated by reference therein
contain limitations on the rights of the Trustee, should it become a creditor of
the Company, to obtain payment of claims in certain cases or to realize on
certain property received by it in respect of any such claims, as security or
otherwise. The Trustee is permitted to engage in other transactions; provided,
however, that if it acquires any conflicting interest, it must eliminate such
conflict or resign.
SATISFACTION AND DISCHARGE
The Indenture, the Notes and the Guarantees will be discharged and will
cease to be of further effect (except as to surviving rights or registration of
transfer or exchange of the Notes, as expressly provided for in the Indenture)
as to all outstanding Notes when (i) either (a) all the Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and 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 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 Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the 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 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 Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees are 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.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the 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 of
the Company or at the time it merges or consolidates with the Company or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not
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incurred by such Person in connection with, or in anticipation or contemplation
of, such Person becoming a Restricted Subsidiary of the Company or such
acquisition, merger or consolidation; provided that Indebtedness of such Person
which is redeemed, defeased, retired or otherwise repaid at the time of or
immediately upon consummation of the transaction by which such Person becomes a
Restricted Subsidiary or at the time of such merger or consolidation or
acquisition of assets shall not be Acquired Indebtedness.
"ADJUSTED CONSOLIDATED NET INCOME" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP and before any reduction in respect of
preferred stock dividends; provided that (x) there shall be added to such
aggregate net income (or loss) the amount of any decrease in the deferred tax
asset for such period relating to the actual cash tax benefit realized by the
Company (or the consolidated tax group of which the Company is a member)
resulting from the election under Section 338(h)(10) of the Code in respect of
the Recapitalization so long as the aggregate amounts added back in determining
Adjusted Consolidated Net Income pursuant to this clause (x) at no time exceed
the actual amount of tax savings realized by the Company and its Restricted
Subsidiaries as a result of the Section 338(h)(10) election referenced above and
(y) the following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication):
(i) the net income of any Person that is not a Restricted Subsidiary,
except to the extent of the amount of dividends or other distributions
actually paid to the Company or any of its Restricted Subsidiaries by such
Person during such period;
(ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
the "Limitation on Restricted Payments" covenant described above (and in
such case, except to the extent includable pursuant to clause (i) above),
the net income (or loss) of any Person accrued prior to the date it becomes
a Restricted Subsidiary or is merged into or consolidated with the Company
or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by the Company or any of
its Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis) attributable to Asset
Sales;
(v) all extraordinary, non-recurring and unusual gains and losses (on
an after-tax basis) and, without duplication, all restructuring charges (on
an after-tax basis);
(vi) write-offs of intangible assets, including research and
development, relating to assets acquired by the Company and its Restricted
Subsidiaries if such write-offs are done at the time of, or within three
months after, such acquisition;
(vii) any non-cash compensation expense incurred in connection with
the exercise of or paid or payable solely with Qualified Capital Stock of
the Company or any options, warrants or other rights to acquire Qualified
Capital Stock of the Company;
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(viii) in the case of any successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation,
merger or transfer of assets;
(ix) the fees, expenses or other costs incurred in connection with the
Recapitalization;
(x) any net after-tax earnings (or losses) from discontinued
operations and any net after-tax gains or losses on any disposal of
discontinued operations; and
(xi) the cumulative effect of changes in accounting principles after
the Issue Date.
"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, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person.
"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 for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; provided, however,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $1,000,000, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company, or the consolidation or merger of the Company with any
other Person, in each case as permitted under "-- Merger, Consolidation and Sale
of Assets", (iii) any disposition of property of the Company or any of its
Restricted Subsidiaries that, in the reasonable judgment of the Company, has
become uneconomic, damaged, obsolete or worn out, (iv) the sale of inventory in
the ordinary course of business, (v) the sale or discount, in each case without
recourse (other than recourse for a breach of a representation or warranty) of
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof, (vi) sales of Cash
Equivalents, (vii) surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind, (viii)
granting of Liens not prohibited by the Indenture, (ix) the licensing of
intellectual property, (x) the sale, lease, conveyance, disposition or other
transfer of Permitted Investments or the Capital Stock of or any Investment in
any Unrestricted
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Subsidiary, (xi) leases or subleases to third persons not interfering in any
material respect with the business of the Company or any of its Restricted
Subsidiaries, (xii) the Miller Real Property Transactions and (xiii) the making
of any Permitted Investments or other Restricted Payments permitted by the
covenant described under the caption "-- Covenants -- Limitation on Restricted
Payments."
"BOARD OF DIRECTORS" means the board of directors of the Company or any
duly authorized committee thereof.
"BOARD RESOLUTION" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"CAPITAL STOCK" means (i) with respect to any Person that is a corporation,
any and all shares, 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, membership 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 S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having one of the two highest ratings obtainable from S&P or 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; (vi) investments in money market
funds with assets of $5,000,000 or greater; and (vii) Indebtedness (issued by
Persons other than the Company and its Subsidiaries), which Indebtedness matures
within one year from the date of the acquisition thereof and has a rating of "A"
or higher from S&P or "A2" or higher from Moody's.
"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 and its Restricted Subsidiaries, taken as a whole, 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
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(whether or not otherwise in compliance with the provisions of the Indenture)
other than to a Subsidiary of the Company, the Principals and their Related
Parties; (ii) the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of the Indenture); (iii) any Person
or Group (other than the Principals and their Related Parties) 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.
"CONSOLIDATED EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus (A) to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income: (i) consolidated interest
expense, (ii) income taxes (other than income taxes or income tax effects
(either positive or negative) attributable to extraordinary, unusual and
non-recurring gains or losses or sales of assets and all restructuring charges),
(iii) depreciation expense, (iv) amortization expense, (v) any out-of-pocket
costs and transaction expenses relating to any issuance of Capital Stock or
incurrence of Indebtedness or Asset Acquisition or Permitted Investment and (vi)
all other non-cash items reducing Adjusted Consolidated Net Income, less (B) (i)
all non-cash items increasing Adjusted Consolidated Net Income (excluding
reversals of accruals or reserves referred to in the following clause (ii)) and
(ii) the amount of all reversals of accruals or reversals of reserves
established in the ordinary course of business, and all amortizations of prepaid
cash expenses from prior periods, occurring during the respective period, all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Consolidated EBITDA attributable to
such Restricted Subsidiary multiplied by (B) the percentage ownership interest
in the income of such Restricted Subsidiary not owned on the last day of such
period by the Company or any of its Restricted Subsidiaries.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means the ratio of (i)
Consolidated EBITDA 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") for which financial statements are available to (ii) 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
repayment 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 or Preferred Stock (and the
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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 repayment, 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 other dispositions 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 the case may be, any Consolidated EBITDA (including any pro forma
expense and cost reductions calculated on a basis consistent with Regulation S-X
under the Exchange Act) attributable to the assets which are the subject of the
Asset Acquisition or Asset Sale or other disposition 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 other disposition or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. Furthermore, if the Company has
categorized any of its Subsidiaries or operations as discontinued operations in
accordance with GAAP, and if there is any Indebtedness or Preferred Stock
relating solely to such discontinued operations for which no recourse is
available, whether pursuant to direct obligations, Guarantees or otherwise, to
the non-discontinued operations (or related Assets) of the Company and its
Restricted Subsidiaries (in any event excluding Indebtedness incurred pursuant
to the New Credit Facility or other Indebtedness with direct liability on the
part of the Company which survives such discontinuation), "Consolidated Fixed
Charges" shall be calculated giving pro forma effect to the deemed retirement of
such Indebtedness or Preferred Stock, as the case may be. If such Person or any
of its Restricted Subsidiaries directly or indirectly Guarantees Indebtedness of
a third Person, the second 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. If since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Acquisition or Asset Sale or other disposition that would
have required adjustment pursuant to this definition, then the Consolidated
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto
as if such Asset Acquisition or Asset Sale or other disposition had occurred at
the beginning of the applicable Four Quarter Period. 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 average rate of
interest on such Indebtedness in effect on the 30 business days preceding the
Transaction Date; (2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate in effect on the Transaction Date will be
deemed to have been in effect during the Four Quarter Period; and (3)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest
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Rate Agreements with a remaining term at the Transaction Date of at least 12
months, shall be deemed to accrue at the rate per annum resulting after giving
effect to the operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum, without
duplication, of:
(1) the consolidated interest expense of the Company and its
Restricted Subsidiaries for such period, whether paid or accrued,
including, without limitation, original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or banker's acceptance financings, and net
payments, if any, pursuant to Interest Rate Agreements or Currency
Agreements, but excluding amortization or write-off debt issuance costs;
plus
(2) the consolidated interest expense of the Company and its
Restricted Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by the Company or one of its Restricted Subsidiaries or secured
by a Lien on assets of such person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon; plus
(4) the product of (a) all dividend accruals, whether or not paid or
payable in cash, during such period on any Disqualified Capital Stock of
the Company or any of its Restricted Subsidiaries, and on any Preferred
Stock of Restricted Subsidiaries of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the
then current combined federal, state and local statutory tax rate of the
Company, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP; plus
(5) the product of (a) all dividends actually paid, whether paid in
cash or in any other consideration (but excluding any dividends to the
extent paid through the issuance of additional shares of Qualified Capital
Stock of the Company), during such period with respect to any Preferred
Stock (not constituting Disqualified Capital Stock) of the Company, times
(b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory
tax rate of the Company, expressed as a decimal, in each on a consolidated
basis and in accordance with GAAP.
"CREDIT FACILITIES" means, with respect to the Company and its Restricted
Subsidiaries, one or more debt facilities (including, without limitation, the
New Credit Facility) or commercial paper facilities or indentures providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to lenders or to special purpose entities formed to borrow
from lenders against receivables), letters of credit or other long-term
indebtedness, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"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.
"DESIGNATED NONCASH CONSIDERATION" means any non-cash consideration
received by the Company or one of its Restricted Subsidiaries in connection with
an Asset Sale that is
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designated as Designated Noncash Consideration pursuant to an officer's
certificate executed by the principal executive officer or the principal
financial officer of the Company. Such officer's certificate shall state the
basis of valuation, and the fair market value of the Designated Noncash
Consideration being received in the respective Asset Sale (which shall be
determined in good faith by the Board of Directors). A particular item of
Designated Noncash Consideration shall no longer be considered outstanding when
it has been sold for cash or redeemed or paid in full in the case of non-cash
consideration in the form of promissory notes or equity.
"DESIGNATED PREFERRED STOCK" means Preferred Stock (not constituting
Disqualified Capital Stock) of the Company (excluding the Company's 12%
Cumulative Redeemable Preferred Stock, any other Preferred Stock issued on or
prior to the Issue Date and any Preferred Stock issued in exchange or
substitution for any of the foregoing) that is designated as Designated
Preferred Stock pursuant to an officer's certificate executed by the principal
executive officer or the principal financial officer of the Company, on the
issuance date thereof, the cash proceeds of which are excluded from the
calculation set forth in the clause (C)(2) of the "Limitation on Restricted
Payments" covenant.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Indebtedness under or in respect
of the New Credit Facility and (ii) any other Indebtedness constituting Senior
Indebtedness which, at the time of determination, has an aggregate principal
amount of at least $25,000,000 and is specifically designated in the instrument
evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the
Company.
"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 at the option of the holder), 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 Stated Maturity of the Notes; provided that any
Capital Stock that would not constitute Disqualified Capital Stock but for
provisions therein giving holders thereof the right to cause the issuer thereof
to repurchase or redeem such Capital Stock upon the occurrence of an "Asset
Sale" or "Change of Control" occurring prior to the final stated maturity of the
Notes will not constitute Disqualified Capital Stock if the "Asset Sale" or
"Change of Control" provisions applicable to such Capital Stock, taken as a
whole, are not materially more favorable to the holders of such Capital Stock
than the provisions described under "-- Certain Covenants -- Change of Control"
and "-- Certain Covenants -- Limitation on Assets Sales"; provided further that
if such Capital Stock is issued pursuant to any plan for the benefit of
employees of the Company or its Subsidiaries or by any such plan to such
employees, such Capital Stock shall not constitute Disqualified Capital Stock
solely because it may be required to be repurchased by the Company in order to
satisfy applicable statutory or regulatory obligations.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"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 in good
faith and shall be evidenced by a Board Resolution of the Board of Directors of
the Company delivered to the Trustee.
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"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"GUARANTOR" means each of (i) Winchester Pasta, L.L.C., a Delaware limited
liability company, and Pasta Group, L.L.C., a Delaware limited liability company
and (ii) each of the Company's Restricted Subsidiaries that in the future
executes a supplemental indenture in which such Restricted Subsidiary agrees to
be bound by the terms of the Indenture as a Guarantor; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Subsidiary Guarantee is released in accordance
with the terms of the Indenture.
"GUARANTOR SENIOR INDEBTEDNESS" means, with respect to any Guarantor, the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor. Without limiting the generality of the foregoing,
"Guarantor Senior Indebtedness" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing by the respective Guarantor in
respect of, (x) all obligations (including Guarantees thereof) of every nature
under the New Credit Facility, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, (y) all obligations under Interest Rate Agreements
(including Guarantees thereof) and (z) all obligations (including Guarantees
thereof) under Currency Agreements, in each case whether outstanding on the
Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor
Senior Indebtedness" shall not include (i) any Indebtedness of such Guarantor to
the Company or any other Subsidiary of the Company or to any Affiliate of such
Guarantor or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or
guaranteed on behalf of, any director, officer or employee of such Guarantor or
any Restricted
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Subsidiary of such Guarantor (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, commodities, materials or services, (iv)
Indebtedness represented by Preferred Stock or Disqualified Capital Stock, (v)
any liability for federal, state, local or other taxes owed or owing by such
Guarantor, (vi) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "-- Certain Covenants -- Limitation on
Incurrence of Indebtedness", (vii) Indebtedness which, when incurred and without
respect to any election under Section 1111(b) of Title 11, United States Code,
is without recourse to the Company and (viii) any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of
such Guarantor.
"INCUR" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Acquired Indebtedness; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"INDEBTEDNESS" means, with respect to any Person at any date of
determination (without duplication):
(i) all indebtedness of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(iii) all obligations of such Person in respect of letters of credit,
bankers' acceptances or other similar instruments (including reimbursement
obligations with respect thereto);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than two months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services;
(v) all Capitalized Lease Obligations;
(vi) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness;
(vii) all Indebtedness of other Persons Guaranteed by such Person to
the extent such Indebtedness is Guaranteed by such Person;
(viii) all Disqualified Capital Stock and, in the case of a Restricted
Subsidiary, all Preferred Stock issued by such Person; and
(ix) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided (A)
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP, (B) that the amount of
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Indebtedness at any time of any Disqualified Capital Stock or Preferred Stock
shall be the greater of its voluntary or involuntary liquidation preference and
the maximum fixed redemption or repurchase price in respect thereof, and (C)
that Indebtedness shall not include (x) trade accounts payable, contingent
liabilities (excluding contingent liabilities of the types described in clauses
(iii), (iv), (vi), (vii) and (ix) above) and accrued liabilities arising in the
ordinary course of business and (y) any liability for federal, state, local or
other taxes.
"INTEREST RATE AGREEMENT" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, interest rate option or interest rate future
contract or other similar agreement or arrangement.
"INVESTMENT" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers or suppliers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable, prepaid expenses or deposits on the balance sheet of the
Company or its Restricted Subsidiaries) 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 of
Capital Stock, bonds, notes, debentures or other similar instruments issued by,
such Person and shall include (i) the designation of a Restricted Subsidiary as
an Unrestricted Subsidiary (which shall be deemed to constitute an Investment
made on the date of such designation) and (ii) an amount equal to the fair
market value of the Capital Stock (or any other Investment), held by the Company
or any of its Restricted Subsidiaries, of (or in) any Person that was a
Restricted Subsidiary and that has ceased for any reason to be a Restricted
Subsidiary, including without limitation, by reason of any Asset Sale or any
other issuance of Capital Stock by such Restricted Subsidiary (with an
Investment in the amount described above being deemed made on the date the
respective Person ceases to be a Restricted Subsidiary, for any reason). For
purposes of the definition of "Unrestricted Subsidiary" and the "Limitation on
Restricted Payments" covenant described below, (i) "Investment" shall include
the fair market value of the assets (net of liabilities (other than liabilities
to the Company or any of its Restricted Subsidiaries)) of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary, (ii) the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary shall be considered a reduction
in outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, with the fair market value of the various items as required to be
determined pursuant to the foregoing provisions of this sentence to be
determined, in each case, in good faith by the Board of Directors.
"ISSUE DATE" means the date of original issuance of the Old 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).
"MANAGEMENT INVESTOR" means Miller Pasta LLC, a Delaware limited liability
company.
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"MILLER REAL PROPERTY TRANSACTIONS" means (a) the lease by the Company to
Miller Milling of real property in Winchester, Virginia underlying Miller
Milling's flour milling facility (the "Miller Property"), and (b) the transfer
for $1.00 by the Company to Miller Milling of the Miller Property.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET CASH PROCEEDS" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or Cash Equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or Cash
Equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to permanently repay
Indebtedness or any other obligation (excluding Indebtedness and obligations
pursuant to the Credit Facilities) outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or Cash
Equivalents, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"NEW CREDIT FACILITY" means the Credit Agreement dated as of January 28,
1999, among the Company, the lenders party thereto in their capacities as
lenders thereunder and The Bank of Nova Scotia, as administrative agent and a
lender, together with the related documents thereto (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 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, lender or group of lenders.
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"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"OFFER TO PURCHASE" means an offer to purchase Notes by the Company from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating:
(i) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata
basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase
shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the
Offer to Purchase will be required to surrender the Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof.
On the Payment Date, the Company shall (i) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. The Trustee shall act as the Paying
Agent for an Offer to Purchase. The Company will comply with 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 the event that the Company
is required to repurchase Notes pursuant to an Offer to Purchase.
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"PERMITTED INVESTMENTS" means:
(i) Investments by the Company or any Restricted Subsidiary of the
Company in any Person that is or will become immediately after such
Investment a Restricted Subsidiary of the Company or that will merge or
consolidate into the Company or a Restricted Subsidiary of the Company;
(ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment to the
extent held by a Restricted Subsidiary that is not a Guarantor is unsecured
and subordinated, pursuant to a written agreement, to the Company's
obligations under the Notes and the Indenture;
(iii) investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business for bona
fide business purposes;
(v) Currency Agreements and Interest Rate Agreements entered into in
the ordinary course of the Company's or its Restricted Subsidiaries'
businesses and otherwise in compliance with the 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 or in
good faith settlement of delinquent obligations of such trade creditors or
customers;
(vii) Investments made pursuant to the Recapitalization;
(viii) Guarantees of Indebtedness and other obligations otherwise
permitted under the Indenture;
(ix) obligations of one or more officers or other employees of the
Company or any of its Restricted Subsidiaries in connection with such
officer's or employee's acquisition of shares of Common Stock of the
Company so long as no cash is paid by the Company or any of its Restricted
Subsidiaries to such officers or employees in connection with the
acquisition of any such obligations;
(x) 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;
(xi) commission, travel, payroll, entertainment, relocation and
similar advances to officers and employees of the Company or any Restricted
Subsidiary made in the ordinary course of business;
(xii) advances or payments to individuals in an amount equal to any
income taxes payable by such individuals resulting solely from imputed
income attributable to Preferred Stock of the Company owned by them or the
Management Investor; provided that the aggregate amount of advances and
payments made pursuant to this clause (xii) in any fiscal year of the
Company shall not exceed $775,000;
(xiii) Investments acquired in exchange for, or out of the Net Cash
Proceeds (which have not, and will not, be included pursuant to clause
(C)(2) of the "Limitation on Restricted Payments" covenant) of a
substantially concurrent offering of, shares of Qualified Capital Stock
(which is not Designated Preferred Stock) of the
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Company (or options, warrants or other rights to acquire such Qualified
Capital Stock);
(xiv) Investments in Unrestricted Subsidiaries not to exceed an amount
equal to (a) $10,000,000 plus (b) to the extent not previously reinvested
under this clause (xiv), any cash return of capital (whether realized as a
result of payments from the respective Unrestricted Subsidiary, the receipt
of Net Cash Proceeds from the sale of the respective Permitted Investment
or otherwise) realized on a Permitted Investment made after the Issue Date
pursuant to this clause (xiv) (but with the total return of capital for
purposes of this clause (xiv) not to exceed the amount Invested pursuant to
this clause (xiv)); and
(xv) additional Investments not to exceed an amount equal to (a) the
greater of $25,000,000 or 10% of Total Assets, as determined on the date of
the making of each Investment, plus (b) to the extent not previously
reinvested under this clause (xv), any cash return of capital (whether
realized as a result of payments from the respective Person in which the
Permitted Investment was made, the receipt of Net Cash Proceeds from the
sale of the respective Permitted Investment or otherwise) realized on a
Permitted Investment made after the Issue Date pursuant to this clause (xv)
(but with the total return of capital for purposes of this clause (xv) not
to exceed the amount Invested pursuant to this clause (xv)).
"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.
"PRINCIPALS" means (i) JLL Fund III and each Affiliate of JLL Fund III as
of the Issue Date; and (ii) each officer or employee of JLL Fund III or any such
member referred to in clause (i) as of the Issue Date.
"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 or equipment.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.
"RECAPITALIZATION" shall mean the transactions contemplated by the
Recapitalization Agreement and the incurrence of Indebtedness under the New
Credit Facility and the Note Purchase Agreement dated as of January 28, 1999
among the Issuer, Morgan Stanley & Co. Incorporated and Scotiabanc Inc. in
connection therewith.
"RECAPITALIZATION AGREEMENT" shall mean that certain Recapitalization
Agreement, dated as of December 15, 1998 (as amended, modified or supplemented
from time to time), by and among Hershey Foods Corporation, Hershey Chocolate &
Confectionery Corporation (as the successor in interest to Hershey CRE, Inc.),
Homestead, Inc., the Company, New World LLC, JLL Fund III (with respect to
Sections 7.7 and 7.8 only), Pasta Group, L.L.C., and Winchester Pasta, L.L.C.
"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
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Indebtedness (whose proceeds are applied within 90 days after the incurrence
thereof) in exchange or replacement for, such security or Indebtedness in whole
or in part. "Refinanced" and "Refinancing" shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Indebtedness" covenant (other than pursuant to
clauses (2), (3), (4), (5), (6), (7), (8), (9), (12), (14), (15) or (16) of the
definition of Permitted Indebtedness), in each case that does not (1) result in
an increase in the aggregate principal amount (or accreted value, if applicable)
of Indebtedness of such Person as of the date of such proposed Refinancing
(provided that the amount of any penalties, interest or premium required to be
paid under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable fees, discounts, commissions and other expenses incurred by
the Company in connection with such Refinancing may also be Refinanced) or (2)
create Indebtedness with (A) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or (B) a Stated Maturity earlier than the Stated Maturity of the Indebtedness
being Refinanced; provided that (x) if such Indebtedness being Refinanced is
solely Indebtedness of the Company, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company, (y) if such Indebtedness being Refinanced is
subordinate or junior to the Notes or any Subsidiary Guarantee, then such
Refinancing Indebtedness shall be subordinate or junior to the Notes and/or the
respective Subsidiary Guarantees at least to the same extent and in
substantially the same manner as the Indebtedness being Refinanced and (z) if
such Indebtedness being Refinanced constitutes Preferred Stock of a Restricted
Subsidiary or Disqualified Capital Stock, then the refinancing Indebtedness
shall also constitute Capital Stock of the respective issuer of the Capital
Stock being refinanced.
"RELATED PARTY" with respect to any Principal means (A) any controlling
stockholder or 80% (or more) owned Subsidiary of such Principal or (B) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (A).
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, and its successors.
"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.
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"SENIOR INDEBTEDNESS" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Indebtedness" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing by the Company in respect of,
(x) all obligations (including guarantees thereof) of every nature under the New
Credit Facility, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all obligations under Interest Rate Agreements (including
guarantees thereof) and (z) all obligations (including guarantees thereof) under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall
not include (i) any Indebtedness of the Company to a Subsidiary of the Company
or any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any director, officer or employee
of the Company or any Subsidiary of the Company (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and other
amounts incurred in connection with obtaining goods, commodities, materials or
services, (iv) Indebtedness represented by Preferred Stock or Disqualified
Capital Stock, (v) any liability for federal, state, local or other taxes owed
or owing by the Company, (vi) that portion of any Indebtedness incurred in
violation of the Indenture provisions set forth under "-- Certain
Covenants -- Limitation on Incurrence of Indebtedness", (vii) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is without recourse to the Company and (viii)
any Indebtedness which is, by its express terms, subordinated in right of
payment to any other Indebtedness of the Company.
"SIGNIFICANT RESTRICTED SUBSIDIARY" means, at any date of determination,
any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent period of four full fiscal quarters (or, if shorter, the period beginning
on the Issue Date and) ending on or prior to the date of any determination
pursuant to this definition for which financial statements are available,
accounted for more than 10% of the consolidated revenues of the Company and its
Restricted Subsidiaries for such period or (ii) as of the end of such fiscal
quarter or year, was the owner of more than 10% of the consolidated assets of
the Company and its Restricted Subsidiaries, all as set forth on the most
recently available consolidated financial statements of the Company for such
fiscal quarter or year.
"STATED MATURITY" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"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
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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.
"SUBSIDIARY GUARANTEE" means the guarantee of the Obligations of the
Company with respect to the Notes by each Guarantor pursuant to the terms of the
Indenture.
"TOTAL ASSETS" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as set forth on the Company's most recent consolidated
balance sheet.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that at
the time of determination shall be or continue to be designated an Unrestricted
Subsidiary by the Board of Directors of the Company in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of
the Company may at any time and from time to time after the Issue Date designate
any Subsidiary (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any other Subsidiary
of the Company that is not a Subsidiary of the Subsidiary to be so designated;
provided that (x) the Company certifies to the Trustee that such designation
complies with the "Limitation on Restricted Payments" covenant and (y) each
Subsidiary to be so designated and each of its Subsidiaries has not at the time
of designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors 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. The Board of Directors of the Company may at any time and
from time to time after the Issue Date designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided that (i) no Default or Event of Default
shall occur or result from such designation and (ii) all Liens and Indebtedness
of such Unrestricted Subsidiary outstanding immediately after such designation
would, if Incurred or issued at such time, have been permitted to be Incurred or
issued (and shall be deemed to have been Incurred or issued) for all purposes of
the Indenture. Any such designation by the Board of Directors of 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.
"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.
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BOOK-ENTRY; DELIVERY AND FORM
Except as described below, the New Notes will initially be issued in the
form of one or more registered New Notes in global form without coupons (each, a
"Global Note"). Each Global Note will be deposited with, or on behalf of, The
Depository Trust Company and registered in the name of Cede & Co., as nominee of
The Depository Trust Company, or will remain in the custody of the Trustee
pursuant to the FAST Balance Certificate Agreement between The Depository Trust
Company and the Trustee.
The Depository Trust Company has advised the Company that it is (1) a
limited purpose trust company organized under the laws of the State of New York,
(2) a member of the Federal Reserve System, (3) a "clearing corporation" within
the meaning of the Uniform Commercial Code, as amended, and (4) a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. The Depository
Trust Company was created to hold securities for its participating organizations
(collectively, the "DTC Participants") and facilitates the clearance and
settlement of securities transactions between DTC Participants through
electronic book-entry changes to the accounts of the DTC Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC
Participants include securities brokers and dealers (including the Placement
Agents), banks and trust companies, clearing corporations and other
organizations. Access to The Depository Trust Company's system is also available
to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect DTC Participants") that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly.
Holders who are not DTC Participants may beneficially own securities held by or
on behalf of The Depository Trust Company only through DTC Participants or
Indirect DTC Participants.
The Company expects, as provided in the procedures established by The
Depository Trust Company, that (1) upon deposit of the Global Notes, The
Depository Trust Company will credit the accounts of DTC Participants with an
interest in the Global Note and (2) ownership of the New Notes will be shown on,
and the transfer of ownership of the New Notes will be effected only through,
records maintained by The Depository Trust Company (with respect to the interest
of DTC Participants), the DTC Participants and the Indirect DTC Participants.
The laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that a security interest in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer the New
Notes or to pledge the New Notes as collateral will be limited to this extent.
So long as The Depository Trust Company or its nominee is the registered
owner of a Global Note, The Depository Trust Company or the nominee, as the case
may be, will be considered the sole owner or holder of the New Notes represented
by the Global Note for all purposes under the Indenture. Except as provided
below, owners of beneficial interests in a Global Note will not be entitled to
have the New Notes represented by the Global Note registered in their names,
will not receive or be entitled to receive physical delivery of certificated
securities (the "Certificated Securities"), and will not be considered the
owners or holders of the New Notes under the Indenture for any purpose,
including with respect to the giving of any directions, instruction or approval
to the Trustee under the Indenture. As a result, the ability of a person having
a beneficial interest in New Notes represented by a Global Note to pledge or
transfer that interest to persons or entities that do not participate in The
Depository Trust Company's system or to otherwise take action
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with respect to that interest, may be affected by the lack of a physical
certificate evidencing the interest.
Accordingly, each holder owning a beneficial interest in a Global Note must
rely on the procedures of The Depository Trust Company and, if the holder is not
a DTC Participant or an Indirect DTC Participant, on the procedures of the DTC
Participant through which the holder owns its interest, to exercise any rights
of a holder of New Notes under the Indenture or the Global Note. The Company
understands that under existing industry practice, in the event the Company
requests any action of holders of New Notes or a holder that is an owner of a
beneficial interest in a Global Note desires to take any action that The
Depository Trust Company, as the holder of the Global Note, is entitled to take,
The Depository Trust Company would authorize the DTC Participants to take the
action and the DTC Participants would authorize holders owning through the DTC
Participants to take the action or would otherwise act upon the instruction of
such holders. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of the New Notes by The Depository Trust Company, or for maintaining,
supervising or reviewing any records of The Depository Trust Company relating to
the New Notes.
Payments with respect to the principal of, premium on, if any, and interest
on, any New Notes represented by a Global Note registered in the name of The
Depository Trust Company or its nominee on the applicable record date will be
payable by the Trustee to or at the direction of The Depository Trust Company or
its nominee in its capacity as the registered holder of the Global Note
representing the New Notes under the Indenture. Under the terms of the
Indenture, the Company and the Trustee may treat the persons in whose names the
New Notes, including the Global Notes, are registered as the owners for the
purpose of receiving payment and for any and all other purposes whatsoever. As a
result, neither the Company nor the Trustee has or will have any responsibility
or liability for the payment of amounts due to beneficial owners of interest in
the Global Note (including principal, premium, if any, and interest), or to
immediately credit the accounts of the relevant DTC Participants with such
payment, in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the Global Note as shown on the records of The
Depository Trust Company. Payments by the DTC Participants and the Indirect DTC
Participants to the beneficial owners of interests in the Global Note will be
governed by standing instructions and customary practice and will be the
responsibility of the DTC Participants or the Indirect DTC Participants and The
Depository Trust Company.
CERTIFICATED SECURITIES
If (1) The Depository Trust Company notifies the Company in writing that it
is no longer willing or able to act as a depository or The Depository Trust
Company ceases to be registered as a clearing agency under the Exchange Act and
the Company is unable to locate a qualified successor within 90 days, (2) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of New Notes in definitive form under the Indenture or (3) upon the
occurrence of certain other events, then, upon surrender by The Depository Trust
Company of its Global Notes, Certificated Securities will be issued to each
person that The Depository Trust Company identifies as the beneficial owner of
the New Notes represented by the Global Notes. Upon any such issuance, the
Trustee is required to register the Certificated Securities in the name of the
persons identified as beneficial owners (or the nominee of any thereof), and
cause the same to be delivered to these persons.
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<PAGE> 138
Neither the Company nor the Trustee will be liable for any delay by The
Depository Trust Company or any DTC Participant or Indirect DTC Participant in
identifying the beneficial owners of the related New Notes and each beneficial
owner may conclusively rely on, and will be protected in relying on,
instructions from The Depository Trust Company for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the New Notes to be issued).
REGISTRATION RIGHTS
Holders of the New Notes are not entitled to any registration rights with
respect to the New Notes. On February 19, 1999, New World Pasta, New World
Pasta's wholly owned subsidiaries, Pasta LLC and Winchester LLC (the
Guarantors), and the Placement Agents entered into a Registration Rights
Agreement. The Registration Rights Agreement requires the Company and the
Guarantors to use their reasonable best efforts to cause a registration
statement relating to the exchange of Old Notes for registered New Notes to be
declared effective under the Securities Act by August 18, 1999. We have also
agreed to bear the cost of preparing, filing and having the Registration
Statement declared effective. The Registration Statement of which this
Prospectus forms a part is the registration statement required by the
Registration Rights Agreement. Upon the Registration Statement being declared
effective, the Company and the Guarantors will offer to all holders of the Old
Notes an opportunity to exchange their securities for a like principal amount of
the New Notes (and the related guarantees). The Company and the Guarantors will
keep the Exchange Offer open for acceptance for not less than 20 business days
(or longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the holders of the Old Notes (subject to certain customary
exceptions). For each Old Note accepted for exchange in the Exchange Offer, the
holder of the Old Note will receive a New Note having a principal amount at
maturity equal to that of the surrendered Old Note. Interest on the New Note
will accrue (1) from the later of (a) the last date to which interest was paid
on the Old Note surrendered in exchange for the New Note or (b) if the Old Note
is surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date to which interest will be paid on
such interest payment or (2) if no interest has been paid on such Old Note, from
and including February 19, 1999.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, we believe that the New Notes (and
the related guarantees) you receive in the Exchange Offer may be offered for
resale, resold or otherwise transferred without compliance with the registration
and prospectus delivery provisions of the Securities Act. By tendering your Old
Notes, you represent to us:
- that any New Notes you receive in the Exchange Offer are being acquired
by you in the ordinary course of your business;
- that at the time of the commencement of the Exchange Offer, you do not
have any arrangement or understanding with any person to participate in
the distribution (as defined in the Securities Act) of the New Notes in
violation of the Securities Act;
- that you are not an "affiliate" (as defined in Rule 405 under the
Securities Act) of New World Pasta;
- if you are not a broker-dealer, that you are not engaged in, and do not
intend to engage in, the distribution of the New Notes; and
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<PAGE> 139
- if you are a Participating Broker-Dealer, that you will receive the New
Notes for your own account in exchange for Old Notes that were acquired
by you as a result of your market-making or other trading activities and
that you will deliver a prospectus in connection with any resale of the
New Notes you receive. See "Plan of Distribution."
The Commission has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to resales of the
New Notes (other than a resale of an unsold allotment from the original sale of
the Old Notes) by delivering this Prospectus to prospective purchasers. The
Company and the Guarantors have agreed that for a period of not less than 90 nor
more than 270 days after the date on which the Registration Statement of which
this Prospectus forms a part is declared effective, they will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any resale of the New Notes.
Under certain circumstances, we may be required to file a shelf
registration statement covering resales of the Old Notes (the "Shelf
Registration Statement"). This requirement will be triggered if:
- because of any change in currently prevailing interpretations of the
staff of the Commission, we are not permitted to effect the Exchange
Offer;
- the Exchange Offer is not completed by September 17, 1999;
- under certain circumstances, holders of unregistered New Notes request
that we do so; or
- upon completion of the Exchange Offer, a holder who has properly tendered
Old Notes does not receive in exchange New Notes that are freely
transferrable under federal and state securities laws (other than as a
result of the holder's status as an "affiliate" of New World Pasta
Company, as defined in the Securities Act).
If we are required to file the Shelf Registration Statement, then we will
- promptly deliver to the holders of the Old Notes and the Trustee written
notice of our intention to file the Shelf Registration Statement;
- as promptly as practicable and at our expense, file the Shelf
Registration Statement with the Commission;
- use our reasonable best efforts to cause the Shelf Registration Statement
to be declared effective under the Securities Act; and
- subject to certain customary exceptions, use our reasonable best efforts
to keep the Shelf Registration Statement effective until the earlier of:
- the date on which, in the written opinion of our counsel, all
outstanding Old Notes held by persons that are not affiliates of New
World Pasta may be resold without registration under the Securities
Act pursuant to Rule 144(k) under the Securities Act or any successor
provision; and
- such time as all of the Old Notes have been sold under the Shelf
Registration Statement.
In the event that a Shelf Registration Statement is filed, we will:
- provide a copy of the prospectus that forms a part of the Shelf
Registration Statement to each holder of Old Notes;
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<PAGE> 140
- notify each holder of Old Notes when the Shelf Registration Statement has
been declared effective; and
- and take other actions as are required to permit unrestricted resales of
the Old Notes.
If you sell Old Notes under the Shelf Registration Statement:
- you must be named as a selling security holder in the prospectus that
forms a part of the Shelf Registration Statement;
- you must deliver a prospectus to any purchasers of your Old Notes;
- you will be subject to the civil liability provisions of the Securities
Act in connection with such sales; and
- you will be bound by the provisions of the Registration Rights Agreement
that are applicable to holders who sell their Old Notes under the Shelf
Registration Statement (including certain indemnification rights and
obligations).
If by [the 35th day following effectiveness of the Registration Statement],
1999, neither (i) the Exchange Offer is completed nor (ii) the Shelf
Registration Statement is declared effective, the rate per annum at which the
Old Notes bear interest will increase by 0.5% every 90 days to a maximum of
1.0%, until the earlier of (i) the completion of the Exchange Offer and (ii) the
effective date of the Shelf Registration Statement.
This summary of the Registration Rights Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the full text of the Registration Rights Agreement, a copy of which is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part
and is incorporated by reference in this Prospectus.
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<PAGE> 141
DESCRIPTION OF OTHER INDEBTEDNESS
In connection with the Recapitalization, the Company entered into the
Senior Credit Facilities. The following summary of the material provisions of
the Senior Credit Facilities does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the terms of the Senior Credit
Facilities.
Under the Senior Credit Facilities, a syndicate of lenders led by The Bank
of Nova Scotia made a total of $250.0 million available to the Company in the
form of the $50.0 million Term A Loan, fully drawn on the closing thereof, the
$150.0 million Term B Loan, fully drawn on the closing thereof, and a commitment
to provide a Revolving Credit Facility of up to $50.0 million. To date, the
Company has borrowed $200.0 million under the Term A Loan and Term B Loan and
has not borrowed any funds under the Revolving Credit Facility. Proceeds from
the Senior Credit Facilities were used by the Company to finance a portion of
the stock purchase price associated with the Recapitalization, to pay fees and
expenses associated with the Recapitalization and to provide for the general
corporate and working capital needs of the Company and its subsidiaries. The
Company used a portion of the proceeds of the offering of the Old Notes to repay
the Term A Loan in full. The loans under the Senior Credit Facilities bear
interest at variable rates at a fixed margin above either The Bank of Nova
Scotia's alternate base rate or its reserve-adjusted LIBO rate. The terms and
conditions of the Senior Credit Facilities with respect to collateral,
guarantees, covenants and events of default are customary for transactions
similar to the Recapitalization.
The Senior Credit Facilities are secured by a first-priority perfected lien
on a portion of the capital stock of the Company and substantially all of the
capital stock of each of its subsidiaries and all property and assets (tangible
and intangible) of the Company and each of its subsidiaries, whenever acquired
and wherever located, except that no assets of non-U.S. subsidiaries and not
more than 65% of the equity interests of non-U.S. subsidiaries are required to
be pledged as security supported by the pledge by New World LLC and Miller LLC
of their respective shares of stock in the Company.
The Senior Credit Facilities are also guaranteed by New World LLC and all
direct and indirect subsidiaries of the Company other than non-U.S.
subsidiaries.
The Company may voluntarily prepay some or all of its obligations under the
Senior Credit Facilities. In addition, the loans under the Senior Credit
Facilities are subject to mandatory prepayment under certain circumstances,
including if the Company generates Excess Cash Flow (as defined therein). The
Company must apply the following percentage of Excess Cash Flow to repay
outstanding term loans: (i) 75% so long as the Debt to EBITDA Ratio (as defined
therein) as of the end of the fiscal year in respect of which the prepayment is
to be made is greater than or equal to 4.00 to 1.00, (ii) 50% so long as such
Debt to EBITDA Ratio is greater than or equal to 2.50 to 1.00 but less than 4.00
to 1.00 and (iii) 0% so long as such Debt to EBITDA Ratio is less than 2.50 to
1.00.
REVOLVING CREDIT FACILITY. Pursuant to the Revolving Credit Facility, up
to $50.0 million may be borrowed, repaid and reborrowed by the Company from time
to time. Letters of credit up to $10,000,000 in the aggregate and swing line
loans up to $5,000,000 in the aggregate are available under the Revolving Credit
Facility. At the Company's option, loans under the Revolving Credit Facility
bear interest at either The Bank of Nova Scotia's alternate base rate or
reserve-adjusted LIBO rate, plus, in each case, an applicable margin (the
"Applicable Margin"). For the first six months following the closing of the
Senior Credit Facilities, the Applicable Margin will be 2.75% in the case of
LIBO rate
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<PAGE> 142
loans and 1.75% in the case of alternate base rate loans. Thereafter, the
Applicable Margin will be subject to performance based reductions, with the rate
determined according to the results of the Company's operations and its
financial position. Swing line loans bear interest at The Bank of Nova Scotia's
alternate base rate plus an Applicable Margin then in effect for Revolving
Credit Loans. The Revolving Credit Facility terminates six years after the
closing date of the Senior Credit Facilities.
TERM A LOAN. The $50.0 million Term A Loan was made available in a single
borrowing that occurred on the closing date of the Senior Credit Facilities, and
once repaid, cannot be reborrowed. The Term A Loan bears interest at the same
optional rates as the Revolving Credit Facility and matures on the sixth
anniversary of the closing of the Senior Credit Facilities. The Company must
make mandatory repayments of principal on the Term A Loan on each March 31, June
30, September 30 and December 31, beginning June 30, 1999 as follows: $1,250,000
on each of the first four such dates, $1,875,000 on each of the following eight
such dates, $2,500,000 on each of the following 11 such dates and $2,500,000 (or
the remaining principal amount outstanding on the Term A Loan, if different) at
maturity. The Term A Loan was repaid with a portion of the proceeds from the
offering of the Old Notes.
TERM B LOAN. The $150.0 million Term B Loan was made available in a single
borrowing that occurred on the closing date of the Senior Credit Facilities, and
once repaid, cannot be reborrowed. At the Company's option, the Term B Loan
bears interest at either Scotiabanc's alternate base rate plus 2.25% or its
reserve-adjusted LIBO rate plus 3.25%. The Term B Loan matures on the seventh
anniversary of the closing of the Senior Credit Facilities. The Company must
make mandatory repayments of principal on the Term B Loan on a quarterly basis
as follows: $375,000 on each March 31, June 30, September 30 and December 31,
beginning June 30, 1999 through and including March 31, 2005, $35,250,000 on
June 30, September 30 and December 31, 2005 and $35,250,000 (or the remaining
principal amount outstanding on the Term B Loan, if different) at maturity.
The Senior Credit Facilities contain restrictive covenants limiting the
ability of the Company to, among other things, incur debt, create liens, pay
dividends, make distributions or stock repurchases, make investments or capital
expenditures, engage in transactions with affiliates, sell assets, and engage in
mergers or acquisitions. Except on terms satisfactory to The Bank of Nova
Scotia, the Company is also restricted from refinancing, defeasing, repurchasing
or prepaying its subordinated debt or redeeming or paying cash dividends on the
Preferred Stock.
The Senior Credit Facilities require the Company to comply with certain
financial tests and to maintain certain financial ratios relating to total debt,
fixed charge coverage, and interest expense coverage. Failure to satisfy any of
these financial covenants constitutes an event of default under the Senior
Credit Facilities. The Senior Credit Facilities also include other customary
events of default, including, without limitation, a cross-default to other
material indebtedness of the Company (and its subsidiaries or any guarantor) or
a change of control of the Company.
DESCRIPTION OF PREFERRED STOCK
The Company has one class of Preferred Stock. A total of 115,000 shares of
Preferred Stock are authorized and 113,485 shares were outstanding upon
consummation of the Recapitalization. Holders of the Preferred Stock are not
entitled to preemptive rights. The
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<PAGE> 143
Preferred Stock is mandatorily redeemable by the Company on January 28, 2010 for
$1,000 per share plus all accrued and unpaid dividends to the redemption date or
as soon thereafter as will not be prohibited by the Company's then-existing debt
agreements. The Preferred Stock has a liquidation preference over the Common
Stock equal to the redemption price of $1,000 per share plus all accrued and
unpaid dividends. Dividends on the Preferred Stock are cumulative and are
payable when, as and if declared by the Company's Board of Directors, at an
annual cash dividend of 12% per year. No dividends or distributions may be made
on the Common Stock unless all accrued and unpaid dividends are first paid to
the holders of the Preferred Stock. Without the consent of the holders of a
majority of the outstanding Preferred Stock, the Company may not enter into any
merger, consolidation or other business combination, unless and until the
Preferred Stock is repurchased for an amount equal to $1,000 per share plus all
accrued and unpaid dividends thereon. Except as required by law, the holders of
the Preferred Stock are not entitled to vote on any matter submitted to a vote
of the stockholders. The redemption of, and payment of cash dividends on, the
Preferred Stock is generally prohibited by the terms of the Senior Credit
Facilities and restricted by the Indenture. For a description of the ownership
of the Preferred Stock, see "Stock Ownership of Certain Beneficial Owners and
Management."
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of the 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 the Old Notes
were acquired as a result of market-making activities or other trading
activities. The Company has agreed that for a period of not less than 90 nor
more than 270 days after the effectiveness of the Registration Statement of
which this Prospectus forms a part, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with resales
of the New Notes.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account in
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 resale of the New Notes may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account in the Exchange
Offer and any broker or dealer that participates in a distribution of the New
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act. Any profit on any resale of New Notes and any commissions or concessions
received by any persons deemed to be underwriters may be deemed to be
underwriting compensation under the Securities Act. The enclosed Letter of
Transmittal states that by acknowledging that it will deliver and be delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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<PAGE> 144
For a period of not less than 90 nor more than 270 days after the
effectiveness of the Registration Statement of which this Prospectus forms a
part, the Company will promptly send additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any broker-dealer that
requests these documents in the Letter of Transmittal it submits to the Exchange
Agent. The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions or concessions of any brokers or dealers) and will
indemnify the holders of the New Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
Following completion of the Exchange Offer, the Company may, in its sole
discretion, commence one or more additional exchange offers to holders of Old
Notes who did not exchange their Old Notes for New Notes in the Exchange Offer
on terms which may differ from those contained in the Prospectus and the
enclosed Letter of Transmittal, as provided in the Registration Rights
Agreement. This Prospectus, as it may be amended or supplemented from time to
time, may be used by the Company in connection with any additional exchange
offers. These additional exchange offers may take place from time to time until
all outstanding Old Notes have been exchanged for New Notes, subject to the
terms and conditions contained in the prospectus and letter of transmittal
distributed by the Company in connection with these additional exchange offers.
LEGAL MATTERS
The legality of the New Notes offered hereby is being passed upon for the
Company by Skadden, Arps, Slate, Meagher & Flom LLP.
EXPERTS
The combined financial statements of Hershey Pasta for the fiscal years
ended December 31, 1998, 1997 and 1996 included in this Registration Statement
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 in giving said reports.
AVAILABLE INFORMATION
New World Pasta and the Guarantors have filed with the Commission a
Registration Statement on Form S-4 (together with all amendments and exhibits,
the "Registration Statement") under the Securities Act, in connection with our
offering of the New Notes. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information in the
Registration Statement. You will find additional information about New World
Pasta, the Guarantors and the New Notes in the Registration Statement. Any
statements made in this Prospectus concerning the provisions of legal documents
are not necessarily complete and you should read the documents that are filed as
exhibits to the Registration Statement.
As a result of the Exchange Offer, New World Pasta will become subject to
the informational requirements of the Exchange Act and will file periodic
reports, statements and other information with the Commission. We do not expect
that the Guarantors will be subject to the informational requirements of the
Exchange Act. You may inspect and copy the Registration Statement, including
exhibits, and, when filed, our periodic reports, statements and other
information filed with the Commission at the public reference
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facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at 7 World Trade Center, New York, New York 10048 and at Citicorp
Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661. Copies
may be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a Web site at http://www.sec.gov which will contain, when filed, our
reports, statements and other information filed with the Commission.
If we are not required to be subject to the reporting requirements of the
Exchange Act in the future, we will be required under the Indenture for the New
Notes and the Old Notes to continue to file with the Commission and to furnish
to holders of the New Notes and the Old Notes the reports, statements and other
information specified in Sections 13 and 15(d) of the Exchange Act, including
annual reports containing audited consolidated financial statements of New World
Pasta and quarterly reports containing unaudited condensed consolidated
financial data for the first three quarters of each fiscal year.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HERSHEY PASTA GROUP:
Report of Independent Public Accountants.................... F-2
Combined Statements of Income and Parent Company's
Investment and Advances for the years ended December 31,
1996, 1997 and 1998 (audited)............................. F-3
Combined Balance Sheets as of December 31, 1997 and 1998
(audited)................................................. F-4
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998 (audited)................ F-5
Notes to Combined Financial Statements for the years ended
December 31, 1996, 1997 and 1998 (audited)................ F-6
</TABLE>
F-1
<PAGE> 147
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hershey Foods Corporation:
We have audited the accompanying combined balance sheets of the Hershey Pasta
Group (Note 1) as of December 31, 1998 and 1997, and the related combined
statements of income and parent company's investment and advances and cash flows
for the three years in the period then ended. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Hershey Pasta
Group as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for the three years in the period then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
February 12, 1999
F-2
<PAGE> 148
HERSHEY PASTA GROUP
COMBINED STATEMENTS OF INCOME AND
PARENT COMPANY'S INVESTMENT AND ADVANCES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net Sales..................................... $407,370 $386,218 $373,096
Cost of Sales................................. 235,025 210,003 205,773
-------- -------- --------
Gross Profit................................ 172,345 176,215 167,323
Marketing Expenses............................ 106,121 101,731 92,081
Selling, General and Administrative
Expenses.................................... 35,080 32,764 33,374
-------- -------- --------
Income before Provision for Income Taxes.... 31,144 41,720 41,868
Provision for Income Taxes.................... 12,451 16,563 15,954
-------- -------- --------
Net Income.................................. 18,693 25,157 25,914
Parent Company's Investment and Advances,
beginning of period......................... 194,155 183,698 162,777
Advances and Withdrawals, net................. (29,150) (46,078) (21,747)
-------- -------- --------
Parent Company's Investment and Advances, end
of period................................... $183,698 $162,777 $166,944
======== ======== ========
</TABLE>
The notes to combined financial statements are an integral part of these
combined statements.
F-3
<PAGE> 149
HERSHEY PASTA GROUP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable -- trade........................... $ 15,889 $ 18,447
Inventories............................................ 22,161 22,547
Deferred income taxes.................................. 6,857 3,275
Prepaid expenses and other............................. 1,453 4,793
-------- --------
Total current assets........................... 46,360 49,062
Property, Plant and Equipment, Net....................... 116,078 108,928
Intangible Assets, Net................................... 69,482 67,027
-------- --------
Total assets................................... $231,920 $225,017
======== ========
LIABILITIES AND PARENT COMPANY'S INVESTMENT AND ADVANCES
CURRENT LIABILITIES:
Accounts payable....................................... $ 14,862 $ 9,657
Accrued liabilities.................................... 23,315 18,607
-------- --------
Total current liabilities...................... 38,177 28,264
Other Long-Term Liabilities.............................. 7,678 7,872
Deferred Income Taxes.................................... 23,288 21,937
-------- --------
Total liabilities.............................. 69,143 58,073
Parent Company's Investment and Advances................. 162,777 166,944
-------- --------
Total liabilities and parent company's
investment and advances..................... $231,920 $225,017
======== ========
</TABLE>
The notes to combined financial statements are an integral part of these
combined balance sheets.
F-4
<PAGE> 150
HERSHEY PASTA GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS PROVIDED FROM (USED BY) OPERATING
ACTIVITIES
Net income.................................. $ 18,693 $ 25,157 $ 25,914
Adjustments to reconcile net income to net
cash provided from operations:
Depreciation and amortization............ 15,992 15,437 14,647
Deferred income taxes.................... 292 (1,598) 2,231
Changes in assets and liabilities:
Accounts receivable -- trade........... 1,604 1,068 (2,558)
Inventories............................ 3,624 (271) (386)
Accounts payable....................... (3,577) 3,919 (5,205)
Accrued liabilities.................... (1,073) 3,640 (4,708)
Other assets and liabilities........... 724 (1,141) (3,146)
Other, net............................... 26 304 --
-------- -------- --------
Net Cash Provided from Operating Activities... 36,305 46,515 26,789
-------- -------- --------
CASH FLOWS PROVIDED FROM (USED BY) INVESTING
ACTIVITIES
Purchases of property, plant and
equipment................................ (8,906) (1,850) (4,660)
Property, plant and equipment retirements
and transfers............................ 1,751 1,413 (382)
-------- -------- --------
Net Cash (Used by) Investing Activities....... (7,155) (437) (5,042)
-------- -------- --------
CASH FLOWS PROVIDED FROM (USED BY) FINANCING
ACTIVITIES
Advances and withdrawals, net............... (29,150) (46,078) (21,747)
-------- -------- --------
Net Cash (Used by) Financing Activities....... (29,150) (46,078) (21,747)
-------- -------- --------
Increase (Decrease) in Cash................... $ -- $ -- $ --
======== ======== ========
</TABLE>
The notes to combined financial statements are an integral part of these
combined statements.
F-5
<PAGE> 151
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
The accompanying combined financial statements include the operations of
Hershey Pasta Group (HPG), a division of Hershey Foods Corporation (HFC), which
is a Delaware corporation. HPG is comprised of Hershey Pasta Manufacturing
Company (HPMC), Hershey Pasta Group Winchester, Inc., each of which is an
operating subsidiary of HFC, and certain directly and indirectly owned assets of
HFC.
On January 28, 1999, HFC effected a recapitalization whereby New World LLC
and Miller LLC acquired a controlling interest in HPG while Hershey Chocolate &
Confectionery Corporation (HCCC), a HFC wholly owned subsidiary, retained a
substantive minority ownership interest. Prior to the recapitalization, HFC
completed a reorganization whereby HPMC became a wholly owned subsidiary of HCCC
and the net assets of HPG were transferred into HPMC. HPMC subsequently changed
its name to New World Pasta Company (New World Pasta).
As part of the recapitalization, New World Pasta repurchased $307.7 million
of its common stock from HCCC, and New World LLC directly purchased from HCCC
$100.6 million of mandatorily redeemable non-voting preferred stock and $41.7
million of common stock. New World Pasta issued $12.8 million of mandatorily
redeemable non-voting preferred stock and $5.3 million of common stock directly
to Miller LLC. Upon completion of the recapitalization, HCCC retained 6.0% of
the voting equity of New World Pasta and New World Pasta LLC and Miller LLC held
83.4% and 10.6%, respectively. The historical basis of accounting for New World
Pasta has been maintained.
HPG manufactures and sells quality pasta products in a variety of shapes,
sizes, flavors and packages throughout the United States. HPG markets its
products on a regional basis under several brand names, including AMERICAN
BEAUTY, IDEAL BY SAN GIORGIO, LIGHT 'N FLUFFY, MRS. WEISS', P&R, RONZONI, SAN
GIORGIO and SKINNER, as well as certain private labels.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies employed by HPG are discussed below and in
other notes to the combined financial statements.
COMBINATION
The accompanying combined financial statements include the accounts of HPG
and its combining entities after elimination of all significant intercompany
accounts and transactions.
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 with consideration given to materiality. Actual results
F-6
<PAGE> 152
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
could differ from those estimates, particularly for accounts receivable,
inventory and certain current and long-term liabilities.
COMMODITIES FUTURES AND OPTIONS CONTRACTS
In connection with the purchasing of semolina milled from durum wheat for
anticipated manufacturing requirements, HPG began utilizing commodities futures
contracts in 1998 to reduce the effect of price fluctuations. In accordance with
Statement of Financial Accounting Standards No. 80 "Accounting for Futures
Contracts," these futures contracts meet the hedge criteria and are accounted
for as hedges. Accordingly, gains and losses are deferred and recognized in cost
of sales as part of the product cost.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133). SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999,
but may be implemented as of the beginning of any fiscal quarter after issuance.
Retroactive application is not permitted. SFAS No. 133 must be applied to (a)
derivative instruments and (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after December
31, 1997. Changes in accounting methods will be required for commodity futures
contracts utilized by HPG to hedge commodity price risks. As of December 31,
1998, approximately $2 million of deferred losses on commodity futures contracts
included in prepaid expenses and other assets would be tax effected and
classified as accumulated other comprehensive income upon adoption of SFAS No.
133.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of
buildings, machinery and equipment is computed using the straight-line method
over the estimated useful lives of the various classes of assets ranging from
three to 40 years.
INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS
Intangible assets resulting from business acquisitions principally consist
of the excess of the acquisition cost over the fair value of the net assets of
businesses acquired (goodwill). Goodwill, net of accumulated amortization, was
$66.4 million and $64.3 million as of December 31, 1997 and 1998, respectively.
Goodwill is amortized on a straight-line basis over 40 years. Other intangible
assets are amortized on a straight-line basis over their estimated useful lives.
HPG periodically evaluates whether events or circumstances have occurred
indicating that the carrying amount of goodwill may not be
F-7
<PAGE> 153
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, HPG uses an estimate of the acquired business' undiscounted
future cash flows compared to the related carrying amount of net assets,
including goodwill, to determine if an impairment loss should be recognized.
Accumulated amortization of intangible assets resulting from business
acquisitions was $24.0 million and $26.5 million as of December 31, 1997 and
1998, respectively.
PARENT COMPANY'S INVESTMENT AND ADVANCES
HFC's investment and advances includes the stockholder's equity of HPG. The
equity of HPG represents the original investment by HFC, plus accumulated net
income, allocation of expenses related to services provided by HFC and income
taxes payable. As of December 31, 1998, HPG had no components of accumulated
other comprehensive income under Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income. Cash is swept daily by HFC which funds the
operations of HPG.
RESEARCH AND DEVELOPMENT
HPG expenses research and development costs as incurred. Research and
development expense was $.1 million, $.3 million and $.4 million for the years
ended December 31, 1996, 1997 and 1998, respectively.
ADVERTISING
HPG expenses advertising costs as incurred. Advertising expense was $3.1
million, $2.4 million and $3.1 million for the years ended December 31, 1996,
1997 and 1998, respectively.
3. RENTAL AND LEASE COMMITMENTS
Rent expense was $.7 million, $1.0 million and $1.5 million for the years
ended December 31, 1996, 1997 and 1998, respectively. Rent expense pertains to
all operating leases, which are principally related to certain sales offices,
distribution facilities and transportation equipment. There are no future
minimum rental payments required under non-cancelable operating leases.
4. INCOME TAXES
The operations of HPG are included in the consolidated tax returns of HFC.
The provision for income taxes includes the effect of certain temporary
differences between amounts reported in the external financial statements and
Federal income tax returns of HFC. The temporary differences are primarily
attributable to depreciation, allowances for trade promotion accruals and
doubtful accounts. Accordingly, deferred tax assets and liabilities have been
reflected on the balance sheet to account for these temporary differences.
F-8
<PAGE> 154
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current:
Federal................................ $10,761 $15,788 $11,459
State.................................. 1,398 2,373 2,264
------- ------- -------
Current provision for income taxes....... 12,159 18,161 13,723
------- ------- -------
Deferred:
Federal................................ 130 (770) 531
State.................................. 162 (828) 1,700
------- ------- -------
Deferred provision (benefit) for income
taxes.................................. 292 (1,598) 2,231
------- ------- -------
Total provision for income taxes......... $12,451 $16,563 $15,954
======= ======= =======
</TABLE>
The tax effects of the significant temporary differences which comprised
the deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
---------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred tax assets:
Post-retirement benefit and other employee
obligations......................................... $ 2,420 $ 2,447
Accrued expenses and other reserves.................... 5,563 3,201
Inventory and packaging................................ 1,008 159
------- -------
Total deferred tax assets...................... 8,991 5,807
------- -------
Deferred tax liabilities:
Depreciation........................................... 23,204 22,907
Acquisition assets and other........................... 2,218 1,562
------- -------
Total deferred tax liabilities................. 25,422 24,469
------- -------
Net deferred tax liabilities............................. $16,431 $18,662
======= =======
Included in:
Current deferred tax assets, net....................... $ 6,857 $ 3,275
Non-current deferred tax liabilities, net.............. 23,288 21,937
------- -------
Net deferred tax liabilities............................. $16,431 $18,662
======= =======
</TABLE>
F-9
<PAGE> 155
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between the effective tax rate and the Federal statutory
rates is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate......................... 35.0% 35.0% 35.0%
Increase resulting from:
State income taxes, net of Federal income tax
benefits............................................. 2.7 2.1 1.5
Non-deductible acquisition costs........................ 2.0 1.5 1.5
Other, net.............................................. .3 1.1 .1
---- ---- ----
Effective income tax rate................................. 40.0% 39.7% 38.1%
==== ==== ====
</TABLE>
5. RELATED PARTY TRANSACTIONS
Certain HFC general and administrative expenses which are more specifically
allocable to HPG have been included in the accompanying combined statements of
income as allocated by HFC. In 1996, these included building rent and
information technology expenses of $2.0 million. For the years ended December
31, 1997 and 1998, total expenses of $3.8 million and $3.9 million,
respectively, were charged for building rent, information technology, quality
assurance, logistics, packaging and procurement services. Quality assurance,
logistics, packaging and procurement services were directly charged in 1996. The
results of operations for 1998 include incremental allocated costs relating to
accounts receivable accounting and divisional accounting. These costs were
directly charged in 1997. The allocation of these costs are based on certain
methodologies which management believes reasonably approximate the cost of
resources provided or services performed.
HFC charges HPG for its share of group insurance costs for eligible HPG
employees based upon location specific costs, HFC's overall insurance costs and
loss experience incurred during a calendar year. Pension costs are also charged
to HPG based upon eligible employees participating in the plans. In addition,
HFC charges HPG for its share of retiree medical expenses and for its share of
matching contributions to HFC's 401(k) plans.
Various insurance coverages are provided to HPG through HFC's consolidated
programs. Workers compensation, auto, property, product liability and other
insurance coverages are charged directly based on HPG's loss experience.
In 1997, HPG's sales organization was combined with the sales force
responsible for selling HFC's grocery products. During 1997 and 1998, certain
sales management and administrative costs were charged directly or allocated by
HPG to the HFC grocery division. The total of such charges was $14.3 million and
$15.6 million, respectively for the years ended December 31, 1997 and 1998. Such
allocation was based on sales revenue which management believes approximates the
cost of resources provided.
Certain other HFC general and administrative expenses including department
costs for: finance, HFC corporate accounting, treasury, legal, tax, risk
management, salaries of
F-10
<PAGE> 156
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
corporate officers and staff, human resources and science and technology costs
have been excluded from the accompanying combined statements of income as they
do not benefit HPG operating entities. As such, costs are not allocated for
purposes of these combined statements.
6. EMPLOYEE BENEFITS
HPG participates in several HFC defined benefit plans which provide
retirement benefits to substantially all non-union and certain union employees,
as well as union administered multi-employer plans. Upon completion of the HPG
sale, HPG's salaried employees and all Winchester plant employees will no longer
participate in the HFC Retirement Plan. Hourly employees at the Omaha and
Louisville manufacturing facilities participate in single employer pension plans
administered by HFC. The assets and related obligations of these plans were not
material to HPG's financial position. Hourly employees at the Fresno, Kansas
City and Lebanon manufacturing facilities participate in multi-employer plans.
HFC's policy is to fund domestic pension liabilities in accordance with the
minimum and maximum limits imposed by the Employee Retirement Income Security
Act of 1974 and Federal income tax laws, respectively. Plan assets are invested
in a broadly diversified portfolio consisting primarily of domestic and
international common stocks and fixed income securities. Other benefits include
health care and life insurance provided by HPG under a post-retirement benefit
plan.
F-11
<PAGE> 157
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
PENSION BENEFITS OTHER BENEFITS
------------------ ------------------
1997 1998 1997 1998
------- ------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of
year................................ $12,704 $15,868 $ 3,600 $ 4,200
Service cost.......................... 1,001 1,115 200 200
Interest cost......................... 964 1,119 300 300
Amendments............................ -- 24 -- (200)
Actuarial (gain)/loss................. 1,667 1,973 100 (300)
Benefits paid......................... (468) (708) -- --
------- ------- ------- -------
Benefit obligation at end of year..... $15,868 $19,391 $ 4,200 $ 4,200
======= ======= ======= =======
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning
of year............................. 12,915 16,449 -- --
Actual return on plan assets.......... 3,369 1,982 -- --
Employer contribution................. 633 651 -- --
Benefits paid......................... (468) (708) -- --
------- ------- ------- -------
Fair value of plan assets at end of
year................................ $16,449 $18,374 $ -- $ --
======= ======= ======= =======
FUNDED STATUS......................... 581 (1,017) (4,200) (4,200)
Unrecognized transition obligation.... 143 133 -- --
Unrecognized prior service cost....... 229 229 (400) (500)
Unrecognized net actuarial loss
(gain).............................. (252) 1,436 (1,604) (1,574)
------- ------- ------- -------
Prepaid (accrued) benefit cost........ $ 701 $ 781 $(6,204) $(6,274)
======= ======= ======= =======
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate......................... 7.00% 6.40% 7.00% 6.40%
Expected long-term rate of return on
assets.............................. 9.50 9.50 N/A N/A
Rate of increase in compensation
levels.............................. 5.00 4.90 N/A N/A
</TABLE>
For measurement purposes, a 6% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999 and future years.
F-12
<PAGE> 158
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
PENSION BENEFITS OTHER BENEFITS
------------------ --------------
1997 1998 1997 1998
------- ------- ----- -----
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost............................... $ 1,001 $ 1,115 $200 $200
Interest cost.............................. 964 1,119 300 300
Expected return on plan assets............. (1,172) (1,532) -- --
Amortization of prior service cost......... 23 24 -- (100)
Recognized net actuarial loss.............. 13 33 -- --
------- ------- ---- ----
Corporate sponsored plans.................. 829 759 500 400
Multi-employer plans....................... 448 413 -- --
------- ------- ---- ----
Net periodic benefit cost.................. $ 1,277 $ 1,172 $500 $400
======= ======= ==== ====
</TABLE>
HPG has two non-pension post retirement benefit plans. The health care plan
is contributory, with participants' contributions adjusted annually; the life
insurance plan is non-contributory.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan.
A one percentage point change in assumed health care cost trend rates would
have the following effects:
<TABLE>
<CAPTION>
1 PERCENTAGE POINT 1 PERCENTAGE POINT
INCREASE DECREASE
------------------ ------------------
<S> <C> <C>
Effect on total service and
interest cost
components................ $ 23 $ (21)
Effect on post retirement
benefit obligation........ 210 (189)
</TABLE>
7. SUPPLEMENTAL BALANCE SHEET INFORMATION
ACCOUNTS RECEIVABLE -- TRADE
In the normal course of business, HPG extends credit to customers which
satisfy pre-defined credit criteria. Revenues are recognized upon shipment of
goods. HPG operates in a single industry and is not dependent upon any single or
major group of customers for its sales. HPG believes that it has little
concentration of credit risk due to the diversity of its customer base.
Receivables, as shown on the balance sheets, were net of allowances and
anticipated discounts of $2.7 million and $4.2 million as of December 31, 1997
and 1998.
F-13
<PAGE> 159
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes allowances and anticipated discounts and their
related activity:
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND OTHER FROM AT END
OF PERIOD EXPENSES ACCOUNTS(A) RESERVES OF PERIOD
ALLOWANCES AND DISCOUNTS ---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1996:.................... $1,229 $ 761 $(41) $ -- $1,949
Year Ended December 31,
1997:.................... 1,949 1,619 10 (850) 2,728
Year Ended December 31,
1998:.................... 2,728 2,468 18 (1,032) 4,182
</TABLE>
- -------------------------
(a) Includes recoveries of amounts previously written off.
INVENTORIES
HPG values much of its inventories under the last-in, first-out (LIFO)
method and the remaining inventories at the lower of first-in, first-out (FIFO)
cost or market. Inventories valued using the LIFO method totaled $7.9 million as
of December 31, 1997 and 1998. All inventories were stated at amounts that did
not exceed realizable values. Total inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials.................................. $ 6,568 $ 5,901
Goods in process............................... 395 320
Finished goods................................. 18,298 17,309
--------- ---------
Inventories at FIFO............................ 25,261 23,530
Adjustment to LIFO............................. (3,100) (983)
--------- ---------
Total inventories.................... $ 22,161 $ 22,547
========= =========
</TABLE>
F-14
<PAGE> 160
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
PREPAID EXPENSES AND OTHER
Prepaid expenses and other assets were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Commodity related transactions................. $ -- $ 2,221
Prepaid pension................................ 701 781
Other.......................................... 752 1,791
--------- ---------
Total prepaid expenses and other..... $ 1,453 $ 4,793
========= =========
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment balances included construction in progress of
$1.1 million and $1.5 million as of December 31, 1997 and 1998, respectively.
Major classes of property, plant and equipment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Land........................................... $ 3,666 $ 3,666
Buildings...................................... 33,181 33,486
Machinery and equipment........................ 183,554 188,185
--------- ---------
Property, plant and equipment, gross........... 220,401 225,337
Accumulated depreciation....................... (104,323) (116,409)
--------- ---------
Property, plant and equipment, net............. $ 116,078 $ 108,928
========= =========
</TABLE>
ACCRUED LIABILITIES
Accrued liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Payroll and other compensation................. $ 5,603 $ 5,243
Advertising and promotion...................... 15,400 10,932
Accrued insurance.............................. 1,058 1,045
Other.......................................... 1,254 1,387
--------- ---------
Total accrued liabilities............ $ 23,315 $ 18,607
========= =========
</TABLE>
F-15
<PAGE> 161
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER LONG-TERM LIABILITIES
Other long-term liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Accrued post-retirement benefits............... $ 5,300 $ 5,300
Accrued insurance.............................. 2,378 2,572
--------- ---------
Total other long-term liabilities.... $ 7,678 $ 7,872
========= =========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, HPG is involved in various pending or
threatened litigation claims. Although the outcome of any legal proceeding
cannot be predicted with certainty, management believes that any ultimate
liability arising from such matters in the aggregate will not have a material
adverse effect on the combined financial statements.
In 1992, HPG and Miller Milling entered into a custom milling supplier
arrangement for a portion of its semolina requirements. John Miller, President &
CEO of Miller Milling through Miller Pasta LLC, is a stockholder in New World
Pasta Company. The supplier arrangement will continue until the expiration date
of December 31, 2004 without regard to the change in ownership described in Note
1.
9. SUBSIDIARY FINANCIAL INFORMATION
Effective January 28, 1999, the Company has two wholly owned subsidiaries,
Pasta Group L.L.C. and Winchester Pasta, L.L.C. Set forth below is summarized
financial information attributed to the combined subsidiaries on a historical
basis as if the subsidiaries were combined as of January 1, 1996:
<TABLE>
<CAPTION>
1996* 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net Sales............................. $334,209 $315,653 $303,697
Gross Profit.......................... 155,833 160,289 152,459
Operating income...................... 22,099 32,996 32,973
Net income............................ 11,471 18,191 18,136
Current Assets........................ 42,572 46,719
Non-current assets.................... 150,521 142,402
Current liabilities................... 29,650 18,966
Non-current liabilities............... 23,603 22,937
</TABLE>
* This information is estimated; HPMC (the parent company) was incorporated on
January 1, 1997.
F-16
<PAGE> 162
HERSHEY PASTA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. SUBSEQUENT EVENT
In connection with the recapitalization explained in Note 1, a syndicate of
lenders led by The Bank of Nova Scotia provided New World Pasta with the
following financing:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Revolving Credit Facility......................... $ 50,000
Term A Loan....................................... 50,000
Term B Loan....................................... 150,000
</TABLE>
The recapitalization was funded with portions of the financings noted above
and with an equity investment of $18.2 million by Miller LLC and the issuance of
$110.0 million in Senior Subordinated Increasing Rate Notes. In February 1999,
$160 million of 9.25% Senior Subordinated Notes due 2009 were issued. The
proceeds of this issuance were used to satisfy the principle obligations
relating to the Revolving Credit Facility Term A Loan and the Senior
Subordinated Increasing Rate Notes.
F-17
<PAGE> 163
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY
ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF [ ], 1999.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statement............. 2
Prospectus Summary.................... 3
Risk Factors.......................... 15
Use of Proceeds....................... 25
The Exchange Offer.................... 27
Certain United States Federal Income
Tax Considerations.................. 35
The Recapitalization.................. 40
Capitalization........................ 42
Unaudited Pro Forma Combined Financial
Information......................... 43
Selected Historical Combined Financial
Data................................ 51
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 53
Business.............................. 62
Management............................ 81
Stock Ownership of Certain Beneficial
Owners and Management............... 86
Certain Relationships and Related
Transactions........................ 88
Description of the Notes.............. 92
Description of Other Indebtedness..... 140
Description of Preferred Stock........ 141
Plan of Distribution.................. 142
Legal Matters......................... 143
Experts............................... 143
Available Information................. 143
Index to Financial Statements......... F-1
</TABLE>
DEALER PROSPECTUS DELIVERY REQUIREMENT
UNTIL [ ], 1999 [90 DAYS AFTER EFFECTIVE DATE], ALL DEALERS THAT
EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$160,000,000
NEW WORLD
PASTA COMPANY
9 1/4% SENIOR SUBORDINATED
EXCHANGE NOTES DUE 2009
------------------------
PROSPECTUS
------------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 164
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") permits a
Delaware corporation to indemnify any person who was or is a party or witness or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reasons of the
fact that he or she is or was a director, officer, employee or agent of the
corporation) by reasons of the fact that he or she 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 or enterprise. Depending on the character of the proceeding, a
corporation may indemnify against expenses, costs and fees (including attorneys'
fees) judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if the person
indemnified acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. If the person indemnified is not wholly successful in
such action, suit or proceeding, but is successful, on the merits or otherwise,
in one or more but less than all claims, issues or matters in such proceeding,
he or she may be indemnified against expenses actually and reasonably incurred
in connection with each successfully resolved claim, issue or matter. In the
case of an action or suit by or in the right of the corporation, no
indemnification may be made in respect to any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery of the State of Delaware, or the
court in which such action or suit was brought, shall determine that, despite
the adjudication of liability, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
provides that, to the extent a director, officer, employee or agent of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or manner therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
The Amended and Restated Certificate of Incorporation and Amended and
Restated By-Laws of New World Pasta Company (the "Company") provide for
indemnification by the Company of its directors and officers to the fullest
extent permitted by the DGCL and such right to indemnification shall continue as
to a person who has ceased to be a director or officer of the Company and shall
inure to the benefit of his or her heirs, executors and administrators. The
Company's Amended and Restated By-laws provide that every person will be
indemnified against any and all judgments, fines, amounts paid in settling or
otherwise disposing of threatened, pending or completed actions, suits or
proceedings (including an action by or in the right of the Corporation, subject
to certain conditions), whether by fact that he is or was a director or officer
of the Company or is or was serving at the request of the Company as a director
or officer of another corporation, subject in all instances to the requirements
that such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Company, and with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. While these provisions provide directors
with protection from awards for monetary damages for breaches of their duty of
care, they do
II-1
<PAGE> 165
not eliminate such duty. Accordingly, these provisions will have no effect on
the availability of equitable remedies such as an injunction or rescission based
on a director's breach of his or her duty of care.
Section 18-108 of the Delaware Limited Liability Act (the "LLC Act")
empowers a Delaware limited liability company to indemnify and hold harmless any
member, manager or other person from and against any and all claims and demands
whatsoever. In accordance with such section, the Limited Liability Company
Agreement of Winchester Pasta, L.L.C. ("Winchester LLC"), dated as of December
17, 1998, as amended by Amendment No. 1 thereto, dated as of January 28, 1999
(as amended, the "Winchester LLC Agreement"), and the Limited Liability Company
Agreement of Pasta Group L.L.C. ("Pasta Group LLC"), dated as December 17, 1998,
as amended by Amendment No. 1 thereto, dated as of January 28, 1999 (as amended,
the "Pasta Group LLC Agreement" and, together with the Winchester LLC Agreement,
the "LLC Agreements"), each provide that the Company shall, to the fullest
extent authorized by the LLC Act, as in effect from time to time, indemnify and
hold harmless any member, manager, officer, employee or agent of Winchester LLC
or Pasta Group LLC, as the case may be, from and against any and all claims and
demands arising by reason of the fact that such person is, or was, a member,
manager, officer, employee or agent of the respective LLC. The LLC Agreements
further provide that expenses incurred by any member, manager, officer, employee
or agent of Winchester LLC or Pasta Group LLC, as the case may be, in defending
a proceeding shall be paid by the respective LLC in advance of such proceeding's
final disposition unless otherwise determined by the manager or the president of
such LLC in the specific case upon receipt of an undertaking by or on behalf of
the member, manager or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the respective
LLC. Such expenses incurred by other employees and agents may be so paid upon
such terms and conditions if any, as the manager or the president of the
Winchester LLC or Pasta Group LLC, as the case may be, deems appropriate.
The Company, Winchester LLC and Pasta Group LLC have each purchased and
maintain insurance to protect persons entitled to indemnification pursuant to
its certificate of incorporation, by-laws or limited liability company
agreement, as the case may be, against liabilities asserted against or incurred
by them in such capacity or arising out of their status as such.
ITEM 21. EXHIBITS.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1 Purchase Agreement, dated February 11, 1999, by and among
New World Pasta Company, Winchester Pasta, L.L.C., as
guarantor, Pasta Group, L.L.C., as guarantor, and Morgan
Stanley & Co. Incorporated and Scotia Capital Markets (USA),
Inc., as placement agents.
2.1 Recapitalization Agreement, dated as of December 15, 1998,
by and among Hershey Foods Corporation, Hershey CRE, Inc.,
Homestead, Inc., New World Pasta Company, New World Pasta,
LLC, Joseph Littlejohn and Levy Fund III, L.P.
</TABLE>
II-2
<PAGE> 166
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.2 Amendment No. 1 to Recapitalization Agreement, dated as of
January 28, 1999, by and among Hershey Foods Corporation,
Hershey Chocolate & Confectionery Corporation (as successor
to Hershey CRE, Inc.), Homestead, Inc., New World Pasta
Company, New World Pasta, L.L.C., Joseph Littlejohn and Levy
Fund III, L.P.
3.1 Amended and Restated Certificate of Incorporation of New
World Pasta Company, as filed with the Secretary of State of
the State of Delaware on January 28, 1999.
3.2 Amended and Restated By-Laws of New World Pasta Company.
3.3 Certificate of Formation of Winchester Pasta, L.L.C., as
filed with the Secretary of State of the State of Delaware
on December 17, 1998.
3.4 Limited Liability Company Agreement of Winchester Pasta,
L.L.C., dated as of December 17, 1998, by and between
Hershey Foods Corporation, as the sole member, and
Winchester Pasta, L.L.C.
3.5 Amendment No. 1 to Limited Liability Company Agreement of
Winchester Pasta L.L.C., dated as of January 28, 1999, among
Hershey Foods Corporation, as the original member, New World
Pasta Company, as the successor member, and Winchester
Pasta, L.L.C.
3.6 Certificate of Formation of Pasta Group, L.L.C., as filed
with the Secretary of State of the State of Delaware on
December 17, 1998.
3.7 Limited Liability Company Agreement of Pasta Group L.L.C.,
dated as December 17, 1998, by and between Hershey Foods
Corporation, as the sole member, and Pasta Group, L.L.C.
3.8 Amendment No. 1 to Limited Liability Company Agreement of
Pasta Group L.L.C., dated as of January 28, 1999, among
Hershey Foods Corporation, as the original member, New World
Pasta Company, as the successor member, and Pasta Group,
L.L.C.
4.1 Indenture, dated as of February 19, 1999, among New World
Pasta Company, as issuer, Winchester Pasta, L.L.C., as
guarantor, Pasta Group, L.L.C., as guarantor, and The Bank
of New York, as trustee.
4.2 Senior Subordinated Guarantee, dated February 19, 1999, by
Pasta Group, L.L.C. in favor of (i) the holders of New World
Pasta Company's outstanding 9 1/4% Senior Subordinated Notes
due 2009 and 9 1/4% Senior Subordinated Exchange Notes due
2009 to be issued under this Registration Statement and (ii)
the Bank of New York, as trustee under the indenture
governing the above-referenced notes.
4.3 Senior Subordinated Guarantee, dated February 19, 1999, by
Winchester Pasta, L.L.C. in favor of (i) the holders of New
World Pasta Company's outstanding 9 1/4% Senior Subordinated
Notes due 2009 and 9 1/4% Senior Subordinated Exchange Notes
due 2009 to be issued under this Registration Statement and
(ii) the Bank of New York, as trustee under the indenture
governing the above-referenced notes.
4.4 Registration Rights Agreement, dated as of February 19,
1999, by and among New World Pasta Company, Winchester
Pasta, L.L.C., Pasta Group, L.L.C., Morgan Stanley & Co.
Incorporated and Scotia Capital Markets (USA), Inc.
</TABLE>
II-3
<PAGE> 167
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
4.5 Form of New World Pasta Company 9 1/4% Senior Subordinated
Note due 2009 (included in Exhibit 4.1).
4.6 Form of New World Pasta Company 9 1/4% Senior Subordinated
Exchange Note due 2009.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the securities being registered
hereby.+
10.1 Stockholders Agreement, dated as of January 28, 1999, among
New World Pasta Company, New World Pasta, L.L.C., Miller
Pasta, L.L.C. and Hershey Foods Corporation.
10.2 Credit Agreement, dated as of January 28, 1999, among New
World Pasta Company, the various financial institutions
party thereto (the "Lenders"), certain financial
institutions as the Co-Agents for the Lenders, Morgan
Stanley Senior Funding, Inc., as Syndication Agent, and The
Bank of Nova Scotia, as Lead Arranger and as Administrative
Agent for the Lenders.
10.3 Borrower Security Agreement, dated as of January 28, 1999,
between New World Pasta Company, as grantor, and The Bank of
Nova Scotia, as Administrative Agent.
10.4 Borrower Pledge Agreement, dated as of January 28, 1999,
between New World Pasta Company, as pledgor, and The Bank of
Nova Scotia, as Administrative Agent.
10.5 Subsidiary Guaranty, dated as of January 28, 1999, made by
each of Pasta Group, L.L.C. and Winchester Pasta, L.L.C., in
favor of The Bank of Nova Scotia, as Administrative Agent.
10.6 Subsidiary Security Agreement, dated as of January 28, 1999,
among Pasta Group, L.L.C. and Winchester Pasta, L.L.C. as
grantors, and The Bank of Nova Scotia, as Administrative
Agent.
10.7 Transitional Services Agreement, dated as of January 28,
1999, between Hershey Foods Corporation and New World Pasta
Company.
10.8 Procurement Agreement, dated January 28, 1999, between New
World Pasta Company and Miller Milling Company.
10.9 Mill Agreement, dated January 28, 1999, between Winchester
Pasta, L.L.C. and Miller Milling Company.
10.10 Amended and Restated Mill Agreement, dated March 1, 1998,
between Hershey Pasta and Grocery Group, the predecessor to
New World Pasta Company, and Miller Milling Company.
10.11 First Amendment to Amended and Restated Mill Agreement,
dated January 28, 1999, between New World Pasta Company, as
successor to Hershey Pasta and Grocery Group, and Miller
Milling Company.
10.12 Tax Sharing Agreement, dated January 28, 1999, between New
World Pasta Company and New World Pasta, L.L.C.
10.13 Employment Agreement, dated as of January 28, 1999, among
New World Pasta Company and C. Mickey Skinner.
10.14 Employment Agreement, dated as of January 28, 1999, among
New World Pasta Company and John C. Miller.
</TABLE>
II-4
<PAGE> 168
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.15 Employment Agreement, dated as of January 28, 1999, among
New World Pasta Company and Michael L. Snow.
10.16 New World Pasta Company 1999 Stock Option Plan.
10.17 Form of Qualified Stock Option Agreement for C. Mickey
Skinner, John C. Miller and Michael L. Snow.
10.18 Form of Qualified Stock Option Agreement for other
personnel.
10.19 Form of Non-Qualified Stock Option Agreement for C. Mickey
Skinner, John C. Miller and Michael L. Snow.
10.20 Form of Non-Qualified Stock Option Agreement for other
personnel.
12.1 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges.
22.1 Subsidiaries of New World Pasta Company
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
24.1 Powers of Attorney (included in the signature pages to the
Registration Statement).
25.1 Form T-1 Statement of Eligibility of The Bank of New York,
as trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- -------------------------
+ To be filed by an amendment to this Registration Statement.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by one or more of the
registrants 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, each 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 Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrants hereby undertake to file an application for the
purposes of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act, as amended (the "TIA"), in
accordance with the rules and regulation prescribed by the Commission under
Section 305(b)(2) of the TIA.
II-5
<PAGE> 169
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in The City of Hershey,
State of Pennsylvania, on April 21, 1999.
NEW WORLD PASTA COMPANY
By: /s/ MARK E. KIMMEL
----------------------------------------------
Mark E. Kimmel, Esq.
Vice President, Administration and
Development,
and General Counsel and Secretary
WINCHESTER PASTA, L.L.C.
By: NEW WORLD PASTA COMPANY, its sole member
By: /s/ MARK E. KIMMEL
----------------------------------------------
Mark E. Kimmel, Esq.
Vice President, Administration and
Development,
and General Counsel and Secretary
PASTA GROUP, L.L.C.
By: NEW WORLD PASTA COMPANY, its sole member
By: /s/ MARK E. KIMMEL
----------------------------------------------
Mark E. Kimmel, Esq.
Vice President, Administration and
Development,
and General Counsel and Secretary
POWER OF ATTORNEY
Each of the directors and officers of New World Pasta Company, Winchester
Pasta, L.L.C. and Pasta Group, L.L.C. whose signature appears below hereby
authorizes Mark E. Kimmel, Esq. and James A. Bohenick, and each of them, as
attorney-in-fact and agents, with full powers of substitution, to sign on his or
her behalf, individually and in the capacities stated below, and to file any and
all amendments (including post-effective amendments) to this Registration
Statement with the Securities and Exchange Commission, granting to said
attorney-in-fact and agents full power and authority to perform any other act on
behalf of the undersigned required to be done in the premises.
II-6
<PAGE> 170
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates set forth below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ C. MICKEY SKINNER Chairman of the Board, Chief April 21, 1999
- ------------------------------ Executive Officer and Director
C. Mickey Skinner
/s/ JOHN C. MILLER President and Director April 21, 1999
- ------------------------------
John C. Miller
/s/ MICHAEL S. SNOW Executive Vice President and April 21, 1999
- ------------------------------ Director
Michael S. Snow
/s/ JAMES A. BOHENICK Vice President, Financial and April 21, 1999
- ------------------------------ Chief Financial Officer
James A. Bohenick
/s/ PAUL S. LEVY Director April 21, 1999
- ------------------------------
Paul S. Levy
/s/ JEFFREY C. LIGHTCAP Director April 21, 1999
- ------------------------------
Jeffrey C. Lightcap
/s/ BRETT N. MILGRIM Director April 21, 1999
- ------------------------------
Brett N. Milgrim
/s/ DAVID Y. YING Director April 21, 1999
- ------------------------------
David Y. Ying
</TABLE>
II-7
<PAGE> 171
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1 Purchase Agreement, dated February 11, 1999, by and among
New World Pasta Company, Winchester Pasta, L.L.C., as
guarantor, Pasta Group, L.L.C., as guarantor, and Morgan
Stanley & Co. Incorporated and Scotia Capital Markets (USA),
Inc., as placement agents.
2.1 Recapitalization Agreement, dated as of December 15, 1998,
by and among Hershey Foods Corporation, Hershey CRE, Inc.,
Homestead, Inc., New World Pasta Company, New World Pasta,
LLC, Joseph Littlejohn and Levy Fund III, L.P.
2.2 Amendment No. 1 to Recapitalization Agreement, dated as of
January 28, 1999, by and among Hershey Foods Corporation,
Hershey Chocolate & Confectionery Corporation (as successor
to Hershey CRE, Inc.), Homestead, Inc., New World Pasta
Company, New World Pasta, L.L.C., Joseph Littlejohn and Levy
Fund III, L.P.
3.1 Amended and Restated Certificate of Incorporation of New
World Pasta Company, as filed with the Secretary of State of
the State of Delaware on January 28, 1999.
3.2 Amended and Restated By-Laws of New World Pasta Company.
3.3 Certificate of Formation of Winchester Pasta, L.L.C., as
filed with the Secretary of State of the State of Delaware
on December 17, 1998.
3.4 Limited Liability Company Agreement of Winchester Pasta,
L.L.C., dated as of December 17, 1998, by and between
Hershey Foods Corporation, as the sole member, and
Winchester Pasta, L.L.C.
3.5 Amendment No. 1 to Limited Liability Company Agreement of
Winchester Pasta L.L.C., dated as of January 28, 1999, among
Hershey Foods Corporation, as the original member, New World
Pasta Company, as the successor member, and Winchester
Pasta, L.L.C.
3.6 Certificate of Formation of Pasta Group, L.L.C., as filed
with the Secretary of State of the State of Delaware on
December 17, 1998.
3.7 Limited Liability Company Agreement of Pasta Group L.L.C.,
dated as December 17, 1998, by and between Hershey Foods
Corporation, as the sole member, and Pasta Group, L.L.C.
3.8 Amendment No. 1 to Limited Liability Company Agreement of
Pasta Group L.L.C., dated as of January 28, 1999, among
Hershey Foods Corporation, as the original member, New World
Pasta Company, as the successor member, and Pasta Group,
L.L.C.
4.1 Indenture, dated as of February 19, 1999, among New World
Pasta Company, as issuer, Winchester Pasta, L.L.C., as
guarantor, Pasta Group, L.L.C., as guarantor, and The Bank
of New York, as trustee.
</TABLE>
<PAGE> 172
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
4.2 Senior Subordinated Guarantee, dated February 19, 1999, by
Pasta Group, L.L.C. in favor of (i) the holders of New World
Pasta Company's outstanding 9 1/4% Senior Subordinated Notes
due 2009 and 9 1/4% Senior Subordinated Exchange Notes due
2009 to be issued under this Registration Statement and (ii)
the Bank of New York, as trustee under the indenture
governing the above-referenced notes.
4.3 Senior Subordinated Guarantee, dated February 19, 1999, by
Winchester Pasta, L.L.C. in favor of (i) the holders of New
World Pasta Company's outstanding 9 1/4% Senior Subordinated
Notes due 2009 and 9 1/4% Senior Subordinated Exchange Notes
due 2009 to be issued under this Registration Statement and
(ii) the Bank of New York, as trustee under the indenture
governing the above-referenced notes.
4.4 Registration Rights Agreement, dated as of February 19,
1999, by and among New World Pasta Company, Winchester
Pasta, L.L.C., Pasta Group, L.L.C., Morgan Stanley & Co.
Incorporated and Scotia Capital Markets (USA), Inc.
4.5 Form of New World Pasta Company 9 1/4% Senior Subordinated
Note due 2009 (included in Exhibit 4.1).
4.6 Form of New World Pasta Company 9 1/4% Senior Subordinated
Exchange Note due 2009.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the securities being registered
hereby.+
10.1 Stockholders Agreement, dated as of January 28, 1999, among
New World Pasta Company, New World Pasta, L.L.C., Miller
Pasta, L.L.C. and Hershey Foods Corporation.
10.2 Credit Agreement, dated as of January 28, 1999, among New
World Pasta Company, the various financial institutions
party thereto (the "Lenders"), certain financial
institutions as the Co-Agents for the Lenders, Morgan
Stanley Senior Funding, Inc., as Syndication Agent, and The
Bank of Nova Scotia, as Lead Arranger and as Administrative
Agent for the Lenders.
10.3 Borrower Security Agreement, dated as of January 28, 1999,
between New World Pasta Company, as grantor, and The Bank of
Nova Scotia, as Administrative Agent.
10.4 Borrower Pledge Agreement, dated as of January 28, 1999,
between New World Pasta Company, as pledgor, and The Bank of
Nova Scotia, as Administrative Agent.
10.5 Subsidiary Guaranty, dated as of January 28, 1999, made by
each of Pasta Group, L.L.C. and Winchester Pasta, L.L.C., in
favor of The Bank of Nova Scotia, as Administrative Agent.
10.6 Subsidiary Security Agreement, dated as of January 28, 1999,
among Pasta Group, L.L.C. and Winchester Pasta, L.L.C. as
grantors, and The Bank of Nova Scotia, as Administrative
Agent.
10.7 Transitional Services Agreement, dated as of January 28,
1999, between Hershey Foods Corporation and New World Pasta
Company.
10.8 Procurement Agreement, dated January 28, 1999, between New
World Pasta Company and Miller Milling Company.
</TABLE>
<PAGE> 173
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.9 Mill Agreement, dated January 28, 1999, between Winchester
Pasta, L.L.C. and Miller Milling Company.
10.10 Amended and Restated Mill Agreement, dated March 1, 1998,
between Hershey Pasta and Grocery Group, the predecessor to
New World Pasta Company, and Miller Milling Company.
10.11 First Amendment to Amended and Restated Mill Agreement,
dated January 28, 1999, between New World Pasta Company, as
successor to Hershey Pasta and Grocery Group, and Miller
Milling Company.
10.12 Tax Sharing Agreement, dated January 28, 1999, between New
World Pasta Company and New World Pasta, L.L.C.
10.13 Employment Agreement, dated as of January 28, 1999, among
New World Pasta Company and C. Mickey Skinner.
10.14 Employment Agreement, dated as of January 28, 1999, among
New World Pasta Company and John C. Miller.
10.15 Employment Agreement, dated as of January 28, 1999, among
New World Pasta Company and Michael L. Snow.
10.16 New World Pasta Company 1999 Stock Option Plan.
10.17 Form of Qualified Stock Option Agreement for C. Mickey
Skinner, John C. Miller and Michael L. Snow.
10.18 Form of Qualified Stock Option Agreement for other
personnel.
10.19 Form of Non-Qualified Stock Option Agreement for C. Mickey
Skinner, John C. Miller and Michael L. Snow.
10.20 Form of Non-Qualified Stock Option Agreement for other
personnel.
12.1 Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges.
22.1 Subsidiaries of New World Pasta Company
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
24.1 Powers of Attorney (included in the signature pages to the
Registration Statement).
25.1 Form T-1 Statement of Eligibility of The Bank of New York,
as trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.4 Form of Letter to Clients.
</TABLE>
- -------------------------
+ To be filed by an amendment to this Registration Statement.
<PAGE> 1
EXHIBIT 1.1
EXECUTION VERSION
$160,000,000
NEW WORLD PASTA COMPANY
9 1/4% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
February 11, 1999
<PAGE> 2
Morgan Stanley & Co. Incorporated
Scotia Capital Markets (USA) Inc..
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
New World Pasta Company, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several purchasers named in Schedule I hereto
(the "INITIAL PURCHASERS") $160,000,000 principal amount of its 9 1/4% Senior
Subordinated Notes due 2009 (thE "SECURITIES") to be issued pursuant to the
provisions of an Indenture dated as of February 19, 1999 (the "INDENTURE")
between the Company and The Bank of New York, as Trustee (the "TRUSTEE").
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), to qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act and in offshore transactions in reliance
on Regulation S under the Securities Act ("REGULATION S").
The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of a Registration Rights Agreement dated the date
hereof between the Company and the Initial Purchasers (the "REGISTRATION RIGHTS
AGREEMENT").
In connection with the sale of the Securities, the Company has prepared
a preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and will
prepare a final offering memorandum (the "FINAL MEMORANDUM" and, with the
Preliminary Memorandum, each a "MEMORANDUM") including or incorporating by
reference a description of the terms of the Securities, the terms of the
offering and a description of the Company. As used herein, the term "Memorandum"
shall mean, as of any date or time referred to in this Agreement, the most
recent offering memorandum (whether the Preliminary Memorandum or the Final
Memorandum, including any amendment or supplement to either such document) and
including any exhibits and schedules thereto and shall include in each case the
documents incorporated by reference therein, if any.
1. Representations and Warranties. The Company represents and warrants
to, and agrees with, you that:
(a) The Preliminary Memorandum as of its date did not contain
and the Final Memorandum, as of its date did not, and on the Closing
Date (as defined in Section 4) will not, contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in either Memorandum based upon information relating to any
Initial Purchaser furnished to the Company in writing by
1
<PAGE> 3
such Initial Purchaser through you expressly for use therein.
(b) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in each Memorandum and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification
(such jurisdictions being set forth on Annex I hereto), except to the
extent that the failure to be so qualified or be in good standing would
not have a material adverse effect on the business, condition
(financial or otherwise), performance, properties, assets or
liabilities (contingent or otherwise) of the Company and its
subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(c) Each subsidiary of the Company has been duly organized, is
validly existing as a limited liability company in good standing under
the laws of the jurisdiction of its organization, has the limited
liability company power and authority to own its property and to
conduct its business as described in each Memorandum and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification (such jurisdictions
being set forth on Annex I hereto), except to the extent that the
failure to be so qualified or be in good standing would not have a
Material Adverse Effect; all of the issued membership interests of each
subsidiary of the Company have been duly and validly authorized and
issued and are owned directly by the Company, free and clear of all
liens, encumbrances, defects, equities or claims (collectively,
"LIENS"), except for Liens contemplated by the Senior Credit Facilities
(as defined in the Memorandum). Pasta Group, L.L.C. and Winchester
Pasta, L.L.C. are the Company's only subsidiaries.
(d) This Agreement has been duly authorized, executed and
delivered by the Company and each Subsidiary Guarantor (as defined).
(e) The Securities have been duly authorized, and on the
Closing Date will have been duly executed and delivered, by the
Company. When the Securities are (i) executed and authenticated in
accordance with the provisions of the Indenture, (ii) delivered to and
paid for by the Initial Purchasers in accordance with the terms of this
Agreement and (iii) the Indenture has been duly executed and delivered
by the Company (assuming due authorization, execution and delivery
thereof by the Trustee) and the Registration Rights Agreement has been
duly executed and delivered by the Company (assuming the due
authorization, execution and delivery thereof by the Initial
Purchasers), the Securities will be valid and binding obligations of
the Company, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally or (ii)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity), and will be entitled
to the benefits of the Indenture and
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<PAGE> 4
the Registration Rights Agreement pursuant to which such Securities are
to be issued.
(f) Each of the Indenture and the Registration Rights
Agreement has been duly authorized, and on the Closing Date will have
been duly executed and delivered, by the Company and the Subsidiary
Guarantors. Each of the Indenture and the Registration Rights Agreement
will, upon the due authorization, execution and delivery thereof by the
parties thereto, be a valid and binding agreement of the Company and
the Subsidiary Guarantors, enforceable in accordance with its terms,
except to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally
or (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) and
except to the extent that rights to indemnification and contribution
contained therein may be limited by state or federal securities laws or
the public policy underlying such laws.
(g) Each guarantee by any subsidiary of the Company (each such
subsidiary, a "SUBSIDIARY GUARANTOR") of the Company's obligations
under the Indenture or the Securities (each, a "GUARANTEE") has been
duly authorized by, and on the Closing Date will have been duly
executed and delivered by, and will upon such execution and delivery be
a valid and binding agreement of, such Subsidiary Guarantor,
enforceable in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally or (ii) general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(h) The execution and delivery by the Company of, and the
performance by the Company of its obligations under this Agreement, the
Indenture, the Registration Rights Agreement and the Securities will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company or its subsidiaries taken as a whole or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, the Indenture, the
Registration Rights Agreement or the Securities, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities and by Federal and
state securities laws with respect to the Company's obligations under
the Registration Rights Agreement.
(i) The execution and delivery by each Subsidiary Guarantor
of, and the performance by such Subsidiary Guarantor of its obligations
under, its Subsidiary Guarantee, the Indenture, the Registration Rights
Agreement and the Securities will not contravene any provision of
applicable law or the organizational documents of such
3
<PAGE> 5
Subsidiary Guarantor or any agreement or other instrument binding upon
such Subsidiary Guarantor that is material to the Company and the
Subsidiary Guarantors, taken as a whole, or any judgment, order or
decree of any governmental body, agency or court having jurisdiction
over such Subsidiary Guarantor, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency is
required for the performance by such Subsidiary Guarantor of its
obligations under its Subsidiary Guarantee, the Indenture, the
Registration Rights Agreement or the Securities, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities and by Federal and
state securities laws with respect to the Subsidiary Guarantor's
obligations under the Registration Rights Agreement.
(j) Subsequent to the respective dates as of which information
is given in the Memorandum, (1) the Company and its subsidiaries have
not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the
ordinary course of business; (2) the Company has not purchased any of
its outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any
material change in the capital stock, short-term debt or long-term debt
of the Company and its subsidiaries, except in each case as described
in the Memorandum.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in each Memorandum.
(l) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party
or to which any of the properties of the Company or any of its
subsidiaries is subject other than proceedings accurately described in
all material respects in each Memorandum and proceedings that would not
have a Material Adverse Effect, or that would not have a material
adverse effect on the power or ability of the Company or any Subsidiary
Guarantor to perform its obligations under this Agreement, the
Indenture, the Registration Rights Agreement or the Securities or any
Guarantee, as applicable, or to consummate the transactions
contemplated by the Final Memorandum.
(m) No material labor dispute with the employees of the
Company or any of its subsidiaries exists, except as described in the
Memorandum, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could have a Material Adverse Effect.
(n) The Company and its subsidiaries possess all such
certificates,
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<PAGE> 6
authorizations and permits issued by federal, state or foreign
regulatory authorities as are necessary to conduct the business
currently conducted by them as set forth in the Memorandum, except
where the failure to have any such permit, certificate or authorization
would not, singly or in the aggregate, have a Material Adverse Effect,
and neither the Company nor any of its subsidiaries has received any
notice of proceedings relating to the revocation or modification of any
such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect, except as described in
the Memorandum.
(o) Except as described in the Memorandum, the Company and its
subsidiaries (i) are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a Material Adverse Effect.
(p) Except as described in the Memorandum, there are no costs
or liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties)
which would, singly or in the aggregate, have a Material Adverse
Effect.
(q) Except as described in the Memorandum, the Company and
each of its subsidiaries is in the process of implementing a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's
general or specific authorizations; (2) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain asset
accountability; (3) access to assets is permitted only in accordance
with management's general or specific authorization; and (4) the
recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to
any differences.
(r) Neither the Company nor any subsidiary is, and after
giving effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the Final
Memorandum, will be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(s) The Company and its subsidiaries have good and marketable
title in fee
5
<PAGE> 7
simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of
the Company and its subsidiaries, in each case free and clear of all
Liens, except such as are described in the Memorandum or are
contemplated by the Senior Credit Facilities or such as do not
materially and adversely affect the value of such property and do not
materially and adversely interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially
and adversely interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries, in
each case except as described in the Memorandum.
(t) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and
trade names currently employed by them in connection with the business
now operated by them, and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect.
(u) The Company and its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in
which the Company and its subsidiaries are currently engaged.
(v) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "AFFILIATE") of the
Company has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be
integrated with the sale of the Securities in a manner that would
require the registration under the Securities Act of the Securities or
(ii) engaged in any form of general solicitation or general advertising
in connection with the offering of the Securities (as those terms are
used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(w) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries will be affected by the Year
2000 Problem (that is, any significant risk that computer hardware or
software applications used by the Company and its subsidiaries will
not, in the case of dates or time periods occurring after December 31,
1999, function at least as effectively as in the case of dates or times
periods occurring prior to January 1, 2000); as a result of such
review, the Company does not believe, that (A) there are any
6
<PAGE> 8
issues related to the Company's preparedness to address the Year 2000
Problem that are of a character required to be described or referred to
in the Memorandum which have not been accurately described in the
Memorandum and (B) the Year 2000 Problem will have a Material Adverse
Effect.
(x) None of the Company, its Affiliates or any person acting
on its or their behalf has engaged or will engage in any directed
selling efforts (within the meaning of Regulation S) with respect to
the Securities and the Company and its Affiliates and any person acting
on its or their behalf have complied and will comply with the offering
restrictions requirement of Regulation S, except no representation,
warranty or agreement is made by the Company in this paragraph with
respect to the Initial Purchasers.
(y) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers in the manner
contemplated by this Agreement to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended.
(z) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
(aa) On the date hereof, the Company shall have given notice
to all of the holders of its Senior Subordinated Increasing Rate Notes
due 2000 (the "BRIDGE NOTES") that the Bridge Notes are to be redeemed
on the Closing Date.
(bb) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair
saleable value of the assets of each of the Company and each of its
subsidiaries (each on a consolidated basis) will exceed the sum of its
stated liabilities and identified contingent liabilities; none of the
Company or any of its subsidiaries (each on a consolidated basis) is,
nor will any of the Company or any of its subsidiaries (each on a
consolidated basis) be, after giving effect to the execution, delivery
and performance of this Agreement, and the consummation of the
transactions contemplated hereby, (i) left with unreasonably small
capital with which to carry on its business as it is currently or
proposed to be conducted, (ii) unable to pay its debts (contingent or
otherwise) as they mature or otherwise become due or (iii) otherwise
insolvent.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell
to the several Initial Purchasers, and each Initial Purchaser, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective principal amount of Securities set forth in
Schedule I hereto opposite its name at a purchase price of 100% of the principal
amount thereof less a discount of 2.6796875% of such principal amount, plus
accrued interest, if any, to the Closing Date (the "PURCHASE PRICE").
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<PAGE> 9
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Initial Purchasers, it will
not, during the period beginning on the date hereof and continuing to and
including the Closing Date, offer, sell, contract to sell or otherwise issue any
debt of the Company or warrants to purchase debt of the Company substantially
similar to the Securities (other than the sale of the Securities under this
Agreement).
3. Terms of Offering. You have advised the Company that the Initial
Purchasers will make an offering of the Securities purchased by the Initial
Purchasers hereunder on the terms to be set forth in the Final Memorandum, as
soon as practicable after this Agreement is entered into as in your judgment is
advisable.
4. Payment and Delivery. Payment for the Securities shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Securities for the respective accounts of the several
Initial Purchasers at 10:00 a.m., New York City time, on February 19, 1999, or
at such other time on the same date or such other date, not later than February
23, 1999, as shall be designated in writing by you. The time and date of such
payment are hereinafter referred to as the "CLOSING DATE."
Certificates for the Securities shall be in definitive form or global
form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date. The certificates evidencing the Securities shall
be delivered to you on the Closing Date for the respective accounts of the
several Initial Purchasers, with any transfer taxes payable in connection with
the transfer of the Securities to the Initial Purchasers duly paid, against
payment of the Purchase Price therefor plus accrued interest, if any, to the
date of payment and delivery.
5. Conditions to the Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers to purchase and pay for the Securities on
the Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act;
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
8
<PAGE> 10
whole, from that set forth in the Final Memorandum (exclusive
of any amendments or supplements thereto subsequent to the
date of this Agreement) that, in your judgment, is material
and adverse and that makes it, in your judgment, impracticable
to market the Securities on the terms and in the manner
contemplated in the Final Memorandum.
(b) The Initial Purchasers shall have received on the Closing
Date a certificate, dated the Closing Date and signed by an executive
officer of the Company, to the effect set forth in Section 5(a)(i) and
to the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(c) The Initial Purchasers shall have received on the Closing
Date an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, outside
counsel for the Company, dated the Closing Date, to the effect set
forth in Exhibit A. Such opinion shall be rendered to the Initial
Purchasers at the request of the Company and shall so state therein.
(d) The Initial Purchasers shall have received on the Closing
Date an opinion of White & Case LLP, counsel for the Initial
Purchasers, dated the Closing Date, to the effect set forth in Exhibit
B.
(e) The Initial Purchasers shall have received on each of the
date hereof and the Closing Date a letter, dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Initial Purchasers, from Arthur Andersen LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in or incorporated by reference into the Final
Memorandum; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
6. Covenants of the Company. In further consideration of the agreements
of the Initial Purchasers contained in this Agreement, the Company covenants
with each Initial Purchaser as follows:
(a) To furnish to you in New York City, without charge, prior
to 5:00 p.m. (New York City time) on the business day next succeeding
the date of this Agreement (or such other date and time as you and we
may mutually agree) and during the period mentioned in Section 6(c), as
many copies of the Final Memorandum, any documents incorporated by
reference therein and any supplements and amendments thereto as you
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<PAGE> 11
may reasonably request.
(b) Before amending or supplementing either Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and
not to use any such proposed amendment or supplement to which you
reasonably object.
(c) If, during such period after the date hereof and prior to
the date on which all of the Securities shall have been sold by the
Initial Purchasers, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Final
Memorandum in order to make the statements therein, in the light of the
circumstances when the Final Memorandum is delivered to a purchaser,
not misleading, or if, in the opinion of counsel for the Initial
Purchasers, it is necessary to amend or supplement the Final Memorandum
to comply with applicable law, forthwith to prepare and furnish, at its
own expense, to the Initial Purchasers, either amendments or
supplements to the Final Memorandum so that the statements in the Final
Memorandum as so amended or supplemented will not, in the light of the
circumstances when the Final Memorandum is delivered to a purchaser, be
misleading or so that the Final Memorandum, as amended or supplemented,
will comply with applicable law.
(d) To endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.
(e) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including without limitation: (i) the
fees, disbursements and expenses of the Company's counsel and the
Company's accountants in connection with the issuance and sale of the
Securities and all other fees or expenses in connection with the
preparation of each Memorandum and all amendments and supplements
thereto, including all printing costs associated therewith, and the
delivering of copies thereof to the Initial Purchasers, in the
quantities herein above specified, (ii) all costs and expenses related
to the transfer and delivery of the Securities to the Initial
Purchasers, including any transfer or other taxes payable thereon,
(iii) the cost of printing or producing any Blue Sky or legal
investment memorandum in connection with the offer and sale of the
Securities under state securities laws and all expenses in connection
with the qualification of the Securities for offer and sale under state
securities laws as provided in Section 6(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the
Initial Purchasers in connection with such qualification and in
connection with the Blue Sky or legal investment memorandum, (iv) any
fees charged by rating agencies for the rating of the Securities, (v)
the fees and expenses, if any, incurred in connection with the
admission of the Securities for trading in PORTAL or any appropriate
market system, (vi) the costs and charges of the Trustee and (vii) the
cost of the preparation, issuance and delivery of the Securities. It is
understood, however, that except as provided in this Section, Section
8, and the last paragraph of Section 10, the Initial Purchasers will
pay all of their costs and expenses, including fees
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<PAGE> 12
and disbursements of their counsel, transfer taxes payable on resale of
any of the Securities by them and any advertising expenses connected
with any offers they may make.
(f) That neither the Company nor any Affiliate will sell,
offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) which could
be integrated with the sale of the Securities in a manner which would
require the registration under the Securities Act of the Securities.
(g) Not to solicit any offer to buy or offer or sell the
Securities by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(h) While any of the Securities remain "restricted securities"
within the meaning of the Securities Act, to make available, upon
request, to any seller of such Securities the information specified in
Rule 144A(d)(4) under the Securities Act, unless the Company is then
subject to Section 13 or 15(d) of the Exchange Act.
(i) If requested by you, to use its best efforts to permit the
Securities to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities
Dealers, Inc. relating to trading in the PORTAL Market.
(j) That none of the Company, its Affiliates or any person
acting on its or their behalf (other than the Initial Purchasers) will
engage in any directed selling efforts (as that term is defined in
Regulation S) with respect to the Securities, and the Company and its
Affiliates and each person acting on its or their behalf (other than
the Initial Purchasers) will comply with the offering restrictions
requirement of Regulation S.
(k) That during the period of two years after the Closing Date
the Company will not, and will not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to resell any of the
Securities which constitute "restricted securities" under Rule 144 that
have been reacquired by any of them.
(l) That the Company shall apply the Purchase Price as set
forth in the Final Memorandum under the caption "Use of Proceeds."
7. Offering of Securities; Restrictions on Transfer. (a) Each Initial
Purchaser, severally and not jointly, represents and warrants that such Initial
Purchaser is a qualified institutional buyer as defined in Rule 144A under the
Securities Act (a "QIB"). Each Initial Purchaser, severally and not jointly,
agrees with the Company that (i) it will not solicit offers for, or offer or
sell, such Securities by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Securities Act) or in any
manner involving a
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<PAGE> 13
public offering within the meaning of Section 4(2) of the Securities Act and
(ii) it will solicit offers for such Securities only from, and will offer such
Securities only to, persons that it reasonably believes to be (A) in the case of
offers inside the United States, QIBs and (B) in the case of offers outside the
United States, to persons other than U.S. persons ("FOREIGN PURCHASERS," which
term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)) in reliance upon Regulation S under the Securities Act
that, in each case, in purchasing such Securities are deemed to have represented
and agreed as provided in the Final Memorandum under the caption "Transfer
Restrictions".
(b) Each Initial Purchaser, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) such Initial Purchaser understands that no action has been
or will be taken in any jurisdiction by the Company that would permit a
public offering of the Securities, or possession or distribution of
either Memorandum or any other offering or publicity material relating
to the Securities, in any country or jurisdiction where action for that
purpose is required;
(ii) such Initial Purchaser will comply with all applicable
laws and regulations in each jurisdiction in which it acquires, offers,
sells or delivers Securities or has in its possession or distributes
either Memorandum or any such other material, in all cases at its own
expense;
(iii) 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 in
accordance with Rule 144A or Regulation S under the Securities Act or
pursuant to another exemption from the registration requirements of the
Securities Act;
(iv) such Initial Purchaser has offered the Securities and
will offer and sell the Securities (A) as part of their distribution at
any time and (B) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in accordance
with Rule 903 of Regulation S or as otherwise permitted in Section
7(a); accordingly, neither such Initial Purchaser, its Affiliates nor
any persons acting on its or their behalf have engaged or will engage
in any directed selling efforts (within the meaning of Regulation S)
with respect to the Securities, and any such Initial Purchaser, its
Affiliates and any such persons have complied and will comply with the
offering restrictions requirement of Regulation S;
(v) each Initial Purchaser represents and agrees that (a) it
has not offered or sold, and, prior to the expiration of the period of
six months from the closing date for the issue of the Securities, will
not offer or sell any Securities to persons in the United Kingdom,
except to those persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal
or agent) for the purpose of
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<PAGE> 14
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) it has complied and will comply with all applicable provisions of
the Financial Services Act of 1986, with respect to anything done by it
in relation to the Securities in, from or otherwise involving the
United Kingdom, and (c) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Securities to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996, as amended, or is
a person to whom the document may otherwise lawfully be issued or
passed on.
(vi) such Initial Purchaser understands that the Securities
have not been and will not be registered under the Securities and
Exchange Law of Japan, and represents that it has not offered or sold,
and agrees not to offer or sell, directly or indirectly, any Securities
in Japan or for the account of any resident thereof except pursuant to
any exemption from the registration requirements of the Securities and
Exchange Law of Japan and otherwise in compliance with applicable
provisions of Japanese law; and
(vii) such Initial Purchaser agrees that, at or prior to
confirmation of sales of the Securities, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or
other remuneration that purchases 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 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Securities Act.
Terms used above have the meaning given to them by Regulation S."
Terms used in this Section 7(b) have the meanings given to them by Regulation S.
8. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Initial Purchaser and each person, if any, who controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in either Memorandum (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto), or
caused by any omission or alleged omission to state therein a material fact
necessary to make the statements therein in the light of the circumstances under
which they were made not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged
13
<PAGE> 15
untrue statement or omission based upon information relating to any Initial
Purchaser furnished to the Company in writing by such Initial Purchaser through
you expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to the Preliminary Memorandum shall not inure to the
benefit of the Initial Purchaser from whom the person asserting any such losses,
claims, damages or liabilities purchased Securities, or any person controlling
such Initial Purchaser, if a copy of the Final Memorandum (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not seen or given by or on behalf of such Initial Purchaser to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Securities to such person, and if the Final
Memorandum (as so amended or supplemented) would have cured the defect giving
rise to such losses, claims, damages or liabilities, unless such failure is the
result of noncompliance by the Company with Section 6(a) hereof.
(b) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Initial Purchaser, but only
with reference to information relating to such Initial Purchaser furnished to
the Company in writing by such Initial Purchaser through you expressly for use
in either Memorandum or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel and the
indemnifying party has agreed to pay the fees and expenses of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm engaged pursuant to clause (ii) of the preceding sentence (in
addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred upon written
request and presentation of invoices. Such firm shall be designated in writing
by Morgan Stanley & Co. Incorporated, in the case of parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any
14
<PAGE> 16
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. Notwithstanding the immediately preceding sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by this Section 8(c)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent that it in good
faith considers such request to be reasonable and (ii) provides written notice
to the indemnified party substantiating the unpaid balance as unreasonable, in
each case prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a) or
8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other hand from the offering of the Securities or (ii) if the allocation
provided by clause 8(d)(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 8(d)(i) above but also the relative fault of the Company on the one
hand and of the Initial Purchasers on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other hand in connection with the offering of the Securities
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of the Securities (before deducting expenses) received by the
Company and the total discounts and commissions received by the Initial
Purchasers, in each case as set forth in the Final Memorandum, bear to the
aggregate offering price of the Securities as set forth in the Final Memorandum.
The relative fault of the Company on the one hand and of the Initial Purchasers
on the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial
15
<PAGE> 17
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 8 are
several in proportion to the respective principal amount of Securities they have
purchased hereunder, and not joint.
(e) The Company and the Initial Purchasers agree that it would not be
just or equitable if contribution pursuant to this Section 8 were determined by
pro rata allocation (even if the Initial Purchasers were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in Section 8(d) shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities resold by
it in the initial placement of such Securities were offered to investors exceeds
the amount of any damages that such Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section
8 and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Initial Purchaser or any person controlling any Initial
Purchaser or by or on behalf of the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Securities.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange or the National Association
of Securities Dealers, Inc., (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and (b) in the case of any of the events specified in clauses
9(a)(i) through 9(a)(iv), such event, singly or together with any other such
event, makes it, in your judgment, impracticable to market the Securities on the
terms and in the manner contemplated in the Final Memorandum.
16
<PAGE> 18
10. Effectiveness; Defaulting Initial Purchasers. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, any one or more of the Initial Purchasers
shall fail or refuse to purchase Securities that it or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Initial Purchaser or Initial Purchasers agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Securities to be purchased on such date, the other Initial
Purchasers shall be obligated severally in the proportions that the principal
amount of Securities set forth opposite their respective names in Schedule I
bears to the aggregate principal amount of Securities set forth opposite the
names of all such non-defaulting Initial Purchasers, or in such other
proportions as you may specify, to purchase the Securities which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
on such date; provided that in no event shall the principal amount of Securities
that any Initial Purchaser has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such principal amount of Securities without the written consent of such Initial
Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase Securities which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of Securities
with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of Securities to be purchased on such date, and
arrangements satisfactory to you and the Company for the purchase of such
Securities are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Initial Purchaser
or of the Company. In any such case either you or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Final Memorandum or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Initial Purchaser from liability in
respect of any default of such Initial Purchaser under this Agreement.
If this Agreement shall be terminated by the Initial Purchasers, or any
of them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such Initial
Purchasers as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Initial Purchasers in connection
with this Agreement or the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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<PAGE> 19
12. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
NEW WORLD PASTA COMPANY
By: /s/ James Bohenick
Name: James Bohenick
Title: Vice President, Finance,
and Chief Financial Officer
PASTA GROUP, L.L.C.
By: /s/ James Bohenick
Name: James Bohenick
Title: Vice President, Finance,
and Chief Financial Officer
WINCHESTER PASTA, L.L.C.
By: /s/ James Bohenick
Name: James Bohenick
Title: Vice President, Finance,
and Chief Financial Officer
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
SCOTIA CAPITAL MARKETS (USA) INC.
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ David J. Frey
Name: David J. Frey
Title: Vice President
18
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
Initial Purchaser SECURITIES TO BE PURCHASED
<S> <C>
MORGAN STANLEY & CO. INCORPORATED.................................... $128,000,000
SCOTIA CAPITAL MARKETS (USA) INC..................................... $ 32,000,000
TOTAL: ......................................................... $160,000,000
</TABLE>
19
<PAGE> 21
EXHIBIT A
OPINION OF COUNSEL FOR THE COMPANY
The opinion of the counsel for the Company, to be delivered pursuant to
Section 5(c) of the Purchase Agreement shall be to the effect that:
A. The Company is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business as described in
the Final Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction set forth on Annex I to the Purchase Agreement.
B. Each of Winchester Pasta, L.L.C. and Pasta Group, L.L.C. is validly
existing as a limited liability company in good standing under the laws of the
jurisdiction of its organization, has the limited liability company power and
authority to own its property and to conduct its business as described in the
Final Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction set forth on Annex I to the Purchase Agreement;
all of the issued membership interests of Winchester Pasta, L.L.C. and Pasta
Group, L.L.C. have been duly and validly authorized and issued, and, based
solely on such counsel's review of the certificate of formation, resolutions and
limited liability company operating agreement, as amended, of such entities, are
owned of record by the Company.
C. The Purchase Agreement has been duly authorized, executed and
delivered by the Company and each of the Subsidiary Guarantors.
D. The Securities have been duly authorized, executed and delivered by
the Company and, when authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in accordance
with the terms of the Purchase Agreement (assuming due authorization, execution
and delivery of the Indenture by the Trustee and of the Registration Rights
Agreement by the Initial Purchasers), will be valid and binding obligations of
the Company, enforceable in accordance with their terms, except to the extent
that (A) enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and the discretion of the court before which any
proceeding therefor is brought and (B) rights to indemnification and
contribution contained therein may be limited by state or federal securities
laws or the public policy underlying such laws, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement.
E. Each of the Indenture, the Guarantees and the Registration Rights
Agreement has been duly authorized, executed and delivered by, and (assuming due
authorization, execution and
A-1
<PAGE> 22
delivery of the Indenture by the Trustee and of the Registration Rights
Agreement by the Initial Purchasers) is a valid and binding agreement of, the
Company and each Subsidiary Guarantor (to the extent such person is a party
thereto), enforceable in accordance with its terms, except to the extent that
(A) enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and the discretion of the court before which any
proceeding therefor is brought and (B) rights to indemnification and
contribution contained therein may be limited by state or federal securities
laws or the public policy underlying such laws.
F. The issuance and sale of the Securities by the Company, the
execution and delivery of the Indenture, the Registration Rights Agreement and
the Purchase Agreement by the Company, compliance by the Company with the terms
thereof, and the consummation of the transactions contemplated thereby will not
(a) conflict with the charter or by-laws of the Company, (b) result in any
violation of the General Corporation Law or related regulations of the State of
Delaware, the laws or regulations of the State of New York or the federal laws
or regulations of the United States of America (the "REQUIREMENTS OF LAW") or
(c) constitute a breach of or event of default under the terms of any indenture
or other agreement to which the Company or any of its subsidiaries is a party or
bound which is listed on Schedule 2 hereto, which have been identified to such
counsel in an Officers' Certificate as the only such material agreements to
which the Company is a party (except that such counsel need not express an
opinion as to any covenant, restriction or provision of any such agreement with
respect to financial covenants, ratios or tests or any aspect of the financial
condition or results of operations of the Company or any of its subsidiaries and
such counsel may assume that all such agreements or instruments are governed by
the law of New York or Delaware), or any judgment, order or decree known to such
counsel to be applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body or arbitrator of the
United States or the States of Delaware or New York having jurisdiction over the
Company or any of its subsidiaries (collectively, the "ORDERS"); provided,
however, that such counsel's opinion expressed in this paragraph may be based on
such counsel's review of those Requirements of Law which, in such counsel's
experience, are normally applicable to transactions of the type contemplated by
the Purchase Agreement, but without having made any special investigation (other
than our customary due diligence procedures for transactions of the type
contemplated by the Purchase Agreement) concerning any other Requirements of
Law, and those Orders specifically identified to such counsel by the Company in
an Officers' Certificate as being Orders to which it is subject; provided,
however, that such counsel need express no opinion in this paragraph with
respect to any U.S. federal or state securities laws or blue sky laws,
anti-fraud laws, or the rules and regulations of the National Association of
Securities Dealers, Inc.
G. The execution and delivery of the Indenture, Registration Rights
Agreement, the Purchase Agreement and its Guarantee by each Subsidiary
Guarantor, compliance by such Subsidiary Guarantor with the terms thereof and
the consummation of the transactions
A-2
<PAGE> 23
contemplated thereby will not (a) conflict with the organizational documents of
such Subsidiary Guarantor, (b) result in any violation of any Requirements of
Law or (c) constitute a breach of or event of default under the terms of any
indenture or other agreement to which the Company or any of its subsidiaries is
a party or bound which is listed on Schedule 2 hereto, which have been
identified to such counsel in an Officers' Certificate as the only such material
agreements to which such Subsidiary Guarantor is a party (except that such
counsel need not express an opinion as to any covenant, restriction or provision
of any such agreement with respect to financial covenants, ratios or tests or
any aspect of the financial condition or results of operations of the Company or
any of its subsidiaries and such counsel may assume that all such agreements or
instruments are governed by the law of New York or Delaware) or any Orders;
provided, however, that such counsel's opinion expressed in this paragraph may
be based on such counsel's review of those Requirements of Law which, in such
counsel's experience, are normally applicable to transactions of the type
contemplated by the Purchase Agreement, but without having made any special
investigation concerning any other Requirements of Law (other than our customary
due diligence procedures for transactions of the type contemplated by the
Purchase Agreement), and those Orders specifically identified to such counsel by
the Company in an Officers' Certificate as being Orders to which it is subject;
provided, however, that such counsel need express no opinion in this paragraph
with respect to U.S. federal or state securities laws or blue sky laws,
anti-fraud laws, or the rules and regulations of the National Association of
Securities Dealers, Inc.
H. No consent, approval, authorization, order, decree, or qualification
of, or registration or filing with, any federal, Delaware or New York executive,
legislative, judicial, administrative or regulatory body pursuant to any
Requirements of Law (collectively, "CONSENTS") is required for the execution and
delivery of, or the consummation of the transactions contemplated by, the
Purchase Agreement, the Indenture, the Registration Rights Agreement, the
Guarantees or the Securities, except for Consents which have been obtained and
are in full force and effect.
I. To the knowledge of such counsel, there are no legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or any
of its subsidiaries is subject other than proceedings as set forth in the Final
Memorandum and proceedings which would not reasonably be expected to have a
material adverse effect on the Company and its subsidiaries, taken as a whole,
or on the power or ability of the Company or any Subsidiary Guarantor to perform
its obligations under the Purchase Agreement, the Indenture, the Registration
Rights Agreement or the Securities or any Guarantee, as applicable, or to
consummate the transactions contemplated by the Final Memorandum.
J. The Company is not, and after giving effect to the offering and sale
of the Securities and the application of the proceeds thereof as described in
the Final Memorandum, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
A-3
<PAGE> 24
K. The statements in the Final Memorandum under the captions
"Description of Notes", "Description of Other Indebtedness", "Description of
Preferred Stock", "Exchange Offer; Registration Rights", "Private Placement" and
"Transfer Restrictions", insofar as such statements constitute summaries of the
documents, or provisions of documents, referred to therein, fairly summarize the
matters referred to therein.
L. Although the discussion in the Final Memorandum under the caption
"Certain United States Federal Income Tax Considerations" does not purport to
discuss all possible U.S. federal income tax consequences of the purchase,
ownership and disposition of the Securities, such discussion constitutes, in all
material respects, a fair and accurate summary of the U.S. federal income tax
consequences of the purchase, ownership and disposition of the Securities under
current law.
M. Assuming (1) the accuracy of the representations and warranties of
the Company set forth in Sections 1(v), 1(x), 1(z) and of the Initial
Purchasers' representations and warranties set forth in Section 7 of the
Purchase Agreement, (2) the due performance by the Company of the agreements set
forth in Sections 6(f), 6(g) and 6(j) of the Purchase Agreement and the due
performance by the Initial Purchasers of the agreements set forth in Section 7
of the Purchase Agreement and (3) compliance by the Initial Purchasers with the
offering and transfer procedures and restrictions described elsewhere in the
Purchase Agreement and in the Final Memorandum, the offer and sale to the
Initial Purchasers, and the initial resale by the Initial Purchasers of the
Securities in the manner contemplated by this Agreement and the Final
Memorandum, do not require registration under the Securities Act and the
Indenture does not require qualification under the Trust Indenture Act of 1939,
as amended, it being understood that such counsel does not express any opinion
as to any subsequent resale of any Security.
Such counsel shall also state that, in the course of preparation by the
Company of the Final Memorandum, such counsel has participated in conferences
with certain directors, officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Initial Purchasers and representatives of counsel for the
Initial Purchasers, at which conferences the contents of the Final Memorandum
and related matters were discussed and, although such counsel is not passing
upon, and does not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Final Memorandum and has made no
independent check or verification thereof (except to the extent stated in
paragraphs (K) and (L) hereof), on the basis of the foregoing, no facts have
come to such counsel's attention which have caused such counsel to believe that
the Final Memorandum, as of its date and as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits 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 (it being under
stood that such counsel need not express any opinion or belief with respect to
the financial statements and schedules and other financial and accounting data
included in or omitted from the Final Memorandum).
A-4
<PAGE> 25
Such opinions may be limited to the General Corporation Law of the
State of Delaware and the laws of the State of New York and the federal laws of
the United States and may be subject to such counsel's customary assumptions,
qualifications and exceptions to the extent reasonably acceptable to counsel for
the Initial Purchasers.
References to the Final Memorandum in this Exhibit A shall include any
amendment or supplement thereto prepared on or prior to the Closing Date.
A-5
<PAGE> 26
EXHIBIT B
OPINION OF WHITE & CASE LLP
The opinion of White & Case LLP to be delivered pursuant to Section
5(d) of the Purchase Agreement shall be to the effect that:
A. The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
B. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
general principles of equity, and will be entitled to the benefits of the
Indenture and the Registration Rights Agreement pursuant to which such
Securities are to be issued.
C. Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law and except as
rights to indemnification and contribution under the Registration Rights
Agreement may be limited under applicable law.
D. The statements in the Final Memorandum under the captions
"Description of Notes", "Private Placement" and "Transfer Restrictions", insofar
as such statements constitute summaries of the documents, or provisions of
documents, referred to therein, fairly summarize the matters referred to
therein.
E. Such counsel has no reason to believe that (except for financial
statements and schedules and other financial and statistical data as to which
such counsel need not express any belief) the Final Memorandum when issued
contained, or as of the date such opinion is delivered contains, any untrue
statement of a material fact or omitted or omits 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.
F. Based upon the representations, warranties and agreements of the
Company in Sections 1(v), 1(x), 1(z), 6(f), 6(g) and 6(j) of the Purchase
Agreement and of the Initial Purchasers in Section 7 of the Purchase Agreement,
it is not necessary in connection with the
B-1
<PAGE> 27
offer, sale and delivery of the Securities to the Initial Purchasers under the
Purchase Agreement or in connection with the initial resale of such Securities
by the Initial Purchasers in accordance with Section 7 of the Purchase Agreement
to register the Securities under the Securities Act of 1933 or to qualify the
Indenture under the Trust Indenture Act of 1939, it being understood that no
opinion is expressed as to any subsequent resale of any Security.
With respect to paragraph E above, White & Case LLP may state that
their opinion and belief are based upon their participation in the preparation
of the Final Memorandum (and any amendments or supplements thereto) and review
and discussion of the contents thereof (including the review of, but not
participation in the preparation of, the incorporated documents), but are
without independent check or verification except as specified.
B-2
<PAGE> 28
ANNEX I
Jurisdictions in which the Company is qualified to do business:
California
Kansas
Nebraska
Pennsylvania
Jurisdictions in which Pasta Group, L.L.C. is qualified to do business:
California
Colorado
Florida
Kentucky
Nebraska
New York
North Carolina
Ohio
Oregon
Pennsylvania
Texas
Washington
Jurisdictions in which Winchester Pasta, L.L.C. is qualified to do business:
Virginia
I-1
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
RECAPITALIZATION AGREEMENT
among
HERSHEY FOODS CORPORATION
and
HERSHEY CRE, INC.
and
HOMESTEAD, INC.
and
HERSHEY PASTA MANUFACTURING COMPANY
and
NEW WORLD PASTA, LLC
and
with respect to Sections 7.7 and 7.8 only
JOSEPH LITTLEJOHN & LEVY FUND III, L.P.
Dated as of December 15, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
1. Certain Definitions.............................................. 1
2. Reorganization; Recapitalization; Closing........................ 4
2.1 Reorganization.......................................... 4
2.2 Assets.................................................. 4
2.3 Excluded Assets......................................... 5
2.4 Assumed Liabilities..................................... 6
2.5 Excluded Liabilities.................................... 8
2.6 Closing................................................. 8
2.7 Adjustments to Base Transaction Consideration........... 10
3. Conditions to Closing............................................ 12
3.1 New World's Obligation.................................. 12
3.2 Transferors's Obligation................................ 12
4. Representations and Warranties of Transferors.................... 13
4.1 Authority; No Conflicts................................. 13
4.2 Organization and Standing............................... 14
4.3 Capital Stock of the Subsidiaries....................... 14
4.4 Business Financial Statements........................... 14
4.5 Title to Equipment; Condition........................... 15
4.6 Title to Facilities..................................... 15
4.7 Intellectual Property................................... 16
4.8 Contracts............................................... 16
4.9 Litigation; Decrees..................................... 18
4.10 Absence of Undisclosed Liabilities...................... 18
4.11 Absence of Changes or Events............................ 18
4.12 Compliance with Applicable Laws......................... 19
4.13 Environmental Matters................................... 19
4.14 Taxes................................................... 20
4.15 Labor and Employment Matters............................ 21
4.16 Employee Benefit Plans.................................. 21
4.17 Bank Accounts........................................... 22
4.18 Accounts Receivable; Powers of Attorneys................ 22
4.19 Ordinary Course of Business; Distributions.............. 22
4.20 Assets Necessary to Business............................ 22
5. Covenants of Transferors......................................... 22
5.1 Access.................................................. 22
5.2 Ordinary Conduct........................................ 23
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<PAGE> 3
5.3 Confidentiality......................................... 24
5.4 Accounts Receivable..................................... 24
5.5 Name Change of Subsidiaries............................. 24
5.6 WARN Act Covenant....................................... 24
5.7 Confidentiality Agreements.............................. 24
5.8 Financial Statements.................................... 25
5.9 Bridge Loan Expenses.................................... 25
5.10 Insurance............................................... 25
6. Representations and Warranties of New World...................... 26
6.1 Authority; No Conflicts................................. 26
6.2 Actions and Proceedings, etc............................ 26
6.3 Financing............................................... 27
6.4 No Knowledge of Misrepresentations or Omissions......... 27
6.5 Acquisition of Shares for Investment.................... 27
7. Covenants of New World, JLL and the Company...................... 27
7.1 Confidentiality......................................... 27
7.2 No Additional Representations........................... 28
7.3 Notification............................................ 28
7.4 Accounts Receivable..................................... 29
7.5 Customer and Supplier Notification...................... 29
7.6 WARN Act Covenant....................................... 29
7.7 Commitments............................................. 29
7.8 Guarantees.............................................. 30
7.9 Notice of Material Adverse Effect....................... 31
8. Mutual Covenants................................................. 31
8.1 Consents................................................ 31
8.2 Cooperation............................................. 32
8.3 Publicity............................................... 32
8.4 Best Efforts............................................ 33
8.5 Compliance.............................................. 33
8.6 Sales and Transfer Taxes, etc........................... 33
8.7 Promotional Materials and Customer Information.......... 34
8.8 Transitional Services Agreement......................... 35
8.9 Use of Hershey Trademarks............................... 35
8.10 Packaging Material...................................... 35
8.11 Further Assurances...................................... 36
8.12 Tax Matters............................................. 36
9. Employee and Employee Benefit Matters............................ 39
9.1 Employment of Transferred Employees..................... 39
9.2 Severance Benefits Upon Termination..................... 39
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<PAGE> 4
9.3 Terms and Conditions of Employment...................... 39
9.4 Collective Bargaining Agreements........................ 40
9.5 Retirement Plans........................................ 40
9.6 Welfare Benefits........................................ 40
9.7 COBRA Obligations....................................... 41
9.8 Vacation Time........................................... 41
9.9 No Third Party Beneficiaries............................ 41
10. Indemnification.................................................. 41
10.1 Indemnification by Transferors.......................... 41
10.2 Exclusive Remedy........................................ 42
10.3 Indemnification by New World............................ 42
10.4 Calculation of Losses................................... 43
10.5 Termination of Indemnification.......................... 43
10.6 Procedures Relating to Indemnification.................. 43
11. Assignment....................................................... 44
12. No Third-Party Beneficiaries..................................... 44
13. Termination...................................................... 44
14. Survival of Representations...................................... 46
15. Expenses......................................................... 46
16. Amendment and Waiver............................................. 46
17. Notices.......................................................... 46
18. Interpretation................................................... 48
19. Specific Performance............................................. 48
20. No Strict Construction........................................... 48
21. Counterparts..................................................... 48
22. Entire Agreement................................................. 48
23. Brokerage........................................................ 48
24. Disclaimer Regarding Estimates and Projections................... 49
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<PAGE> 5
25. Schedules........................................................ 49
26. Representation by Counsel; Interpretation........................ 49
27. Severability..................................................... 49
28. Bulk Transfer Laws............................................... 50
29. Governing Law.................................................... 50
30. Schedules and Exhibits........................................... 50
31. Jurisdiction..................................................... 50
32. Waiver of Jury Trial............................................. 50
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<PAGE> 6
Schedules and Exhibits
Schedule 1.2 Products
Schedule 1.8 Other Equipment
Schedule 1.10 Facilities
Schedule 1.16(A) Accounts of the General Ledger (assets)
Schedule 1.16(B) Accounts of the General Ledger (liabilities)
Schedule 1.18 Principal Trademarks
Schedule 1.23 Other Transferred Employees
Schedule 2.2.6 Other Trademarks and Patents
Schedule 2.3.7 Certain Excluded Assets
Schedule 2.6 Recapitalization Transactions
Schedule 4.1.2 Authority; No Conflicts
Schedule 4.4 Business Financial Statements
Schedule 4.5.1 Permitted Liens
Schedule 4.6(A) Restrictions
Schedule 4.6(B) Leases
Schedule 4.7.1 Principal Trademarks Exceptions
Schedule 4.7.2 Intellectual Property Exceptions
Schedule 4.8 Contracts
Schedule 4.9 Litigation and Claims
Schedule 4.10 Liabilities and Obligations
Schedule 4.11 Material Adverse Development
Schedule 4.12 Compliance with Applicable Laws
Schedule 4.13 Environmental Compliance
Schedule 4.14 Taxes
Schedule 4.15 Labor and Employment Matters
Schedule 4.16 Employee Benefit Plan
Schedule 4.17 Bank Accounts
Schedule 4.20 Assets Necessary for Business
Schedule 5.2 Ordinary Conduct
Schedule 8.1.2 Shared Contracts
Schedule 8.12.1 Allocation of Transaction Consideration
Exhibit 2.6.1 Legal Opinion, New World
Exhibit 2.6.2 Legal Opinion, Transferors
Exhibit 6.3(A) Debt Commitment Letter
Exhibit 6.3(B) Equity Commitment Letter
Exhibit 8.8 Transitional Services Agreement Term Sheet
- v -
<PAGE> 7
INDEX OF DEFINED TERMS
Adjustments to Base Purchase Price...................................... 10
Agreement .............................................................. 1
Antitrust Laws ......................................................... 33
Applicable Rate ........................................................ 10
Assets ................................................................. 4
Base Net Working Capital................................................ 1
Base Transaction Consideration.......................................... 9
Bridge Loan ............................................................ 25
Bridge Notes ........................................................... 29
Business ............................................................... 1
Business as currently conducted......................................... 15
Business Financial Statements........................................... 14
Business Plans ......................................................... 21
Business Unit .......................................................... 33
Cause .................................................................. 39
CERCLA ................................................................. 1
Closing ................................................................ 8
Closing Date ........................................................... 8
COBRA .................................................................. 41
Code ................................................................... 1
Commitment Letters...................................................... 27
Company ................................................................ 2
Company Guarantee ...................................................... 30
Confidentiality Agreement............................................... 28
Contracts .............................................................. 5
CRE .................................................................... 1
Customer Information.................................................... 2
Debt Commitment Letters................................................. 27
Environmental Claim..................................................... 19
Environmental Laws...................................................... 2
Environmental Matters................................................... 42
Equipment .............................................................. 2
Equity Commitment Letter................................................ 27
ERISA .................................................................. 21
Excluded Assets ........................................................ 5
Excluded Business ...................................................... 2
Excluded Liabilities.................................................... 8
Facilities ............................................................. 2
Final Transaction Consideration......................................... 11
FLSA ................................................................... 39
GAAP ................................................................... 15
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<PAGE> 8
Hershey Trademarks...................................................... 6
HFC .................................................................... 1
HFC Companies .......................................................... 13
Homestead .............................................................. 1
HSR Act ................................................................ 12
Income Statement ....................................................... 14
indemnified party ...................................................... 43
Independent Auditors.................................................... 11
Information ............................................................ 24
Information Memorandum.................................................. 28
Intellectual Property................................................... 5
Interim Balance Sheet................................................... 14
Interim Financial Statements............................................ 2
Interim Income Statement................................................ 14
Internal Financial Statements........................................... 25
Inventory .............................................................. 2
JLL .................................................................... 1
JLL Guarantee .......................................................... 30
knowledge .............................................................. 2
Liability .............................................................. 3
Liens .................................................................. 15
Losses ................................................................. 41
Material Adverse Effect................................................. 3
Materials of Environmental Concern...................................... 20
Net Working Capital..................................................... 3
New World .............................................................. 1
New World Liabilities................................................... 30
New World Obligations................................................... 30
Notice of Disagreement.................................................. 11
On Leave Employee ...................................................... 4
Other Trademarks ....................................................... 5
Permitted Exceptions.................................................... 16
Permitted Liens ........................................................ 15
Person ................................................................. 3
Principal Trademarks.................................................... 3
Promotional Materials................................................... 3
Recapitalization Transactions........................................... 8
Records ................................................................ 35
Reorganization Transactions............................................. 4
Shared Contracts ....................................................... 31
Shared Data Materials................................................... 34
Statement .............................................................. 11
Subsidiaries ........................................................... 3
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<PAGE> 9
Tax .................................................................... 3
Tax Return ............................................................. 4
Third Party Claim ...................................................... 43
Transferor Information.................................................. 28
Transferors ............................................................ 1
Transferred Benefit Plans............................................... 40
Transferred Employees................................................... 4
Transferred Pension Plans............................................... 40
Transitional Services Agreement......................................... 35
WARN Act ............................................................... 24
Winchester Mill Agreement............................................... 4
Year-End Balance Sheet.................................................. 14
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<PAGE> 10
This RECAPITALIZATION AGREEMENT (this "Agreement"), dated as
of December 15, 1998, by and among HERSHEY FOODS CORPORATION ("HFC"), a Delaware
corporation, HERSHEY CRE, INC., a Delaware corporation ("CRE"), HOMESTEAD, INC.,
a Delaware corporation ("Homestead"), HERSHEY PASTA MANUFACTURING COMPANY, a
Delaware corporation, NEW WORLD PASTA, LLC, a Delaware limited liability company
("New World"), and. with respect to Sections 7.7 and 7.8 only, JOSEPH LITTLEJOHN
& LEVY FUND III, L.P. ("JLL"); CRE and HOMESTEAD are each a wholly owned
subsidiary of HFC, and together with HFC are referred to herein as the
"Transferors,"
W I T N E S S E T H:
WHEREAS, the Transferors and the Subsidiaries (defined herein)
conduct the Business (defined herein);
WHEREAS, the Parties desire that the Assets (defined herein)
be contributed to the Company and that the Company assume the Assumed
Liabilities (defined herein); and
WHEREAS, the Parties desire to recapitalize the Company
following the contribution of the Assets to the Company and the assumption of
the Assumed Liabilities by the Company.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement (including
the Schedules and Exhibits hereto), the following definitions shall apply:
1.1 "Base Net Working Capital" shall mean eleven million three
hundred thousand dollars ($11,300,000).
1.2 "Business" shall mean the business as conducted by
Transferors and the Subsidiaries (and their predecessors-in-interest)
relating to the manufacture, marketing, sale and distribution at any
time prior to the Closing of the products listed on Schedule 1.2 hereto
and pasta and noodle products similar to those listed on Schedule 1.2
hereto.
1.3 "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Sections 9601,
et seq., as amended from time to time.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any reference to any particular Code provision shall be
interpreted to include any revision of or successor to such provision
regardless of how numbered or classified.
1.5 "Company" means Hershey Pasta Manufacturing Company, and
its successors, a Delaware corporation.
<PAGE> 11
1.6 "Customer Information" shall mean all current customer and
vendor lists and price lists to the extent relating to the products
sold by the Business as of the Closing Date.
1.7 "Environmental Laws" means all federal, interstate, state
and local statutes, regulations, and ordinances concerning pollution or
protection of the environment and occupational safety and health,
including without limitation those relating to the presence, use,
production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, cleanup of, or human exposure to,
Materials of Environmental Concern (as defined herein).
1.8 "Equipment" shall mean, as of any date, all machinery,
equipment, vehicles, furniture, fixtures, supplies and other tangible
assets owned by Transferors or the Subsidiaries used at the Facilities
in the Business as of such date, together with the items set forth on
Schedule 1.8 hereto, but Equipment shall not include any item described
on Schedule 2.3.7 hereto.
1.9 "Excluded Business" shall mean any business currently or
hereafter conducted by Transferors, its affiliates and/or its licensees
other than the Business.
1.10 "Facilities" shall mean the land, buildings, facilities,
structures, leasehold and other improvements and fixtures located
thereon described in Schedule 1.10 hereto which consists of the
following facilities used in the Business: (i) the facility at Fresno,
California owned by CRE; (ii) the facilities at Lebanon, Pennsylvania
and Louisville, Kentucky owned by HFC; (iii) the facilities at
Winchester, Virginia (excluding the Mill Assets as defined in the
Winchester Mill Agreement); Kansas City, Kansas; and Omaha, Nebraska
owned by the Subsidiaries together with all easements, privileges,
licenses, permits, rights-of-way, riparian and other water rights,
lands underlying any adjacent streets or roads and appurtenances, if
any, pertaining to or accruing to the benefit of such facilities.
1.11 "Interim Financial Statements" means collectively, the
Interim Balance Sheet and the Interim Income Statement.
1.12 "Inventory" shall mean, as of any date, all products of
the Business held for sale by the Business and materials, work
in-process, packaging material, and parts and supplies that are held or
used primarily by the Transferors or the Subsidiaries in connection
with the manufacture, marketing, sale or distribution of the products
of the Business in the Business as of such date.
1.13 The term "knowledge," when used in the phrase "to the
knowledge of Transferors," shall mean, and shall be limited to, the
actual knowledge, of the following individuals: Jay Carr, Dennis
Eshleman, James Bohenick, David Gloeckler, Burton Freeman Cecil
Archbold, William F. Christ and Robert M. Reese.
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<PAGE> 12
1.14 "Liability" shall mean any liability or obligation of any
kind and nature, whether known or unknown, accrued, absolute,
contingent or otherwise, and whether arising before, on or after the
Closing Date and whether due or to become due.
1.15 "Material Adverse Effect" shall mean a material adverse
effect on the assets, liabilities, operations or condition (financial
or otherwise) of the Business taken as a whole.
1.16 "Net Working Capital" shall mean, as of a particular date
(i) the sum of net accounts receivable, inventories and supplies and
certain prepaid expenses of the Transferors and the Subsidiaries
relating to the Business reflected as of such date in the accounts of
the general ledger of the Business specified on Schedule 1.16(A)
hereto, less (ii) the sum of accounts payables and certain accrued
liabilities reflected as of such date in the accounts of the general
ledger of the Business specified on Schedule 1.16(B). The accounts set
forth on Schedule 1.16(A) and Schedule 1.16(B) shall be determined in a
manner consistent with the adjustments, accounting principles and
practices used in the preparation of the Interim Balance Sheet,
provided that any Excluded Liabilities and any Excluded Assets shall be
excluded from Net Working Capital.
1.17 "Person" shall mean any individual, corporation,
partnership, limited liability company, business trust, joint stock
company, trust, unincorporated organization, joint venture, firm or
other entity, or a government or any political subdivision or agency,
department or instrumentality thereof.
1.18 "Principal Trademarks" shall mean the brand names,
trademarks and registrations and applications for registrations thereof
as listed on Schedule 1.18 hereto, and all associated goodwill.
1.19 "Promotional Materials" shall mean all current print
materials (excluding any letterhead, stationery or business cards
bearing any of the Hershey Trademarks) television commercials,
promotional materials, point of sale materials and advertising copy
currently used by Transferors or the Subsidiaries, as applicable,
primarily in connection with the Business.
1.20 "Subsidiaries" shall mean Hershey Pasta Group Winchester,
Inc., a Delaware corporation, its successors, and Hershey Pasta
Manufacturing Company, a Delaware corporation, each directly or
indirectly a wholly owned subsidiary of HFC.
1.21 "Tax" shall mean any federal, state, local, or foreign
income, payroll, employment, excise, environmental (including taxes
under Code Section59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, real
property, personal property, sales, use, transfer, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
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<PAGE> 13
1.22 "Tax Return" shall mean any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
1.23 "Transferred Employees" shall mean (i) each person who is
employed as of the Closing Date at any of the Facilities by the
Transferors or by one of the Subsidiaries and each other person
employed as of the Closing Date by one of the Subsidiaries (including
each such person who as of the Closing Date is on a sickness,
disability (other than long-term disability) or employer-approved other
leave of absence), and (ii) each person listed on Schedule 1.23 hereto
who is employed as of the Closing Date by HFC (including each such
person who as of the Closing Date is on a sickness, disability (other
than long-term disability) or employer approved other leave of
absence); provided, however, that no person (an "On Leave Employee")
who, as of the Closing Date, is on a sickness, disability or other
leave of absence shall be deemed to be a Transferred Employee unless
and until such person actually reports to the applicable Subsidiary or
New World for work after the Closing.
1.24 "Winchester Mill Agreement" shall mean the agreement
between Hershey Pasta & Grocery Group and Miller Milling Company, dated
July 29, 1998.
2. Reorganization; Recapitalization; Closing.
2.1 Reorganization. Upon the terms and subject to the
conditions set forth in this Agreement (including the following
provisions of this Section 2), the parties agree that following the
execution of this Agreement and prior to the consummation of the
Closing the Transferors shall take such actions and undertake such
transactions as they reasonably determine so that prior to the Closing
the Company shall hold directly or indirectly all of the Assets subject
to the Assumed Liabilities, such actions and transactions being
referred to herein as the "Reorganization Transactions".
2.2 Assets. The term "Assets" shall mean all right, title and
interest of Transferors in the following assets relating to the Business as of
the Closing Date:
2.2.1 the Principal Trademarks;
2.2.2 the Facilities;
2.2.3 the Inventory;
2.2.4 the Equipment;
2.2.5 subject to receipt of any required consents and the
provisions of Section 8.1.2 hereof, all contracts, agreements,
licenses, leases and other legally binding arrangements, whether oral
or written, (A) that are listed or described on Schedule 4.8 hereto or
(B) if not
- 4 -
<PAGE> 14
so listed or described, that relate exclusively to the ownership or
operation of the Business or to which the Assets are exclusively
subject and (x) are in existence on the date hereof or (y) are entered
into in the ordinary course of business on or prior to the Closing Date
(collectively, the "Contracts"), including all commitments relating to
and orders for the purchase and sale of products of the Business;
2.2.6 (a) the trademarks, any associated goodwill and any
applications or registrations therefor listed on Schedule 2.2.6 hereto
("Other Trademarks"); (b) the patents, patent applications, copyrights
and Internet domain names listed on Schedule 2.2.6 hereto and any
applications or registrations therefor; (c) any trade secrets,
know-how, recipes, product formulations, processing procedures and
finished product specifications, in each case, primarily used in the
manufacture, distribution or sale of the products of the Business or
primarily relating to the Business (the items referenced in this clause
(c) are referred to collectively as, the "Intellectual Property");
provided, however, that, with respect to any Intellectual Property that
is used both in the Business as well as in any Excluded Business, only
the rights to use such Intellectual Property in connection with the
Business as currently conducted or currently proposed to be conducted
shall be licensed to the Company on a royalty-free, perpetual basis and
the applicable Transferors will retain the ownership of all right,
title and interest in and to such Intellectual Property with respect to
all other uses;
2.2.7 subject to Section 8.7, Promotional Material and
Customer Information;
2.2.8 computer and information systems and software used
exclusively in connection with the conduct of the Business to the
extent they are transferable;
2.2.9 accounts receivable of the Transferors to the extent
they relate to the Business;
2.2.10 all books of account primarily relating to the Business
provided that the Transferors may retain copies of such records;
2.2.11 a printed copy of all personnel records exclusively
relating to the Transferred Employees provided that the Transferors may
retain copies of such records, and
2.2.12 cash margin deposits identified to open futures
contracts made with third parties in connection with the Business and
such deposits will not be included in the calculation of Base Net
Working Capital or Net Working Capital.
2.3 Excluded Assets. The Assets shall not include any assets
other than the assets specifically listed or described in Section 2.2.
Notwithstanding the definition of Assets set forth above, the Assets shall
expressly exclude and the assets, properties, rights and interest of the
Subsidiaries shall exclude the following whether or not related to the Business
(collectively, the "Excluded Assets"):
- 5 -
<PAGE> 15
2.3.1 all cash and cash equivalents and marketable securities
held by the Transferors and the Subsidiaries and intercompany accounts
or loans receivable reflecting any liability of any Transferor or any
affiliate or subsidiary of any Transferor (other than the
Subsidiaries);
2.3.2 subject to the provisions of Section 5.10 all rights
under any insurance policy (including claims whether or not reported)
insuring any Transferor or any affiliate or subsidiary of any
Transferor, including Subsidiaries against any risk of any type or
description or insuring the life of any Transferred Employee; all
rights (including claims whether or not reported) to receive tax
refunds, all tax returns relating to the Business and any notes,
worksheets, files or documents relating thereto; and any legal files or
other documents covered by an evidentiary privilege of any Transferor
that are not exclusively related to the Assumed Liabilities, Business
or Assets;
2.3.3 all books, documents, records and files prepared in
connection with the transactions contemplated by this Agreement,
including bids received from other parties and analyses relating to the
Assets, the Assumed Liabilities and the Business;
2.3.4 all of Transferors' rights under or pursuant to this
Agreement and the other agreements between New World or the Company
following the Closing and Transferors contemplated hereby;
2.3.5 the trademarks and trade names "Hershey", "Hershey
Foods" and any other trademark, tradename, corporate or company name,
or service mark that incorporates the word "Hershey", including any
abbreviations and derivatives of the word "Hershey", and all logos,
designs and goodwill associated therewith ("Hershey Trademarks");
2.3.6 computer and information systems and software and other
information technology equipment that is not exclusively used in the
Business;
2.3.7 the assets listed or described on Schedule 2.3.7 hereto;
2.3.8 any asset, including but not limited to all machinery,
equipment, vehicles, furniture, fixtures, supplies and other tangible
assets that is used or held for use primarily in an Excluded Business;
and
2.3.9 all employee benefit plan assets except as specifically
provided in Section 9 hereof.
HFC may cause the Subsidiaries to assign and transfer their right, title and
interest in and to any Excluded Assets held by such Subsidiaries to any of the
Transferors or any other Person designated by HFC at any time prior to Closing
without any consideration or value being received by the Subsidiaries for such
Excluded Assets.
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<PAGE> 16
2.4 Assumed Liabilities. At or prior to the Closing, HFC shall
cause the Company to assume and agree to be responsible for and to discharge or
otherwise satisfy the Assumed Liabilities, but only the Assumed Liabilities, in
accordance with the terms thereof. The Assumed Liabilities shall consist of all
Liabilities that have arisen prior to or arise after the Closing in the conduct
of or relate to the Business or any of the Assets, including, but not limited
to, the following:
2.4.1 all trade payables and accrued expenses of the Business,
including all such items reflected in Closing Net Working Capital;
2.4.2 all obligations and liabilities of Transferors or any of
their affiliates, other than the Subsidiaries under the Contracts;
2.4.3 all Liabilities, expenses or damages arising out of or
in connection with the design, manufacture, marketing, sale and
distribution of any product of the Business or otherwise in connection
with the Business, whether disclosed or undisclosed, including without
limitation (A) all product liability claims, infringement claims,
warranty or merchantability claims and claims for personal injuries,
property damage or losses that involve the sale or use of any product
sold or otherwise disposed of by the Business, whether or not
identified on Schedule 4.9 hereto and (B) any liabilities or
obligations for refunds, adjustments, allowances, exchanges, returns,
commissions, detailers' fees or other trade or consumer promotional
activities related to or arising from the sale or other disposal of any
product of the Business;
2.4.4 all Liabilities, expenses and damages related in any way
to the Facilities, including without limitation expenses and damages
relating to (i) personal injury or economic or property damage, (ii)
protection of human health and the environment, (iii) any hazardous or
toxic wastes, substances or material, or (iv) arising under
Environmental Laws;
2.4.5 all Liabilities relating to the Transferred Employees,
subject to Section 9 of this Agreement;
2.4.6 all Liabilities for sales, use, gross receipts, excise,
value-added, business, goods and services, transfer, stamp, recording,
documentary, registration, conveyancing or similar taxes, duties or
expenses related to the transactions contemplated by this Agreement;
2.4.7 all Liabilities, expenses or damages arising out of or
in connection with (A) any pending lawsuit or claim listed on Schedule
4.9 hereto and (B) each claim of any current or former employee of the
Business under applicable workers' compensation law; and
2.4.8 other Liabilities specifically assumed by the Company
under this Agreement.
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The Company's obligations under this Section 2.4 shall not be
subject to offset or reduction by reason of any actual or alleged breach of any
representation, warranty or covenant contained in this Agreement or any
agreement or document delivered in connection herewith or any right or alleged
right to indemnification hereunder. Nothing in this Section 2.4 shall otherwise
limit New World's rights or remedies hereunder (including its rights under
Section 10 hereof) regarding any breach by Transferors of their respective
representations, warranties or covenants.
2.5 Excluded Liabilities. Except as provided in this Agreement
and the Schedules hereto and notwithstanding Section 2.4 hereof, the Company
shall not assume, and the Transferors shall retain, the Excluded Liabilities of
the Transferors. The "Excluded Liabilities" shall mean the following specific
Liabilities of the Transferors.
2.5.1 any obligations of Transferors under this Agreement and
the Transitional Services Agreement;
2.5.2 as provided in and subject to Section 15 of this
Agreement, any obligations or liabilities of Transferors for expenses
or fees incident to or arising out of the negotiation, preparation,
approval or authorization of this Agreement and the other agreements
contemplated hereby or the consummation (or preparation for the
consummation) of the transactions contemplated hereby and thereby,
including attorneys' and accountants' fees;
2.5.3 as provided in and subject to Section 8.12 of this
Agreement, and except as provided in Section 8.6 of this Agreement, any
obligation or liability of Transferors or the Subsidiaries with respect
to federal, state, local or foreign income taxes and any liabilities
for interest, penalties or additions to any of such income taxes
relating to any taxable period (or the portion thereof) ending on or
prior to the Closing Date or to the transfer by Transferors of the
Assets to the Company (except taxes specifically allocated to, prorated
to or assumed by the Company or retained by the Subsidiaries under this
Agreement); provided, that any income resulting from a transaction
entered into by the Subsidiaries outside of the normal course of
business on the Closing Date following the Closing shall be deemed to
have occurred on the day following the Closing Date;
2.5.4 any obligation or liability of Transferors or the
Subsidiaries with respect to retiree medical benefits under HFC's
retiree medical benefit program to which any Transferred Employee who
is 55 years old or older as of the Closing Date is entitled;
2.5.5 any obligation or liability of Transferors or the
Subsidiaries with respect to all long term disability benefits payable
to any then current or former employee of the Business who is receiving
such benefits as of the Closing Date; and
2.5.6 all Liabilities arising at any time out of any Excluded
Asset.
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2.6 Closing. The closing (the "Closing") of the transactions
enumerated on Schedule 2.6 hereto (the "Recapitalization Transactions") and the
other transactions contemplated hereby that have not been consummated prior to
such time shall be held at the offices of Kirkland & Ellis, 153 East 53rd
Street, New York, New York at 10:00 a.m., local time, on January 28, 1999, or,
if the conditions to Closing set forth in Sections 3.1.3 and 3.2.3 shall not
have been satisfied or waived by such date, on the third business day following
satisfaction of such conditions. The date on which the Closing shall occur is
hereinafter referred to as the "Closing Date," and the Closing shall be deemed
effective as of the close of business on the Closing Date. On the business day
immediately preceding the Closing Date, New World and Transferors shall conduct
a pre-Closing at the same location as the Closing, commencing at 10:00 a.m.,
local time, at which each party shall present for review by the other party
copies in execution form of all documents required to be delivered by such party
at the Closing.
2.6.1 At the Closing, subject to and on the terms and
conditions set forth in this Agreement including Schedule 2.6 hereto,
(i) an aggregate amount of $450,000,000 shall be delivered to
Transferors by wire transfers to one or more bank accounts of
Transferors designated in writing by HFC in immediately available
funds, being the cash consideration to be paid to the Transferors
pursuant to the Recapitalization Transactions as described on Schedule
2.6 hereto (the "Base Transaction Consideration"), (ii) New World shall
cause and the Company shall deliver to Transferors (A) an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP with respect to the matters
set forth on Exhibit 2.6.1 hereto, (B) certified copies of resolutions
duly adopted by New World's board of directors authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby, (C) certified copies of New World's
certificate of incorporation and by-laws, (D) a certificate of the
Secretary or an Assistant Secretary of New World as to the incumbency
of the officer(s) of New World (who shall not be such Secretary or
Assistant Secretary) executing this Agreement and the Transitional
Services Agreement and (E) a short-form certificate of good standing of
New World, certified by the Secretary of State of New World's state of
incorporation as of a date not more than three business days prior to
the Closing Date.
2.6.2 At the Closing, subject to and on the terms and
conditions set forth in this Agreement, Transferors shall deliver or
cause to be delivered to New World (A) certified copies of resolutions
duly adopted by Transferors' boards of directors authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby as applicable, (B) certified copies of
each Transferor's certificate of incorporation and bylaws, (C) a
certificate of the Secretary or an Assistant Secretary of each
Transferor as to the incumbency of the officer(s) of such Transferor
(who shall not be such Secretary or Assistant Secretary) executing this
Agreement and the Transitional Services Agreement, (D) resignations of
the directors and officers of the Subsidiaries effective as of the
Closing, (E) a short-form certificate of good standing of each
Transferor, certified by the Secretary of State of Delaware as of a
date not more than three business days prior to the Closing Date, (F)
evidence that the Reorganization Transactions shall have been
consummated or will be consummated contemporaneous with the Closing and
(G) an
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opinion of Kirkland & Ellis or internal counsel of HFC with respect to
the matters set forth on Exhibit 2.6.2 hereto. With respect to the
Principal Trademarks and the Intellectual Property included in the
Assets, such instruments to be delivered at the Closing or prior to the
Closing in connection with the Reorganization Transactions shall
consist of assignments in form appropriate for recordation with
governmental agencies or authorities responsible for intellectual
property in the appropriate jurisdiction, it being understood that the
cost of preparing, legalizing and recording any such documents shall be
borne by New World or the Company following the Closing.
2.6.3 Certain of the Assets may be in the possession of third
parties (such as contract manufacturers) on the Closing Date. Prior to
the Closing, except as otherwise provided herein or otherwise agreed by
the parties, HFC and New World shall agree on reasonable procedures to
transfer possession of the Assets to the Company as soon as practicable
after the Closing Date, and Transferors shall provide reasonable
assistance to the Company in connection with the transfer thereof. All
out-of-pocket costs incurred by Transferors, New World or the Company
in connection with transferring such Assets shall be borne by New World
or the Company following the Closing.
2.6.4 At the Closing New World and/or the Company and JLL and
certain other investors in New World shall enter into a Stockholders
Agreement and a Registration Agreement the terms of which shall
include, among other things, (i) a provision that JLL or New World
and/or their respective affiliates shall not sell any of the common
stock of the Company that is owned by such person unless HFC is offered
an equal opportunity to participate in such transaction on a pro rata
basis and on terms and conditions that are identical (including price
and type of consideration) to those on which JLL or New World and/or
their respective affiliates sell their shares of common stock; provided
that this provision will not apply to transfers of such common stock to
any affiliate of JLL or New World who agrees to be bound by the
stockholders agreement, and (ii) if the Company files a registration
statement with the Securities and Exchange Commission for the sale or
issuance of the Company's common stock (other than on Form S-4 or S-8
or any similar form), including any registration statement pursuant to
a demand made by any other holder of the Company's common stock, then
HFC shall have a right to piggyback on such registration on a pro rata
basis with any other holder of the Company's common stock participating
in such registration, it being understood that if the underwriters in
such registration determine that it is necessary to limit participation
in such registration, the shares to be registered by HFC thereunder
shall be subject to the same terms and conditions of limitation with
respect to inclusion therein as the shares of JLL and/or its affiliates
that are included or entitled to be included in such registration on a
pari passu basis.
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2.7 Adjustments to Base Transaction Consideration.
2.7.1 The Base Transaction Consideration shall be (i) reduced
by the amount, if any, by which the Net Working Capital as of the
Closing Date is less than the Base Net Working Capital or (ii)
increased by the amount, if any, by which the Net Working Capital as of
the Closing Date is greater than the Base Net Working Capital,
provided, that the Base Transaction Consideration shall not be reduced
or increased if the differences between the Net Working Capital as of
the Closing Date and the Base Net Working Capital is less than
$1,000,000, whether positive or negative. To the extent that the Base
Transaction Consideration is reduced as contemplated hereby, HFC shall
pay such amount to the Company or to the extent that the Base
Transaction Consideration is increased as contemplated hereby the
Company shall pay such amount to HFC, in either case, within five (5)
days of the final determination of such amount together with interest
thereon at the prime rate as then in effect at Citibank (the
"Applicable Rate") calculated on the basis of the number of days
elapsed from the Closing Date to the date of the payment, by wire
transfer of immediately available funds to an account designated by the
Company or HFC, as applicable.
2.7.2 Within 45 days after the Closing Date, HFC shall prepare
and deliver to New World a statement (in its final and binding form,
the "Statement") setting forth the Net Working Capital as of the close
of business on the Closing Date. During the 45 days immediately
following New World's receipt of the Statement, New World shall be
permitted to review the working papers relating to the Statement. The
Statement shall become final and binding upon the parties on the
forty-fifth day following receipt thereof by New World unless New World
gives written notice of its disagreement (a "Notice of Disagreement")
to HFC prior to such date. Any Notice of Disagreement shall (A) specify
in reasonable detail the nature and amount of any disagreement so
asserted and (B) only include disagreements based on mathematical
errors or based on the Net Working Capital as of the close of business
on the Closing Date not being calculated in accordance with the
definition of Net Working Capital in Section 1.16. If a timely Notice
of Disagreement is received by HFC, then the Statement (as revised in
accordance with clause (x) or (y) below) shall become final and binding
upon the parties on the earlier of (x) the date the parties hereto
resolve in writing any differences they have with respect to any matter
specified in the Notice of Disagreement or (y) the date any matters
properly in dispute are finally resolved in writing by the Independent
Auditors. During the 60 days immediately following the delivery of a
Notice of Disagreement, Transferors and New World shall seek in good
faith to resolve in writing any differences which they may have with
respect to any matter specified in the Notice of Disagreement. During
such period, Transferors shall have full access to the working papers
of New World prepared in connection with New World's preparation of the
Notice of Disagreement. At the end of such 60-day period, HFC and New
World shall submit to an independent auditing firm of national
recognition mutually selected by New World and HFC (the "Independent
Auditors") for review and resolution of any and all matters which
remain in dispute and which were properly included in the Notice of
Disagreement, and the
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<PAGE> 21
Independent Auditors shall make a final determination of the Net
Working Capital as of the close of business on the Closing Date, which
determination shall be binding on the parties (it being understood,
however, that the Independent Auditors shall act as an arbitrator to
determine, based solely on presentations by New World and Sellers (and
not by independent review)), only those matters which remain in dispute
and which were properly included in the Notice of Disagreement).
The Independent Auditors shall be retained to resolve such dispute
promptly and, in any event, to resolve such dispute within thirty (30) days from
the date the dispute is submitted to the Independent Auditors. New World shall
pay one-half and Transferors shall pay one-half of the fees and expenses of the
Independent Auditors. The determination of the Net Working Capital as of the
close of business on the Closing Date as determined by agreement of the parties
or by the Independent Auditor shall be final and binding on the parties. The
Base Transaction Consideration as further adjusted pursuant to this Section 2.7
shall be referred to herein as the "Final Transaction Consideration".
3. Conditions to Closing.
3.1 New World's Obligation. The obligation of New World to
enter into and consummate the transactions contemplated by this Agreement is
subject to the satisfaction (or waiver by New World) as of the Closing of the
following conditions:
3.1.1 Other than as a result of the consummation of the
Reorganization Transactions, the representations and warranties of
Transferors made in this Agreement shall be true and correct as of the
date hereof and, on and as of the Closing Date, as though made on and
as of the Closing Date, (except for representations and warranties that
speak as of a specific date or time which need only be true and correct
as of such date or time), and Transferors shall have performed or
complied with all obligations and covenants required by this Agreement
to be performed or complied with by Transferors by the time of the
Closing, except for breaches of such representations, warranties,
obligations and covenants together with all supplements, modifications
and updates to the Schedules hereto by Transferors prior to the Closing
as permitted by this Agreement that, in the aggregate, would not have a
Material Adverse Effect; and HFC shall have delivered to New World a
certificate dated as of the Closing Date and signed by a Vice President
of HFC confirming the foregoing;
3.1.2 No injunction or order of any court or administrative
agency of competent jurisdiction shall be in effect as of the Closing
which restrains or prohibits the consummation of the transactions
contemplated hereby or the exercise by New World of control over the
Company;
3.1.3 The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have
expired or been terminated;
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<PAGE> 22
3.1.4 New World shall have received the proceeds of the
financing contemplated by the Debt Commitment Letters.
3.1.5 New World shall have received the audited financial
statements of the Business as contemplated by Section 5.8(a) below.
3.1.6 The Transferors shall have consummated the
Reorganization Transactions as contemplated by Section 2.1 above.
3.2 Transferors's Obligation. The obligation of Transferors to
enter into and consummate the transaction contemplated by this Agreement is
subject to the satisfaction (or waiver by Transferors) as of the Closing of the
following conditions:
3.2.1 The representations and warranties of New World made in
this Agreement shall be true and correct as of the date hereof and, on
and as of the Closing Date, as though made on and as of the Closing
Date, (except for representations and warranties that speak as of a
specific date or time which need only be true and correct as of such
date or time), and New World shall have performed or complied with the
obligations and covenants required by this Agreement to be performed or
complied with by New World by the time of the Closing, except for
breaches of such representations, warranties, obligations and covenants
that, in the aggregate, would not have a material adverse effect on the
expected benefits to Transferors of the transactions contemplated by
this Agreement; and New World shall have delivered to Transferors a
certificate dated the Closing Date and signed by the President or a
Vice President of New World confirming the foregoing.
3.2.2 No injunction or order of any court or administrative
agency of competent jurisdiction shall be in effect as of the Closing
which restrains or prohibits the purchase and sale of the Assets.
3.2.3 The waiting period under the HSR Act shall have expired
or been terminated.
4. Representations and Warranties of Transferors. Transferors
hereby represent and warrant to New World as follows:
4.1 Authority; No Conflicts.
4.1.1 Each of the Transferors and the Subsidiaries
(collectively, the "HFC Companies") is a corporation duly organized,
validly existing and in good standing under the laws of the state of
its incorporation. Each of the Transferors and the Company has all
requisite corporate power and authority to enter into this Agreement
and the Transitional Services Agreement, to the extent it is a party
hereto or thereto, and to consummate the transactions contemplated
hereby and thereby. All corporate acts and other proceedings required
to be taken by each of the Transferors and the Company to authorize the
execution,
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<PAGE> 23
delivery and performance of this Agreement and the Transitional
Services Agreement, to the extent it is a party hereto or thereto, and
the consummation of the transactions contemplated hereby and thereby,
have been or will have been at or prior to the Closing duly and
properly taken. This Agreement has been duly executed and delivered by
each Transferor and the Company, and the Transitional Services
Agreement that is contemplated hereby to be executed and delivered by
any Transferor will be duly and validly executed and delivered by such
Transferor. This Agreement and the Transitional Services Agreement
constitute, or will constitute, as the case may be, valid and binding
obligations of the applicable Transferor enforceable against the
applicable Transferor and the Company in accordance with their
respective terms.
4.1.2 Subject to the matters disclosed on Schedule 4.1.2
hereto, the execution and delivery of this Agreement by each Transferor
and the Company and the execution and delivery of the Transitional
Services Agreement as is contemplated hereby to be executed and
delivered by any Transferor do not or will not, as the case may be, and
the consummation by each Transferor and the Company, as applicable, of
the transactions contemplated hereby and with respect to the Transferor
thereby and compliance by each Transferor and the Company, as
applicable, with the terms hereof and with respect to the Transferors
thereof will not, conflict with, or result in any violation of or
default under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, or result
in the creation of any lien, claim, encumbrance, security interest,
option, charge or restriction of any kind upon any of the Assets under,
or require any consent, authorization or approval under any provision
of the certificate of incorporation or by-laws of the applicable
Transferor or the Company, any judgment, order or decree or any
statute, law, ordinance, rule or regulation applicable to the
applicable Transferor or the Company or the Assets, other than any such
conflicts, violations, defaults, rights or liens, claims, encumbrances,
security interests, options, charges or restrictions that, individually
or in the aggregate, would not have a Material Adverse Effect and would
not materially impair the ability of Transferors or the Company to
consummate the transactions contemplated hereby, or that result from or
are required under the HSR Act or that result from or are required by
reason of New World's participation in the transactions contemplated
hereby.
4.2 Organization and Standing. Each of the HFC Companies, as
applicable, has all requisite corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
reasonably necessary to enable it to carry on its business as presently
conducted other than such franchises, licenses, permits, authorizations and
approvals the lack of which, individually or in the aggregate, would not have a
Material Adverse Effect. Transferors have made available to New World true and
complete copies of (i) the Certificates of Incorporation, as amended to the date
of this Agreement, and the By-laws, as in effect on the date of this Agreement,
of each Subsidiary and (ii) the stock certificate and transfer books of each
Subsidiary. The Subsidiaries as of the day hereof do not directly or indirectly
own any capital stock of or other equity interests in any corporation,
partnership or other entity.
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<PAGE> 24
4.3 Capital Stock of the Subsidiaries. There are no
outstanding warrants, options, "phantom" stock rights, agreements, convertible
or exchangeable securities or other commitments (other than this Agreement)
pursuant to which either Subsidiary is or may become obligated to issue, sell,
purchase, return or redeem any shares of its capital stock or other securities,
and no equity securities of either Subsidiary are reserved for issuance for any
purpose.
4.4 Business Financial Statements. Schedule 4.4 hereto
consists of (i) a Combined Statement of Adjusted Operating Profit of the
Business for the fiscal year 1997; (the "Income Statement"); (ii) the Combined
Statement of Adjusted Net Assets of the Business as of December 31, 1997 (the
"Year-End Balance Sheet"); (iii) a Combined Statement of Adjusted Operating
Profit of the Business for the nine-month period ended October 4, 1998 (the
"Interim Income Statement"); and (iv) the Combined Statement of Adjusted Net
Assets for the Business as of October 4, 1998 (the "Interim Balance Sheet"). The
financial statements included on Schedule 4.4 hereto, together with the notes
and schedules thereto, are collectively referred to as the "Business Financial
Statements". The Income Statement for 1997 and the Year-End Balance Sheet have
been audited by Arthur Andersen LLP; the other Business Financial Statements are
unaudited. The Business Financial Statements have been derived from the
accounting books and records of the HFC Companies and present fairly in all
material respects the results of operations for the Business for the respective
periods covered by the Income Statement and Interim Income Statement, and the
net assets and liabilities of the Business as of the respective dates of the
Year-End Balance Sheet and the Interim Balance Sheet, in each case in accordance
with United States generally accepted accounting principles ("GAAP"),
consistently applied, but subject to the adjustments, exceptions and practices
referred to in the notes or other schedules to the Business Financial Statements
included in Schedule 4.4 hereto.
4.5 Title to Equipment; Condition.
4.5.1 Each Transferor and each of the Subsidiaries, has good
and valid title to the Equipment owned by it free and clear of all
mortgages, liens, security interests, claims, charges, restrictions,
reservations and agreements, pledges, guarantees and encumbrances of
any nature whatsoever ("Liens"), except (i) such Liens as are disclosed
in Schedule 4.5.1 hereto, (ii) mechanics', carriers', workmen's,
repairmen's or other like liens arising or incurred in the ordinary
course of business, liens arising under original purchase price
conditional sales contracts and equipment leases with third parties
entered into in the ordinary course of business, liens for taxes and
other governmental charges which are not due and payable or which may
thereafter be paid without penalty, (iii) those Liens that will not
survive the Closing and (iv) other imperfections of title, restrictions
or encumbrances, if any, which imperfections of title, restrictions or
encumbrances do not materially and adversely affect the current use of
such Equipment in the Business (collectively, the "Permitted Liens").
This Section (other than the definition of Permitted Liens) does not
relate to real property or interests in real property, such items being
the subject of the following Section.
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<PAGE> 25
4.5.2 The Equipment that has been actively used in the
manufacture, marketing, distribution and sale of the products of the
Business to produce the results reflected in the Interim Income
Statement ("Business as currently conducted") has been maintained in
all material respects in a manner consistent with industry practice and
is in the aggregate in generally good condition, reasonable wear and
tear excepted.
4.6 Title to Facilities. Each HFC Company, as applicable, owns
fee simple title to the Facilities as set forth on Schedule 1.10 hereto, free
and clear of all Liens, except (i) as set forth on Schedule 4.6(A) hereto other
than (A) judgments against Transferors, (B) Liens other than mortgages which can
be satisfied by payment of a liquidated amount, (C) leases, provided same do not
materially adversely affect the marketability or intended use, occupancy or
value of the Facilities, or (D) tax Liens with respect to amounts that are due
and owing, (ii) Permitted Liens, (iii) easements, covenants, rights-of-way and
other similar restrictions of record, (iv) current general real estate taxes and
installments for special assessments which are not yet due and payable, (v)
existing leases, licenses and possession or occupancy agreements, if any listed
on Schedule 4.6(B) hereto, (vi) (A) zoning, building, fire, health,
environmental and pollution control laws, ordinances, rules and safety
regulations and other similar restrictions, (B) mortgages, liens, security
interests or encumbrances that have been placed by any developer, landlord or
other third party on property (other than the Facilities) over which such HFC
Company has easement rights and subordination or similar agreements relating
thereto and (C) unrecorded easements, covenants, rights-of-way or other similar
restrictions, none of which items set forth in clauses (A), (B) and (C) of this
subsection (vi), individually or in the aggregate, materially impair the
continued use and operation of such Facilities in the Business as currently
conducted, (vii) acts done or suffered to be done by, and judgments against, New
World and those claiming by, through or under New World and (viii) any and all
orders, decrees, awards or judgments related to any eminent domain or
condemnation proceeding (the foregoing items in clauses (i) through (viii)
collectively, the "Permitted Exceptions").
4.7 Intellectual Property.
4.7.1 Except as disclosed on Schedule 4.7.1 hereto: (i)
Homestead owns all right, title and interest in and to the Principal
Trademarks; (ii) to the knowledge of the Transferors, use of the
Principal Trademarks in the U.S. in the conduct of the Business as
currently conducted does not infringe upon any U.S. registered or
common law trademarks of any third party; (iii) no litigation or claim
is pending or, to the knowledge of the Transferors, is threatened
against any HFC Company affecting the Principal Trademarks and, to the
knowledge of the Transferors, there is no basis for any such claim;
(iv) no licenses, sublicenses or agreements pertaining to the Principal
Trademarks have been granted or entered into by any HFC Company, other
than any intercompany licenses which shall be terminated as of the
Closing Date; (v) to the extent identified on Schedule 1.18 hereto,
each of the Principal Trademarks is duly registered with the United
States Patent and Trademark Office as identified on Schedule 1.18
hereto with respect thereto and the rights therein have not been
abandoned; and (vi) the Transferors have not received any notices of,
and to the
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<PAGE> 26
knowledge of Transferors there is not, any infringement by any third
party with respect to the Principal Trademarks.
4.7.2 Except as disclosed on Schedule 4.7.2 hereto and except
as would not have a Material Adverse Effect: (i) each HFC Company, as
applicable, has the right to use the Intellectual Property in the
conduct of the Business as currently conducted, (ii) no claim is
pending in writing or, to the knowledge of Transferors, is threatened
in writing against any HFC Company as of the date of this Agreement by
any Person with respect to the ownership or use of any of the
Intellectual Property or the infringement of any intellectual property
of any third party by the conduct of the Business and, to the knowledge
of the Transferors, there is no basis for any such claim; (iii) no
licenses, sublicenses or agreements pertaining to any of the
Intellectual Property have been granted or entered into by any HFC
Company, other than any intercompany licenses which shall be terminated
as of the Closing Date; and (iv) Transferors have not received any
notices of, and to the knowledge of Transferors there are no, facts
which indicate a likelihood of any infringement by any third party with
respect to the Intellectual Property.
4.8 Contracts. Other than as contemplated in Section 8.1.2,
Schedule 4.8 hereto includes the written contracts of the following types
relating to the Business to which any HFC Company is a party but excluding any
contract between or among any of the Transferors and/or their affiliates, on the
one hand, and the Subsidiaries on the other hand that will be terminated on or
prior to the Closing Date:
4.8.1 each collective bargaining agreement covering any
Transferred Employees;
4.8.2 each covenant, agreement or order that restricts the
Businesses right to compete to the extent that such restriction would
reasonably be expected to materially adversely affect the Business;
4.8.3 each lease under which any HFC Company is a lessor or
sublessor, or a lessee or sublessee of any real property, that is used
or held for use in the Business and which has future liability in
excess of $250,000 per annum and is not terminable by notice of not
more than 60 calendar days for a cost of less than $250,000;
4.8.4 each lease under which any HFC Company is lessee of, any
machinery, equipment, vehicles or other tangible personal property
owned by a third party and used in the Business which has future
liability in excess of $100,000 per annum and is not terminable by
notice of not more than 60 calendar days for a cost of less than
$100,000.
4.8.5 each joint venture or consortium agreement involving a
commitment of the Business in excess of $1,000,000;
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<PAGE> 27
4.8.6 each agreement, contract, or commitment or series of
related agreements, contracts or commitments to make capital
expenditures that are, individually or in the aggregate, in excess of
$1,000,000;
4.8.7 each agreement or indenture relating to borrowed money
in excess of $50,000 or the mortgaging, pledging or otherwise placing a
Lien on any Asset in excess of $50,000;
4.8.8 each guarantee of indebtedness or obligation (whether
monetary or non-monetary) of any Person (other than a HFC Company)
involving obligations in excess of $50,000 individually (other than the
endorsement of negotiable instruments for collection in the ordinary
course of business);
4.8.9 each agreement, contract or commitment for currency,
interest rate, commodity or other hedging activities having a value in
excess of $1,000,000;
4.8.10 each contract for the employment of any Transferred
Employee on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $250,000 and a remaining term of more
than twelve months;
4.8.11 each license, indemnification or other agreement with
respect to any Principal Trademark or Intellectual Property, whether as
the licensee or licensor, which involves the annual sale of more than
$1,000,000 of products of the Business or royalty payments in excess of
$250,000 in 1997 or 1998 on an annualized basis;
4.8.12 each agreement involving an obligation of any HFC
Company in excess of $1,000,000 with respect to the advertising,
marketing or promotion (including slotting agreements) of the products
of the Business;
4.8.13 each milling or grain purchase agreement having an
undelivered balance in excess of $1,000,000;
4.8.14 each agreement for the manufacture and sale of private
label products of the Business involving sales of more than $1,000,000
in 1997 or 1998 on an annualized basis; and
4.8.15 each other agreement, contract and lease, entered into
in the conduct of the Business which has future liability in excess of
$1,000,000 per annum and is not terminable by notice of not more than
60 calendar days for a cost of less than $1,000,000 (other than
contracts for the purchase or sale of inventory in the ordinary course
of business).
Except as disclosed on Schedule 4.8 hereto each Contract listed on
Schedule 4.8 hereto is a valid and binding obligation of the HFC
Company which is a party thereto and, to the knowledge of Transferors,
is in full force and effect and is enforceable by such Person in
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accordance with its terms. Except as disclosed on Schedule 4.8 hereto,
to the knowledge of Transferors, the HFC Company which is a party
thereto has performed all material obligations required to be performed
by it under the Contracts and is not (with or without the lapse of time
or the giving of notice, or both) in breach or default.
4.9 Litigation; Decrees. Except as set forth on Schedule 4.9
hereto, there is no lawsuit, action or arbitration proceeding or investigation
by or before any court or administrative agency or arbitral tribunal (except
lawsuits or claims regarding worker's compensation) pending or, to the knowledge
of Transferors, threatened against or affecting any HFC Company or its
affiliates relating to or arising out of the conduct of the Business or which
involves an unspecified amount which, in either case, could reasonably be
expected to result in liability of more than $100,000 or seeking any material
injunctive relief which would affect the Business or the transaction
contemplated by this Agreement. To the knowledge of Transferors, none of the HFC
Companies, with respect to the Business, is in default under any judgment, order
or decree of any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, applicable to
the Business or the Assets.
4.10 Absence of Undisclosed Liabilities. To the knowledge of
the Transferors, except for liabilities and obligations (i) set forth in
Schedule 4.10 hereto, (ii) reflected on the Interim Financial Statements
(including the notes thereto), (iii) incurred in the ordinary course of business
since the date of the Interim Balance Sheet, or (iv) pursuant to Contracts or as
otherwise disclosed in this Agreement or in the Schedules hereto, the Business
is not subject to any material liabilities or obligations of whatsoever nature,
direct or indirect whether accrued, fixed, contingent or otherwise, relating to
the Business.
4.11 Absence of Changes or Events. Except as set forth on
Schedule 4.11 hereto or the other Schedules hereto, since October 4, 1998, there
has been no event or development that has had a Material Adverse Effect, other
than changes relating to or affecting United States or foreign economies in
general or the Business's industry in general and not specifically relating to
the Business, and other than changes that are the result of actions taken or
proposed by New World prior to the Closing Date that have an effect on the
Business. New World acknowledges that there may have been a disruption to the
Business as a result of Transferors' review and consideration of a sale of the
Business (and there may be a disruption to the Business as a result of the
execution of this Agreement, the announcement by New World of its intention to
purchase the Business or the announcement by Transferors (or their affiliates)
of their intention to sell the Business, and the consummation of the
transactions contemplated hereby), and New World agrees that such disruptions do
not and shall not constitute a breach of this Section.
4.12 Compliance with Applicable Laws. Except as set forth on
Schedule 4.12 hereto or the other Schedules hereto or as previously disclosed to
New World in writing, to the knowledge of Transferors, the Business is being
conducted in compliance in all material respects with all applicable statutes,
laws, ordinances, rules, orders and regulations of any governmental authority or
instrumentality that are material to the Business. Except as set forth on
Schedule 4.12
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<PAGE> 29
hereto or the other Schedules hereto, since January 1, 1996, none of the HFC
Companies has received any written communication from a governmental authority
that alleges that the Business is not in material compliance with any federal,
state or local laws, rules and regulations, material to the operation of the
Business. This Section does not relate to environmental matters or Tax matters,
such matters being the subject of Section 4.13 and 4.14, respectively.
4.13 Environmental Matters. (a) Except as set forth in
Schedule 4.13 hereto to the knowledge of the Transferors, the HFC Companies with
respect to the Business and the Facilities are in compliance in all material
respects with all applicable Environmental Laws, which compliance includes, but
is not limited to, the possession by the HFC Companies of all material permits
and other governmental authorizations required under applicable Environmental
Laws, and compliance in all material respects with the terms and conditions
thereof. Except as set forth in Schedule 4.13 hereto the Transferors and the HFC
Companies have not received any material written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges that
the HFC Companies with respect to the Business are not in such compliance in all
material respects.
(b) Except as set forth in Schedule 4.13 hereto, there is no
material claim, action, or investigation by any Person of which any HFC Company
has received written notice alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (i)
the presence, or release into the environment, of any Material of Environmental
Concern at any location owned or operated by Transferor or the HFC Companies in
connection with the Business or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law ("Environmental
Claim") pending or, to the knowledge of the Transferors, threatened against the
HFC Companies with respect to the Business or the Facilities or to the knowledge
of the Transferors, against any Person whose liability for any Environmental
Claim against the HFC Companies arises out of the activities of the Business and
has been contractually retained or assumed by the Business.
(c) Without in any way limiting the generality of the
foregoing, to the knowledge of the Transferors (i) no on-site or off-site
location (including at the Facilities) where the HFC Companies with respect to
the Business have disposed or arranged for the disposal of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
radioactive materials, asbestos, petroleum and petroleum products (collectively,
"Materials of Environmental Concern") is listed on the CERCLA National Priority
List, (ii) except as set forth in Schedule 4.13 hereto, there is no asbestos in
friable and damaged condition contained in or forming part of any building,
building component, structure or office space owned or leased by the HFC
Companies with respect to the Business or at the Facilities, and (iii) except as
set forth in Schedule 4.13 hereto, all underground storage tanks owned,
operated, or leased by Transferors with respect to the Business or located at
the Facilities and which are subject to regulation under the federal Resource
Conservation and Recovery Act (or equivalent state or local law regulating
underground storage
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tanks) meet the technical standards prescribed at Title 40 Code of Federal
Regulations Part 280 which become effective December 22, 1998 (or any applicable
state or local law requirement(s).
This Section 4.13 contains the sole and exclusive representations and warranties
of Transferors with respect to any environmental, health, or safety matters,
including without limitation any arising under any Environmental Laws.
4.14 Taxes.
4.14.1 Each of the Subsidiaries has filed (or had filed on its
behalf) all material Tax Returns that it was required to file (either
separately or on a combined, consolidated or unified basis). All Taxes
shown as due on such Tax Returns have been paid. HFC has filed (or
caused to be filed) all material Tax Returns that it was required to
file with respect to the Assets or the Subsidiaries, and has paid all
Taxes shown thereon as owing.
4.14.2 Except as provided in Schedule 4.14 hereto, none of the
Subsidiaries has waived any statute of limitations in respect of any
Taxes material in the aggregate or agreed to any extension of time with
respect to any Tax assessment or deficiency; and to the knowledge of
Transferors there is no dispute or claim concerning any Tax liability
of any of the Subsidiaries claimed or raised by any authority.
4.14.3 None of the Subsidiaries is a party to any Tax
allocation, indemnification or sharing agreement.
4.14.4 None of the Subsidiaries has been a member of an
affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which was HFC). None of the
Subsidiaries has any liability for the Taxes of any Person other than
current and former members of the group the common parent of which was
HFC under Treas. Reg. Section1.1502-6 (or any similar provision of
state, local, or foreign law).
4.14.5 None of the Subsidiaries is a party to any arrangement
that could result in the payment of any "excess parachute payments"
within the meaning of Code Section280G as a result of the transactions
contemplated by the Agreement.
4.15 Labor and Employment Matters. Since January 1, 1996, no
HFC Company has engaged in any unfair labor practice related to the Business. No
unfair labor practice complaint or charge against any HFC Company related to the
Business is pending or to the knowledge of Transferors, threatened before any
applicable regulatory authority or agency. No organized labor strike, dispute,
slowdown or stoppage is pending or to the knowledge of Transferors threatened
against or involving the Business; no HFC Company has been notified of any
grievance or arbitration proceeding which could reasonably be expected to have a
Material Adverse Effect; no arbitration proceeding arising out of or under any
collective bargaining agreement related to the Business is pending or, to the
knowledge of Transferors, threatened; except as set forth on
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Schedule 4.15 hereto, no collective bargaining agreement or other labor union
agreement is binding upon or currently being negotiated by any HFC Company
related to the Business; no HFC Company has experienced or, to the knowledge of
the Transferors, been threatened with any organized labor strike or material
dispute, walkout, slowdown or stoppage, in each case, related to the Business,
during the three (3) years prior to the date hereof; and there is no union
organizing campaign or other question concerning representation pending or, to
the knowledge of Transferors, threatened.
4.16 Employee Benefit Plans.
4.16.1 HFC has made available or delivered to New World a copy
of each material employee benefit plan (as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, "ERISA") maintained or contributed to by HFC with respect to
current employees of the Business (the "Business Plans") as set forth
on Schedule 4.16 hereto.
4.16.2 Each Transferred Pension Plan that will be assumed by
the Company pursuant to Section 9.5 hereof has received a determination
from the Internal Revenue Service that such Transferred Pension Plan is
qualified under Code Section401(a), and to the knowledge of Transferors
the trusts maintained thereunder are exempt from taxation under Code
Section501(a) and nothing has occurred that could adversely affect the
qualified status of any Transferred Pension Plan or the tax exempt
status of any trust maintained thereunder.
4.16.3 Each Transferred Pension Plan and any related trust,
insurance contract or fund has been maintained, funded and administered
in material compliance with its respective terms and the terms of any
applicable collective bargaining agreements and in material compliance
with all applicable laws and regulations, including, but not limited
to, ERISA and the Code. There has been no application for or waiver of
the minimum funding standards imposed by Code Section412 with respect
to either of the Transferred Pension Plans. No asset that is to be
transferred to the Company pursuant to this Agreement is subject to any
lien under ERISA or the Code; and neither HFC nor any of the
Subsidiaries or any ERISA affiliate has incurred any liability under
Title IV of ERISA (other than for contributions not yet due) or to the
Pension Benefit Guaranty Corporation (other than for payment of
premiums not yet due) and, to the knowledge of the Transferors, no
condition presently exists that presents a material risk to New World
of incurring any such liability.
4.17 Bank Accounts. Schedule 4.17 hereto identifies each bank
account, safe-deposit box or lock box used exclusively in the Business and each
authorized signatory with respect thereto.
4.18 Accounts Receivable; Powers of Attorneys. The accounts
receivable of the Business reflected on the Interim Balance Sheet or arising
after the date thereof (i) arose from the sale of Inventory in the ordinary
course of business, (ii) reflect extensions of credit consistent with
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the past practices of each such HFC Company and (iii) have been made for
valuable consideration. There are no outstanding powers of attorney executed on
behalf of the Subsidiaries.
4.19 Ordinary Course of Business; Distributions. Subject to
Section 4.11 hereof, the Business has been conducted in the ordinary course
since October 4, 1998 and there has not been distributed any dividend or other
distribution of any kind other than the distribution of the Excluded Assets from
the Subsidiaries.
4.20 Assets Necessary to Business. Except as set forth in
Schedule 4.20 hereto (i) the Principal Trademarks constitute all of the material
trademarks that are necessary for the conduct of the Business in substantially
the same manner as it is currently being conducted, (ii) the Assets include the
assets, properties, licenses, rights and agreements necessary to manufacture the
products of the Business in substantially the same manner as such products are
currently manufactured, and (iii) the Assets, together with the transitional
services that the Transferors will provide to the Company following the Closing
pursuant to the Transitional Services Agreement as contemplated by Exhibit 8.8
hereof, constitute all of the material assets, properties, licenses, rights and
agreements that are necessary to otherwise conduct the Business in all material
respects in substantially the same manner as it is currently being conducted, in
each case of clauses (i), (ii) and (iii) above, immediately following the
Closing.
5. Covenants of Transferors. Transferors covenant and agree as
follows:
5.1 Access. Prior to the Closing, Transferors shall grant to
New World or cause to be granted to New World and its representatives,
employees, counsel and accountants reasonable access, during normal business
hours and upon reasonable notice, to the personnel, properties, books and
records of Transferors and the Subsidiaries relating to the transition of the
Business to New World; provided, however, that such access does not unreasonably
interfere with the normal operations of Transferors, the Subsidiaries or the
Business; and provided further, however, that all requests for access shall be
directed to Mr. William Christ, or such other person as Transferors may
designate from time to time. New World shall indemnify and hold Transferors, the
Subsidiaries and their respective affiliates and each of their respective
representatives, agents, officers, shareholders, directors and employees
harmless against any and all losses, liabilities, expenses and damages or
actions or claims with respect thereto suffered or incurred by Transferors, the
Subsidiaries or New World and their respective affiliates or each of their
respective representatives, agents, officers, shareholders, directors and
employees, arising out of, or with respect to, any action taken or the failure
to take any action by any of New World's or its representatives', agents' or
employees' constituting gross negligence, willful misconduct or willful
violation of this Agreement in connection with the exercise of New World's
rights under this Section 5.1. Notwithstanding any provision in this Agreement
to the contrary, New World's indemnity under this Section 5.1 shall survive the
termination of this Agreement and the consummation of the transactions
contemplated hereby.
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5.2 Ordinary Conduct. Except as permitted by the terms of this
Agreement (including the Reorganization Transactions and the Recapitalization
Transactions) or as set forth in Schedule 5.2 hereto, from the date hereof to
the Closing, Transferors will cause the Business to be conducted in the ordinary
course consistent in all material respects with past practice and shall use
their commercially reasonable efforts to preserve intact the present business
organization, keep available the services of the present officers and employees
and preserve the current relationships with customers, suppliers, employees and
any others having business dealings with them. Except as contemplated by this
Agreement or Schedule 5.2 hereto, from the date hereof until the Closing,
Transferors will not do any of the following without the prior written consent
of New World:
5.2.1 make any material change in the conduct of the Business,
except as specifically contemplated by this Agreement;
5.2.2 sell, lease, license or otherwise dispose of (i) any
Facility or Principal Trademark or (ii) any other assets having a value
in excess of, individually $100,000 or $500,000 in the aggregate,
except for sales of Inventory or disposition of obsolete or unused
Equipment in the ordinary course of business consistent with past
practice or as otherwise permitted or contemplated by this Agreement;
5.2.3 permit, allow or subject any of the Assets or any part
thereof to any material Lien or suffer such to be imposed, except for
Permitted Liens;
5.2.4 amend in any material respect or terminate any Contract
required to be disclosed under Schedule 4.8 hereto, other than in the
ordinary course of business; or
5.2.5 (i) materially increase the compensation, severance or
termination benefits of any Transferred Employee, except normal annual
increases in its ordinary course of business, consistent with past
practices or increases required by existing contracts or commitments;
or (ii) except as may be required to comply with applicable law, enter
into, amend or supplement in any material respect any pension plan,
welfare plan, multiemployer plan, employee benefit plan, benefit
arrangement, or similar plan or arrangement, including any bonus,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other
benefit plan, agreement or arrangement, with or for the benefit of any
Transferred Employee;
5.2.6 make or commit to make capital expenditures in an
aggregate amount in excess of $1,000,000;
5.2.7 except as may be required to comply with applicable law,
enter into, adopt, amend or terminate any material collective
bargaining agreement outside the normal course of business;
5.2.8 agree to or commit to do any of the foregoing.
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5.3 Confidentiality. Transferors agree to keep and to use all
reasonable efforts after the Closing Date to cause their respective directors,
officers, employees, advisors and affiliates to keep the Information (as defined
below) confidential for a period of five years from the Closing Date, except
that any Information required by law or legal or administrative process to be
disclosed may be disclosed without violating the provisions of this Section 5.3,
and except that any Information may be used and disclosed solely (i) in
connection with the performance by Transferors of its obligations under the
Transitional Services Agreement, and (ii) in connection with the conduct of the
Excluded Business, in each case without violating the provisions of this Section
5.3. For purposes hereof, the term "Information" means all information primarily
concerning the Business, the Assets and the Assumed Liabilities, other than any
such information that is available to the public on the Closing Date, or
thereafter becomes available to the public other than as a result of a breach of
this Section 5.3, or is developed independently by Transferors or its affiliates
or is obtained from third parties.
5.4 Accounts Receivable. Except as otherwise provided in this
Section 5.4, Transferors shall promptly forward or cause to be forwarded to the
Company any and all proceeds from accounts receivable relating to the Business
and reflected in Net Working Capital as of the Closing Date that are received by
Transferors or their affiliates after the Closing Date. Any proceeds from
accounts receivable that Transferors are otherwise required to remit to the
Company pursuant to this Section 5.4 may be offset and reduced by any amounts
owing from New World to Transferors or their affiliates under this Agreement or
the Transitional Services Agreement. HFC shall give New World prompt written
notice of any amounts that are offset against such proceeds and retained by
Transferors (which written notice shall be accompanied by reasonable supporting
documentation in connection therewith).
5.5 Name Change of Subsidiaries. HFC will change the names of
the Subsidiaries prior to Closing to such new names as New World shall choose
and have delivered in a written notice to HFC not less than five (5) days prior
to Closing, which shall not include "Hershey" or any derivative thereof.
5.6 WARN Act Covenant. None of the HFC Companies shall, at any
time within 90 days before the Closing Date, without complying fully with the
notice and other requirements of Worker Adjustment and Retraining Notification
Act and the regulations promulgated thereunder (the "WARN Act"), effectuate (i)
a "plant closing" (as defined in the WARN Act) affecting any site of employment
of any Transferred Employee or one or more Facilities or operating units within
any site of employment of any Transferred Employee or Facility of any HFC
Company; or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site
of employment or any Transferred Employee or Facility of any HFC Company; or any
similar action under applicable state, local or foreign law or regulation
requiring notice to employees in the event of a plant closing or layoff to the
extent that any of the foregoing activity would result in any liability to the
Business.
5.7 Confidentiality Agreements. At the Closing, Transferors
shall to the extent assignable assign to New World all of their rights under
Confidentiality Agreements entered into by
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or on behalf of Transferors in connection with the offer and sale of the
Business that protect the confidential information of the Business and retain
all other rights under the Confidentiality Agreements. At Closing, Transferors
shall provide New World with true and correct copies of all such Confidentiality
Agreements.
5.8 Financial Statements. (a) The Transferors shall cooperate
with New World so that New World may obtain not less than five (5) days prior to
the Closing (i) an audited Combined Statement of Adjusted Net Assets of the
Business as of December 31, 1996, (ii) an audited Combined Statement of Adjusted
Operating Profit of the Business for the year-ended December 31, 1996 and (iii)
audited Statements of Cash Flows of the Business for the years ended December
31, 1996 and December 31, 1997, which in each case shall be prepared consistent
with the Business Financial Statements.
(b) Promptly following the date hereof, HFC shall deliver to
New World the internally prepared unaudited financial statements covering the
Business that are prepared by management in the ordinary course of business
("Internal Financial Statements") for the fiscal months of October and November,
1998 and, promptly following the time at which they become available in the
ordinary course of business, the Internal Financial Statements for each fiscal
month ending following the date of this Agreement and prior to the Closing.
(c) For a period beginning on the date hereof and ending 180
days following Closing, HFC shall provide, at New World's expense, reasonable
cooperation to New World and shall cause its independent auditors to provide
such cooperation to New World in connection with preparing such audited and
unaudited financial statements of the Business and related management discussion
and analyses for 1996, 1997 and 1998 (including relevant interim periods of
1998) and such summary of financial data as such may be reasonably required by
New Word in conjunction with any financing contemplated by New World.
5.9 Bridge Loan Expenses. Provided that the Bridge Loan (as
defined in and contemplated by the Commitment Letters) is funded and upon
consummation of the Closing, the Transferors shall reimburse New World for the
actual incurred and documented costs and expenses pertaining solely to (i) the
payment of any takedown fee but not in an amount in excess of $2,100,000 and
(ii) reasonable out-of-pocket legal fees not to exceed $300,000 directly related
to the documentation, drawing and closing of the Bridge Loan as contemplated by
the Commitment Letters.
5.10 Insurance. Transferors hereby agree to (i) maintain all
property damage, casualty, automobile and product and general liability
insurance policies (including any business interruption insurance associated
with property damage but excluding any self-insurance arrangements and workmens'
compensation policies or coverage) insuring any Transferor or any affiliate or
any subsidiary of any Transferor against any risk relating to the operation of
the Business prior to the Closing and (ii) assign, to the extent transferable,
to the Company the rights to make claims with respect to any coverage, whether
on a claims-made or on an occurrence basis, for
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pre-closing periods under such policies effective upon consummation of the
Closing. HFC shall use commercially reasonable efforts to assist the Company at
the Company's cost and expense in making and enforcing any claims with respect
to such pre-closing period under such policies; provided that HFC shall have no
obligation to bring any suit or other adversarial proceeding to recover any such
amount. New World acknowledges that HFC will terminate such policies as they
relate to the Business with respect to occurrences following the Closing and
claims relating to such occurrences (and to the extent there are any claims-made
policies, all such coverage) immediately upon consummation of the Closing. In
the event that there is any event that results in a claim being available to the
Company pursuant to this Section 5.10, such claim shall be taken into
consideration in determining the impact of such event on the Business
(including, whether there has been a Material Adverse Effect as the result of
such event).
6. Representations and Warranties of New World. New World
hereby represents and warrants to Transferors as follows:
6.1 Authority; No Conflicts.
6.1.1 New World is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware. New World has all requisite power and authority to enter into
this Agreement and the Transitional Services Agreement and to
consummate the transactions contemplated hereby and thereby. All acts
and other proceedings required to be taken by New World to authorize
the execution, delivery and performance of this Agreement and the
Transitional Services Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and
properly taken. This Agreement has been duly executed and delivered by
New World, and the Transitional Services Agreement to be executed and
delivered by the Company shall be duly and validly executed and
delivered by the Company. This Agreement and the Transitional Services
Agreement constitute, or will constitute, as the case may be, valid and
binding obligations of New World and the Company, as applicable,
enforceable against New World in accordance with their terms.
6.1.2 The execution and delivery by New World of this
Agreement and the Transitional Services Agreement do not, and the
consummation by New World of the transactions contemplated hereby and
thereby and compliance by New World with the terms hereof and thereof
will not, conflict with, or result in any violation of or default
under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, or result
in the creation of any lien, claim, encumbrance, security interest,
option, charge or restriction of any kind upon any of the properties or
assets of New World under, or require any consent, authorization or
approval under any provision of the formation documents of New World,
any material note, bond, mortgage, indenture, deed of trust, license,
lease, contract, commitment, agreement or arrangement to which New
World is a party or by which any of its properties or assets are bound,
or any material judgment,
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order or decree, or any material statute, law, rule or regulation
applicable to New World or its property or assets, or that result from
or are required under the HSR Act.
6.2 Actions and Proceedings, etc. There are no outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against New World which have or could have a
material adverse effect on the ability of New World to consummate the
transactions contemplated hereby or actions, suits, claims or legal,
administrative or arbitration proceedings or investigations pending or, to the
knowledge of New World, threatened against New World, which have or could have a
material adverse effect on the ability of New World to consummate the
transactions contemplated hereby.
6.3 Financing. New World is a newly formed limited liability
company which has not conducted any business other than in connection with the
transactions contemplated by this Agreement and prior to the Closing New World
will not conduct any business other than in connection with the transactions
contemplated by this Agreement. New World has received written debt commitment
letters (the "Debt Commitment Letters") (true, correct and complete copies of
which are attached as Exhibit 6.3(A) hereto) to obtain, subject to the terms and
conditions therein, the funds necessary together with the equity contribution as
contemplated by the equity commitment letter (the "Equity Commitment Letter") (a
true, correct and complete copy of which is attached as Exhibit 6.3(B) hereto)
(the Debt Commitment Letters and the Equity Commitment Letter, collectively, the
"Commitment Letters") for the consummation of the transactions contemplated
hereby, including payment of the Base Transaction Consideration and all related
costs and expenses. New World has paid all commitment fees required to be paid
and taken all other actions required to cause such Commitment Letters to be
effective and to constitute the valid commitment of the issuer of such letter.
New World is not aware of any breach of any representation, warranty or covenant
under any Commitment Letter and each Commitment Letter is a valid and binding
commitment of New World and the issuer thereof to the extent set forth on the
face thereof. New World is not, as of the date hereof, aware of any fact,
occurrence or condition that makes any of the assumptions or statements therein
inaccurate in any material respect or that would cause the commitments provided
in the Commitment Letters to be terminated or ineffective or any of the
conditions contained therein not to be met.
6.4 No Knowledge of Misrepresentations or Omissions. New World
has no actual knowledge that any representation or warranty of Transferors in
this Agreement or the Schedules hereto is not true and correct in all material
respects and New World has no actual knowledge of any material errors in, or
material omissions from, the Schedules hereto.
6.5 Acquisition of Shares for Investment. The shares of the
Company acquired by New World pursuant to this Agreement are being acquired for
investment only and not with a view to any public distribution thereof, and New
World will not offer to sell or otherwise dispose of such shares so acquired by
it in violation of any of the registration requirements of any applicable
securities law.
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7. Covenants of New World, JLL and the Company. New World
covenants as follows:
7.1 Confidentiality.
7.1.1 New World acknowledges that all information provided to
any of it and its affiliates, agents and representatives by Transferors
and their affiliates, predecessors, agents and representatives is
subject to the terms of a confidentiality agreement between HFC and New
World or one of its affiliates or other beneficial owners (the
"Confidentiality Agreement"), the terms of which are hereby
incorporated herein by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement shall terminate; provided,
however, that New World acknowledges that the Confidentiality Agreement
shall terminate only with respect to information provided to New World
or its affiliates, agents or representatives that relates to the
Business, the Assets and the Assumed Liabilities; and provided further,
however, that New World acknowledges that any and all information
provided or made available to it and its affiliates, agents and
representatives by or on behalf of Transferors concerning any Excluded
Business, Excluded Assets or Excluded Liabilities or relating to
Transferors and their affiliates (other than information as and to the
extent that it relates to the Business, the Assets and the Assumed
Liabilities and other than any such information that is available to
the public on the Closing Date, or thereafter becomes available to the
public other than as a result of a breach of this Section 7.1
("Transferor Information") shall remain subject to the terms and
conditions of the Confidentiality Agreement after the Closing Date.
7.1.2 New World agrees that, after the Closing Date, New World
shall, and shall use all reasonable efforts to cause its directors,
officers, employees, advisors and affiliates (including the Company)
to, keep the Transferor Information confidential following the Closing
Date, except that any such Transferor Information required by law or
legal or administrative process to be disclosed may be disclosed
without violating the provisions of this Section 7.1.2. New World will
use reasonable best efforts, at HFC's request and at New World's
expense, to enforce existing confidentiality agreements and rights
under state law requiring Transferred Employees to keep trade secrets
confidential.
7.2 No Additional Representations. New World acknowledges that
neither Transferors nor any other Person has made (i) any representation or
warranty, express or implied, as to the accuracy or completeness of any
information regarding the Assets, the Assumed Liabilities or the Business,
except as expressly set forth in Section 4; or (ii) any implied representation
or warranty as to the condition, merchantability, suitability or fitness for a
particular purpose of any of the Assets. New World agrees that New World takes
the Assets on an "as is" and "where is" basis except for the express
representations and warranties of Transferors contained in Section 4. New World
further agrees that neither Transferors nor any other Person will have or be
subject to any liability to New World or any other Person resulting from the
distribution to New World, or New World's use of, any information, relating to
or included in the Information Memorandum dated
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October 12, 1998 (the "Information Memorandum") and any information, document,
or material made available to New World in any "data rooms," management
presentations or supplemental due diligence information provided to New World,
in connection with discussions or access to management of the Business or in any
other form in expectation of the transactions contemplated by this Agreement.
7.3 Notification. Prior to the Closing, New World shall
promptly notify HFC if New World obtains knowledge that the representations and
warranties of Transferors in this Agreement and the Schedules hereto are not
true and correct in all material respects, or if New World obtains knowledge of
any material errors in, or omissions from, the Schedules hereto.
7.4 Accounts Receivable. Except as otherwise provided in this
Section 7.4, New World shall promptly forward or cause to be forwarded to HFC
for the account of the applicable Transferors any and all proceeds from accounts
receivable of the Transferors that are not transferred to New World hereunder
that are received by New World or any of its affiliates after the Closing Date.
Any proceeds from accounts receivable that New World is otherwise required to
remit to HFC pursuant to this Section 7.4 may be offset and reduced by any
amounts owing from Transferors to New World or its affiliates under this
Agreement or the Transitional Services Agreement. New World shall give HFC
prompt written notice of any amounts that are offset against such proceeds and
retained by New World (which written notice shall be accompanied by reasonable
supporting documentation in connection therewith).
7.5 Customer and Supplier Notification. Promptly following the
Closing, New World shall notify all customers of the Business in writing of the
consummation of the transactions contemplated hereby and request that all such
customers change their respective billing and invoicing codes as appropriate to
reflect the change in ownership of the Business.
7.6 WARN Act Covenant. New World shall not, at any time on or
after the Closing Date, without complying fully with the notice and other
requirements of the WARN Act, effectuate (i) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Business; or
(ii) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of the Business; or any similar action under applicable
state, local or foreign law or regulation requiring notice to employees in the
event of a plant closing or layoff.
7.7 Commitments. New World and JLL hereby covenant and agree
to cause the equity contributions to be made to New World as contemplated by the
Equity Commitment Letter and to use their reasonable best efforts and to do all
other things to obtain for itself and/or the Company the financing necessary for
consummation of the transactions contemplated by this Agreement (whether from
the issuers of the Commitment Letters or from other sources), including, without
limitation, drawing or taking all actions necessary to enable the Company to
draw the Bridge Loan and issuing the Bridge Notes (as defined in and
contemplated by the Commitment Letters) as contemplated by the Commitment
Letters and Section 2.6. New World and JLL further covenant
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and agree that they will not terminate, modify, amend or in any manner alter the
obligations of the issuers of the Commitment Letters in any manner that is
materially adverse to the financial position of New World or the Transferors or
that would be materially adverse to New World's ability to obtain financing for
the transactions contemplated by this Agreement at any time prior to the
termination of this Agreement. Additionally, New World hereby covenants and
agrees that it will enforce its rights to obtain the financing contemplated by
the Commitment Letters to the fullest extent permitted by law. JLL and New World
hereby covenant and agree that they will not, and they will not permit any of
their respective affiliates, representatives or advisors, to commence any
marketing or premarketing of the permanent financing that will be used to repay
the Bridge Notes indebtedness.
7.8 Guarantees.
7.8.1 JLL will be a substantial equity investor in New World.
In that regard, JLL has a substantial interest in and a desire to
assure that the Transferors enter into this Agreement and that the
transactions contemplated hereby are consummated. Therefore, as a
material inducement to the Transferors to enter into this Agreement and
the Transitional Services Agreement and to consummate the transactions
contemplated hereby and thereby, JLL hereby guarantees (the "JLL
Guarantee"), absolutely and unconditionally as a primary obligor, to
the Transferors and their respective successors and assigns (i) the
performance by New World of its covenants, duties and obligations
hereunder ("New World Obligations") and (ii) the satisfaction of all
liabilities of New World under this Agreement or that arise from,
relate to or become due pursuant to or in connection with this
Agreement ("New World Liabilities"), provided that JLL's aggregate
liability to the Transferors due to the New World Obligations and the
New World Liabilities shall not exceed $80,000,000 in the aggregate.
The JLL Guarantee shall be a continuing guaranty and shall remain in
effect until the earliest of (i) the consummation of the Closing
including receipt by the Transferors of the Base Transaction
Consideration, (ii) the time at which all New World Obligations have
been completely performed and all New World Liabilities have been
finally identified and discharged and (iii) JLL has incurred and
satisfied liabilities equal to or exceeding $80,000,000 pursuant to the
JLL Guarantee.
7.8.2 Following the consummation of the transactions
contemplated hereby the Company will become a subsidiary of New World.
Therefore, as an inducement to the Transferors to enter into this
Agreement and the Transitional Services Agreement and to undertake and
consummate the transactions contemplated hereby and thereby, subject to
and effective immediately upon the consummation of the Closing, the
Company hereby guarantees (the "Company Guarantee"), absolutely and
unconditionally as a primary obligor and without limitation, all of the
New World Obligations and all of the New World Liabilities. The Company
Guarantee shall be a continuing guarantee and shall not terminate until
such time as all New World Obligations have been completely performed
and all New World Liabilities have been fully identified and
discharged.
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<PAGE> 41
The JLL Guarantee and the Company Guarantee are guarantees of
performance and payment not of collection and each of them further
waives any right to require that any action be brought against New
World or any other Person.
JLL and the Company hereby consent that from time to time,
with or without further notice to or assent from JLL or the Company,
any obligation or liability of New World may be changed, altered,
renewed, extended, continued, surrendered, compromised, waived,
discharged or released in whole or in part or any default with respect
thereto waived, and the Transferors may generally deal or take action
or no action with regard to New World as the Transferors may see fit,
and JLL and the Company shall remain bound under their respective
guarantees notwithstanding any such change, alteration, renewal,
extension, continuance, compromise, waiver, discharge, inaction or
other dealing.
7.9 Notice of Material Adverse Effect. If at any time prior to
the Closing Date any event or circumstance is discovered by New World which,
when considered in the aggregate with any other event or circumstance then known
to New World results in or could result in (i) a Material Adverse Effect or (ii)
a failure of New World to obtain the financing contemplated by the Commitment
Letters, then New World covenants and agrees to notify HFC in writing of such
event or circumstances as promptly as practicable (and in any event within 2
days of such discovery). Such notice shall describe the event or circumstance in
reasonable detail and shall state whether such event or circumstance results or
is likely to have the result specified in clause (i) or clause (ii) or both of
such clauses. Such notice shall state whether New World agrees to waive the
result specified in clauses (i) or (ii) to the extent caused by or based on such
event or circumstances.
8. Mutual Covenants. Transferors and New World covenant and
agree as follows:
8.1 Consents.
8.1.1 New World acknowledges that certain consents to the
transactions contemplated by this Agreement may be required from
parties to the Contracts and such consents have not been obtained. New
World agrees that Transferors shall not have any liability whatsoever
to New World arising out of or relating to the failure to obtain any
consents that may have been or may be required in connection with the
transactions contemplated by this Agreement or because of the default,
acceleration or termination of any Contract as a result thereof. New
World further agrees that no representation, warranty or covenant of
Transferors contained herein shall be breached or deemed breached and
no condition of New World shall be deemed not to be satisfied as a
result of (A) the failure to obtain any consent or as a result of any
such default, acceleration or termination or (B) any lawsuit, action,
claim, proceeding or investigation commenced or threatened by or on
behalf of any persons arising out of or relating to the failure to
obtain any consent or any such default, acceleration or termination. At
New World's written request prior to the Closing, Transferors shall
cooperate with New World in any reasonable manner in connection with
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New World's obtaining any such consents; provided, however, that such
cooperation shall not include any requirement of Transferors to expend
money, commence any litigation or offer or grant any accommodation
(financial or otherwise) to any third party.
8.1.2 New World acknowledges that any contracts and
arrangements that are listed or described on Schedule 8.1.2 hereto
under the heading "Shared Contracts" shall not constitute Assets and
shall not be assigned by Transferors to New World (such contracts and
arrangements being referred to herein as the "Shared Contracts"). With
respect to any Shared Contract, at New World's written request prior to
the Closing, Transferors shall cooperate with New World in any
reasonable manner in connection with New World's efforts to obtain the
agreement of the other party or parties to any such Shared Contract to
enter into a separate agreement with New World with respect to the
matters covered by such Shared Contract as they relate to the Business;
provided, however, that such cooperation shall not include any
requirement of Transferors to expend money, commence any litigation or
offer or grant any accommodation (financial or otherwise) to any third
party. New World agrees that Transferors shall not have any liability
whatsoever to New World arising out of or relating to the failure to
obtain any such separate agreement or the breach of any separate
agreement between any third party and New World. New World further
agrees that no representation, warranty or covenant of Transferors
contained herein shall be breached or deemed breached, and no condition
of New World shall be deemed not satisfied, as a result of the failure
to obtain any such separate agreement or as a result of any facts
relating to the Shared Contracts.
8.1.3 With respect to any Nontransferable Contract or any
Shared Contract with respect to which New World has requested
Transferors' cooperation in accordance with Section 8.1.1 or 8.1.2 and
with respect to which Transferors and New World are unable to obtain a
separate agreement between New World and the other party or parties,
New World shall have the right to require that Transferors use all
reasonable efforts to enter into such alternative arrangements and
agreements with New World as are reasonably practical in order to
permit New World to realize, receive and enjoy substantially similar
rights and benefits, including using reasonable efforts to perform any
such Nontransferable Contract or Shared Contract, to the extent it
relates to the Business, as agent for and for the account of New World,
for a period up to one year following the Closing Date; provided, that
New World shall reimburse Transferors for any and all costs, expenses,
losses and liabilities incurred in connection with taking such action.
8.2 Cooperation. New World and Transferors shall cooperate
with each other and shall cause their respective officers, employees, agents and
representatives to cooperate with each other for a period of 180 days after the
Closing to provide for an orderly transition of the Assets and the Assumed
Liabilities to New World and to minimize the disruption to the respective
businesses of the parties hereto resulting from the transactions contemplated
hereby. Each party shall reimburse the other for reasonable out-of-pocket costs
and expenses incurred in assisting the other pursuant to
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this Section 8.2. No party shall be required by this Section 8.2 to take any
action that would unreasonably interfere with the conduct of its business.
8.3 Publicity. Transferors and New World agree that, from the
date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued or made by any
party without the prior consent of the other party (which consent shall not be
unreasonably withheld), except (i) as such release or announcement may be
required by law or the rules or regulations of any United States securities
exchange, in which case the party required to make the release or announcement
shall allow the other party reasonable time to comment on such release or
announcement in advance of such issuance, and (ii) Transferors may make such an
announcement to employees of Transferors and/or the Subsidiaries, so long as
such announcement is provided to New World and New World is given an opportunity
to comment thereon prior to its release. Notwithstanding the foregoing,
Transferors and New World shall cooperate to prepare a joint press release to be
issued on the Closing Date and, upon the request of either HFC or New World, at
the time of the signing of this Agreement. Transferors and New World agree to
keep the terms of this Agreement confidential, except to the extent required by
applicable law or for financial reporting purposes and except that the parties
may disclose such terms to their respective accountants and other
representatives as necessary in connection with the ordinary conduct of their
respective businesses (so long as such persons agree to keep the terms of this
Agreement confidential).
8.4 Best Efforts. Subject to the terms of this Agreement, each
party will use its reasonable best efforts to cause the Closing and the
Recapitalization Transactions to occur.
8.5 Compliance. New World and HFC shall each file or cause to
be filed with the Federal Trade Commission and the United States Department of
Justice any notifications required to be filed under the HSR Act with respect to
the transactions contemplated hereby, and any other acts, statutes, legislation
or regulations as may be applicable with respect to the transactions
contemplated hereby. New World and HFC shall bear the costs and expenses of
their respective filings; provided, that New World shall pay all filing fees in
connection therewith. New World and HFC shall use their respective best efforts
to make such filings within five business days of the date hereof, to respond to
any requests for additional information made by any applicable agencies and to
cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date and to resist in good faith, at their own respective cost
and expense (including the institution or defense of legal proceedings), any
assertion that the transactions contemplated hereby constitute a violation of
applicable antitrust or competition laws, all to the end of expediting
consummation of the transactions contemplated hereby. In furtherance and not in
limitation of the foregoing, New World shall use commercially reasonable best
efforts to resolve such objections, if any, as may be asserted with respect to
the transactions contemplated by this Agreement under any antitrust, competition
or trade regulatory laws, rules or regulations of any domestic or foreign
government or governmental authority or any multinational authority ("Antitrust
Laws"). If any suit is instituted challenging any of the transactions
contemplated by this Agreement as violative of any Antitrust Law, New World
shall take such action (including without limitation, agreeing to hold separate
or
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to divest any of the businesses, product lines or assets of New World or any of
its affiliates or of the Business (a "Business Unit") as may be required (a) by
the applicable government or governmental or multinational authority (including,
without limitation, the Antitrust Division of the United States Department of
Justice or the Federal Trade Commission) in order to resolve such objections as
such government or authority may have to such transactions under such Antitrust
Law, or (b) by any domestic or foreign court or similar tribunal, in any suit
brought by a private party or governmental or multinational authority
challenging the transactions contemplated by this Agreement as violative of any
Antitrust Law, in order to avoid the entry of, or to effect the dissolution of,
any injunction, temporary restraining order or other order that has the effect
of preventing the consummation of any of such transactions. The entry by a
court, in any suit brought by a private party or governmental or multinational
authority challenging the transactions contemplated by this Agreement as
violative of any Antitrust Law, of an order or decree permitting the
transactions contemplated by this Agreement, but requiring that any Business
Units be divested or held separate by New World or that would otherwise limit
New World's freedom of action with respect to, or its ability to retain, the
Business or any portion thereof or any of New World's or its affiliates' other
assets or businesses, shall not be deemed a failure to satisfy the conditions
specified in Section 3.1 hereof.
8.6 Sales and Transfer Taxes, etc. The Company following the
Closing shall pay all sales, use, gross receipts, excise, value-added, business,
goods and services, transfer, stamp, recording, documentary, registration,
duties, conveyancing taxes or similar taxes, or expenses that may be imposed as
a result of the transfers contemplated by this Agreement including as part of
the Reorganization Transactions and Recapitalization Transactions including the
transactions contemplated by Section 2.1 and Section 2.6 (including without
limitation any taxes, filing or recording fees or expenses payable in connection
with the sale and transfer, and recordation of such transfer, of the
Intellectual Property, and any stamp, duty or other tax chargeable in respect of
any instrument transferring property), together with any and all penalties,
interest and additions to tax with respect thereto, and Transferors and New
World shall cooperate in timely making all filings, returns, reports and forms
as may be required to comply with the provisions of such tax laws. New World and
Transferors shall also cooperate in providing each other with appropriate resale
exemption certifications and other similar tax and fee documentation. In
addition, the Company following the Closing shall be responsible for and to the
extent incurred by the Transferors reimburse the Transferors for certain
incremental state income Taxes incurred by them in connection with implementing
the transactions contemplated by Section 2.1 and 2.6 hereof as previously agreed
by the parties in writing. Any amount that is owed by the Transferors to New
World or the Company pursuant to Section 2.5.3 hereof may be offset against any
amount that is owed by New World or the Company to the Transferors pursuant to
this Section 8.6.
8.7 Promotional Materials and Customer Information.
8.7.1 On or as soon as reasonably practicable following the
Closing Date, Transferors shall use their reasonable best efforts to
deliver or cause to be delivered to New World the Promotional Materials
and the Customer Information, in each case to the extent that such
Promotional Materials and Customer Information are in the possession of
the
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Subsidiaries or Transferors, as applicable, and not then in the
possession of New World (it being understood, however, that any failure
of Transferors to deliver or cause to be delivered any of the foregoing
shall not constitute a breach of any provision of this Agreement except
to the extent that such failure shall be knowing or willful). After the
Closing, Transferors shall have the continuing obligation to deliver or
cause to be delivered to New World items in the possession of
Transferors that are identified by Transferors or New World after the
Closing as constituting Promotional Materials or Customer Information
and Transferors shall deliver or cause to be delivered to New World
such items as soon as reasonably practicable after such identification
to the extent such items are not then in possession of New World.
Notwithstanding the foregoing, New World acknowledges that (A)
Transferors shall have the right to use any existing television
commercials, print materials, public reporting and informational
promotional materials, point of sale materials and advertising copy
used by Transferors on or prior to the Closing Date in connection with
the Business, to the extent such television commercials, print
materials, promotional materials, point of sale materials and
advertising copy do not relate primarily to the Business ("Shared Data
Materials"), until such time as Transferors shall generate in the
ordinary course of business replacements for any such Shared Data
Materials that do not refer or relate to the Business; and (B) certain
books and records and other materials that are or may be in the
possession of Transferors may contain incidental information relating
to the Assets, the Assumed Liabilities, and the Business or may relate
to other subsidiaries or divisions of the Transferors, as applicable,
and that Transferors may retain such books and records and other
materials, except that Transferors shall use its reasonable best
efforts (to the extent reasonably practicable) to provide or cause to
be provided to New World copies (which may be redacted) of the portions
of such books, records and other materials that contain Promotional
Materials or Customer Information, and New World further acknowledges
that Transferors shall have no obligation to deliver to New World (or
provide New World with access or copies of) any legal files or other
documents covered by an evidentiary privilege exercisable by
Transferors or any of its affiliates, except for Subsidiaries, unless
such legal files or documents relate primarily to the Business or an
Assumed Liability.
8.7.2 New World and Transferors agree that, subject to Section
5.3, Transferors may retain copies of any books and records and other
financial data (collectively, the "Records") that are included in the
Assets and that are delivered to New World hereunder. New World agrees
to give Transferors and its representatives reasonable cooperation,
access (including copies) and staff assistance, as needed, during
normal business hours and upon reasonable notice, with respect to the
Records delivered to New World hereunder, and Transferors agree to give
New World and its representatives reasonable cooperation, access
(including copies) and staff assistance, as needed, during normal
business hours and upon reasonable notice, with respect to the books
and records and other financial data relating to the Business and
retained by Transferors, in each case as may be necessary for general
business purposes, including the preparation of tax returns and
financial statements and the management and handling of tax audits;
provided, that such cooperation, access and assistance does not
unreasonably disrupt the normal operations of New World or Transferors.
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8.8 Transitional Services Agreement. At the Closing, New World
shall cause the Company to and Transferors shall execute and deliver a
Transitional Services Agreement, regarding the Transferors' provision of
transitional services to the Company on the terms and conditions described in
Exhibit 8.8 which, New World and Transferors shall, as soon as practicable
following the date hereof, negotiate in good faith (the "Transitional Services
Agreement").
8.9 Use of Hershey Trademarks. New World and Transferors agree
that New World and the Company shall be permitted for a term of one year
following the Closing to use exclusively on and in connection with the
manufacture, packaging, distribution, marketing and sale of the products of the
Business, the existing packaging materials and labels included in the Inventory
that bear any of the Hershey Trademarks or HFC's consumer toll-free number.
After such one-year period, New World shall not use any such packaging materials
for any purpose and shall destroy such packaging materials upon HFC's request.
Additionally, New World and Transferors agree that New World and the Company
shall be permitted, for a period of one year following the Closing Date, to use
in commerce or publicly display the Promotional Materials that bear the Hershey
Trademarks in a manner consistent with Transferors' practices prior to the
Closing. After such one-year period, New World and the Company shall not use in
commerce (or otherwise) or publicly display any such Promotional Materials.
8.10 Packaging Material. New World and the Company will not
place any order for any packaging material bearing or otherwise relating to the
Hershey Trademarks or HFC's consumer toll-free number following the Closing, if
such order would result in New World and the Company having quantities of any
particular packaging material that could not reasonably be used in the ordinary
course of the Business within one year after the Closing.
8.11 Further Assurances. From time to time, as and when
requested by any party hereto, the other party hereto shall execute and deliver,
or cause to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further or other actions (subject to
the limitations set forth in Section 8.1 and Section 8.2), as such other party
may reasonably deem necessary or desirable to consummate the transactions
contemplated by this agreement.
8.12 Tax Matters.
8.12.1 Code Section 338(h)(10) Election; Allocation of
Transaction Consideration. HFC and New World shall jointly make an
election and, as soon as practicable after the Closing, shall mutually
prepare a Form 8023-A, with all attachments and shall cooperate with
each other to take all actions necessary and appropriate (including
filing such additional forms, returns, elections, schedules and other
documents as may be required to effect and preserve a timely election,
in accordance with the provisions of Section 1.338(h)(10)-1 of the
Treasury Regulations (or any comparable provisions of state or local
tax law) or any successor provisions (the "Election"). The parties
agree that New World shall determine the allocation of the Final
Transaction Consideration and the Assumed Liabilities among the Assets,
such
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allocation to be set forth on a final version of Schedule 8.12.1
hereto; provided, that the allocation set forth on such final schedule
shall be consistent with the allocation of the Base Transaction
Consideration on the preliminary Schedule 8.12.1 hereto among the
various Assets and categories of Assets described in items 1 through 5
of the preliminary Schedule 8.12.1 hereto. Neither New World nor
Transferors, nor any of their respective affiliates, unless required to
do so by applicable law, shall take any position (whether in financial
statements, audits, tax returns or otherwise) which is inconsistent
with the allocation of the Final Transaction Consideration and Assumed
Liabilities set forth on the preliminary version of Schedule 8.12.1
hereto or the final version of Schedule 8.12.1 hereto.
8.12.2 Returns for Periods Through the Closing Date. HFC will
include the income of each Subsidiary (including any deferred income
triggered into income by Treas. Reg. Section 1.1502-13 and Treas. Reg.
Section 1.1502-14, any excess loss accounts taken into income under
Treas. Reg. Section1.1502-19 and any income from the deemed sale of
assets pursuant to the Election) for the period ending on and including
the Closing Date on HFC's consolidated federal and applicable State and
local income Tax Returns that include the Closing Date and pay any
income taxes attributable to such income. Each Subsidiary will and New
World will cause each Subsidiary to furnish Tax information to HFC for
inclusion in such returns for the period which includes the Closing
Date in accordance with the Subsidiary's past custom and practice. The
income of each Subsidiary will be apportioned to the period up to and
including the Closing Date and the period after the Closing Date by
closing the books of each Subsidiary as of the end of the Closing Date;
provided, that any income resulting from a transaction entered into by
any Subsidiary outside of the normal course of business on the Closing
Date following the Closing shall be deemed to have occurred on the day
following the Closing Date.
8.12.3 Tax Periods Ending on or Before the Closing Date. HFC
shall prepare or cause to be prepared and file or cause to be filed all
income Tax Returns for each Subsidiary for all periods ending on or
prior to the Closing Date which are filed after the Closing Date. New
World shall provide (or shall cause each Subsidiary to provide) (i) all
necessary cooperation for the filing of such Tax Returns, which shall
include access to the books and records of each Subsidiary, and (ii)
such powers of attorney or similar instruments as are necessary to file
such Tax Returns.
8.12.4 Tax Periods Beginning Before that End After the Closing
Date. New World or each Subsidiary shall prepare or cause to be
prepared any income Tax Returns of any Subsidiary for any Tax period
that both begins before and ends after the Closing Date. New World
shall provide HFC with complete drafts of any such Tax Return no fewer
than 30 days prior to the date (including all available extensions) on
which such Tax Return must be filed. HFC shall provide New World with
any comments on such draft Tax Returns no fewer than 15 days prior to
the date (including all available extensions) on which such Tax Return
must be filed. New World shall incorporate such comments as are
reasonably determined by New World to be appropriate in the Tax Return,
and HFC and New World shall negotiate in good
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faith with respect to any comments determined by New World not to be
appropriate, and if HFC and New World cannot agree whether to include
any such comments, HFC and New World shall submit such comments to a
"big five" accounting firm not used by HFC or New World for tax
preparation matters for resolution, and New World shall timely file the
Tax Return. For purposes of Section 10.1 hereof in the case of any
income tax that is imposed on a periodic basis and is payable for a
taxable period that includes (but does not end on) the Closing Date,
the portion of such income tax which relates to the portion of such
taxable period ending on the Closing Date shall be deemed equal to the
amount which would be payable if the relevant taxable period ended on
the Closing Date. Any credits relating to a taxable period that both
begins before and ends after the Closing Date shall be taken into
account as though the relevant taxable period ended on the Closing
Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of
each Subsidiary.
8.12.5 Cooperation on Tax Matters.
(A) New World, each Subsidiary and HFC shall
cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns
pursuant to this Section. Such cooperation shall include the
retention and (upon the other party's request) the provision
of records and information which are reasonably relevant and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder.
(B) New World and HFC further agree, upon request, to
use their best efforts without incurring unreasonable cost or
expense to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed
with respect to the transactions contemplated hereby.
8.12.6 Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving any Subsidiary shall be
terminated as of the Closing Date and, after the Closing Date, no
Subsidiary shall be bound thereby or have any liability thereunder.
8.12.7 Audits. New World will promptly inform HFC of any audit
commenced by a taxing authority with respect to a return filed pursuant
to Section 8.12.2 or Section 8.12.3 above. New World will promptly
inform HFC of any material issue raised (and if notice is not given no
claim shall be made for any indemnification with respect to such issue)
with respect to an audit of a return filed pursuant to Section 8.12.4
above which relates (i) to a transaction occurring on or before the
Closing Date or (ii) to an item or items which cannot be specifically
allocated to either the period ending on the Closing Date or the period
beginning on the day after the Closing Date. HFC shall have the right
(but not the obligation) to control that portion of the defense of any
such audit or resulting litigation
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(using counsel of its choice, paid for by HFC), and to settle any such
issue raised on any terms in its sole discretion. Each party shall
cooperate with the other in the defense of any such audit as such party
may reasonably request. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and
information which are reasonably relevant and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
8.12.8 Carrybacks. Except to the extent required by law,
neither New World nor any Subsidiaries will cause any item or attribute
arising after the Closing to be carried back to a period ending on or
before the Closing without the express written permission of HFC. New
World shall not, and shall not permit the Subsidiary to, file or cause
to be filed any Tax Return that includes any such carryback following
receipt of permission granted pursuant to the preceding sentence of or
including any Subsidiary without the prior written consent of HFC,
which consent will not be unreasonably withheld. Neither New World nor
any Subsidiary nor any affiliate of the foregoing shall file or cause
to be filed any Tax Return with respect to any Subsidiary for any
taxable year or other taxable period beginning after the Closing Date
that could reasonably be expected materially and adversely to affect
the liability of Transferors or any of their affiliates with respect to
Taxes for any pre-Closing period without the prior written consent of
HFC, which consent shall not be unreasonably withheld; provided that
HFC shall have notified New World of HFC's objections within 7 calendar
days after New World shall have delivered to HFC the relevant portions
of such Tax Returns.
9. Employee and Employee Benefit Matters.
9.1 Employment of Transferred Employees. On the Closing Date,
the Company or New World shall offer to employ (i) each Transferred Employee
(other than the Transferred Employees then employed by the Subsidiaries who
shall remain employed by the applicable Subsidiary) and (ii) each On Leave
Employee upon such person reporting to New World or a Subsidiary to return to
work within twelve (12) months of the Closing Date, and upon such person
reporting to New World or a Subsidiary for work (within the aforesaid period)
such person shall be deemed to be a Transferred Employee for purposes of this
Section 9 on the terms and conditions contemplated by this Section 9.
9.2 Severance Benefits Upon Termination. For a period of
twelve (12) months immediately following the Closing Date, neither New World nor
any Subsidiary shall terminate (or cause to be terminated) the employment of any
Transferred Employee who was immediately prior to the Closing Date either a
salaried employee or an hourly non-union employee of HFC or any Subsidiary nor
shall New World or any Subsidiary lay off for any period of time or cause to be
laid off for any period of time any Transferred Employee who was immediately
prior to the Closing Date either a salaried employee or an hourly non-union
employee of HFC or any Subsidiary (other than any such Transferred Employee who
at such time was a non-exempt under the Fair Labor Standards Act ("FLSA")
production or maintenance employee of Hershey Pasta Group Winchester, Inc.)
unless
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<PAGE> 50
(A) written notice of such termination (or layoff) is provided to such
Transferred Employee at least 3 months prior to the date of termination (or
layoff) of the Transferred Employee, or (B) such Transferred Employee is
terminated for Cause. For purposes of this Section 9.2, the term "Cause" means a
Transferred Employee's material misconduct, inability or refusal to perform job
responsibilities, or conviction of a felony. With respect to any such non-union
Transferred Employee whose employment is terminated other than for Cause (or who
is subjected to layoff) within such 12 month period, New World shall (or cause a
Subsidiary to): (A) pay to such Transferred Employee severance pay in an amount
equal to the greater of (i) 2 weeks' base compensation for each full year of
service (including years of service with the Business prior to the Closing), or
(ii) the amount of severance pay to which such Transferred Employee would be
entitled under any severance plan, program or arrangement maintained by New
World or a Subsidiary (determined counting years of service with the Business
prior to the Closing); (B) provide such Transferred Employee (and any dependents
and beneficiaries thereof) with medical benefits for a period equal to the
number of weeks of severance pay to which such Transferred Employee is entitled
pursuant to this Section 9.2 and (C) provide to such Employee reasonable
outplacement services. For the purpose of this Section 9.2, any Transferred
Employee who immediately prior to the Closing Date was a non-exempt (under FLSA)
production or maintenance employee of Hershey Pasta Group Winchester, Inc. and
who is laid off for more than 120 work days, whether consecutive or not, in the
twelve months following the Closing Date, shall be considered to have been
terminated, and any such employee so considered to have been terminated shall
receive in addition to the payment of severance pay and other severance benefits
as described above, an amount equal to such person's base compensation for a
period of 90 days.
9.3 Terms and Conditions of Employment. For a period of 12
months immediately following the Closing Date, New World and the Subsidiaries
shall provide to the Transferred Employees who were immediately prior to the
Closing Date salaried employees or hourly non-union employees compensation and
benefits that are in the aggregate no less favorable than the compensation and
benefits provided to such Transferred Employees by HFC or a Subsidiary
immediately prior to the Closing Date. Nothing contained herein shall preclude
New World from amending, substituting or terminating any specific plan of HFC or
any Subsidiaries.
9.4 Collective Bargaining Agreements. New World shall or shall
cause the Subsidiaries to assume, perform and discharge all obligations under
the collective bargaining agreements pertaining to the Business that are in
effect and applicable to any of the Transferred Employees as of the Closing
Date. If New World or any Subsidiary terminates the employment of any
Transferred Employee who was an hourly, union employee immediately prior to the
Closing Date (other than for Cause) within 12 months immediately following the
Closing Date, New World shall pay to such Transferred Employee severance pay on
the terms and in an amount equal to the amount that would have been due under
the collective bargaining agreement applicable to such Transferred Employee if
such Transferred Employee had been terminated on such date by HFC.
9.5 Retirement Plans. Effective on the Closing Date, New World
shall or shall cause the Subsidiaries to assume sponsorship of and all duties,
obligations and liabilities with respect
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to the "Hershey Pasta Group Retirement Plan for Hourly Employees" and the
"Hershey Pasta Group Omaha Plant Retirement Plan" (collectively, the
"Transferred Pension Plans") and HFC shall cease to have any such duties,
obligations or liabilities with respect to such plans. As soon as
administratively possible after the Closing Date, but in no event later than 30
business days thereafter, New World shall or shall cause the Subsidiaries to
establish a trust or trusts to receive the assets of the Transferred Pension
Plans. Upon written notification to HFC by New World that New World or a
Subsidiary has established such trust or trusts, HFC shall cause the trustee for
each trust which holds assets of the Transferred Pension Plans to transfer all
such assets to the successor trust or trusts established by New World or a
Subsidiary.
9.6 Welfare Benefits.
9.6.1 Welfare benefit plans that are maintained by any
Transferor for the benefit of any Transferred Employee shall be treated
as follows: (i) if such plan is maintained exclusively for the benefit
of Transferred Employees, New World shall cause the Company to assume
such plan and any related trust, insurance contract or fund
("Transferred Benefit Plans"); (ii) if such plan is maintained for the
benefit of Transferred Employees and other employees of Transferors
and/or their affiliates and the provision of the benefits provided by
such plan is required by any collective bargaining agreement covering
Transferred Employees, the parties shall treat such plan as a Shared
Contract; and (iii) if such plan is maintained for the benefit of
Transferred Employees and other employees of Transferors and/or their
affiliates and the provision of the benefits provided by such plan is
not required by any collective bargaining agreement covering
Transferred Employees, by the parties such plan will be retained by the
applicable Transferor and not assumed by the Company nor treated as a
Shared Contract.
9.6.2 With respect to each Transferred Employee: (A) New World
and the Subsidiaries shall waive pre-existing condition requirements,
evidence of insurability provisions, waiting period requirements or any
similar provisions under any employee welfare benefit plan maintained
or sponsored by or contributed to by New World or the Subsidiaries for
such Transferred Employees after the Closing Date to the extent such
requirements and conditions were waived by Transferors; (B) New World
and the Subsidiaries shall apply toward any deductible requirements and
out-of-pocket maximum limits under its employee welfare benefit plans
any amounts paid (or accrued) by each Transferred Employee under HFC's
welfare benefit plans during the current plan year; and (C) New World
and the Subsidiaries shall recognize for purposes of participation,
eligibility and vesting (but not for purposes of benefit accrual,
except in the case of the Transferred Pension Plans) under its employee
benefit plans (including any retiree medical or life insurance plan),
as well as for all purposes relating to assumed collective bargaining
agreements, the service of a Transferred Employee with HFC, the
Subsidiaries and any of its or their affiliates or predecessors prior
to the Closing Date.
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<PAGE> 52
9.7 COBRA Obligations. HFC shall be responsible for satisfying
obligations under Section 601 et seq. of ERISA and Code Section4980B ("COBRA")
to provide medical continuation coverage to or with respect to any employee of
the Business in accordance with law on account of any "qualifying event"
occurring prior to the Closing Date. New World shall be responsible for
satisfying obligations under COBRA to provide medical continuation coverage to
or with respect to any Transferred Employee in accordance with law with respect
to any "qualifying event" which occurs on or after the Closing Date.
9.8 Vacation Time. New World shall or shall cause the
Subsidiaries to allow each Transferred Employee employed by a Subsidiary or New
World to use on a paid basis after the Closing Date or receive vacation pay for
any earned, but unused, vacation time that was accrued by such Transferred
Employee as of the Closing Date and is accrued on the Statement.
9.9 No Third Party Beneficiaries. The provisions of this
Section 9 are for the sole benefit of the parties hereto. Nothing in this
Section 9 shall give or be considered to give any person other than the parties
hereto and their permitted assigns any legal or equitable right or any cause of
action and no Person is an intended third party beneficiary of the provisions of
this Agreement including the provisions of this Section 9.
10. Indemnification.
10.1 Indemnification by Transferors. Transferors shall
indemnify New World, its affiliates and each of their respective officers,
directors, employees and agents and hold them harmless from any loss, liability,
damage or expense (including reasonable legal fees and expenses) ("Losses")
suffered or incurred by any such indemnified party to the extent arising from
(i) any breach of any representation or warranty of Transferors contained in
this Agreement, (ii) any breach of any covenant of Transferors contained in this
Agreement or the Transitional Services Agreement and (iii) any Excluded
Liability or any obligation or liability of Transferors that is not an Assumed
Liability; provided, however, that Transferors (A) shall not have any liability
under clause (i) above unless the aggregate of all Losses relating thereto for
which Transferors would, but for this proviso, be liable exceeds $5,000,000 on a
cumulative basis, and then only to the extent of any such excess, (B)
Transferors shall not have any liability under clause (i) above for any
individual item or series of related items where the Loss relating to such item
is less than $50,000, and such items and the alleged Loss relating thereto shall
not be aggregated for purposes of the first proviso to this Section 10.1, and
(C) Transferor's aggregate liability under clause (i) of this Section 10.1 shall
in no event exceed 20% of the Final Transaction Consideration; provided further,
however, that any claim for indemnification under clause (i) of this Section
10.1 is made in writing prior to the termination of the survival period for the
particular representation or warranty.
10.2 Exclusive Remedy. Except as otherwise expressly provided
in Sections 23 and 28 or in the Transitional Services Agreement, New World
acknowledges and agrees that, from and after the Closing, its sole and exclusive
remedy with respect to any and all rights, claims, and causes of action relating
to the subject matter of this Agreement, the Transitional Services
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Agreement, and the other agreements contemplated hereby, including but not
limited to claims relating to environmental, health or safety matters, including
but not limited to those arising under CERCLA, any analogous state law or any
other Environmental Law (collectively, "Environmental Matters"), shall be
pursuant to the indemnification provisions set forth in this Section 10. In
furtherance of the foregoing, New World hereby waives, from and after the
Closing, to the fullest extent permitted under applicable law, any and all such
rights, claims and causes of action (other than tort claims of, or causes of
action arising from, fraudulent misrepresentation) it may have against
Transferors arising under or based upon any federal, state, local or foreign
statute, law, ordinance, rule or regulation or otherwise, including, without
limitation relating to any Environmental Matters.
10.3 Indemnification by New World. New World and the Company
after the Closing shall indemnify each of Transferors, the Subsidiaries, their
respective affiliates, officers, directors, employees and agents against and
hold them harmless from any Losses suffered or incurred by any such indemnified
party to the extent arising from (i) any breach of any representation or
warranty of New World contained in this Agreement, (ii) any breach of any
covenant of New World contained in this Agreement or the Transitional Services
Agreement contemplated hereby, (iii) any failure of New World or the Company,
after the Closing, to pay, discharge or perform any of the Assumed Liabilities,
in accordance with their terms, (iv) any guarantee or obligation to assure
performance given or made by Transferors, any Subsidiary or any of their
respective affiliates with respect to any of the Assumed Liabilities, (v) any
and all obligations, liabilities, actions, suits, claims and other proceedings
which arise directly or indirectly out of the operation of the Business or use
of the Assets after the Closing, including those arising pursuant to New World's
exercise of the rights granted in Section 8.9 of this Agreement, (vi) any
Liabilities of a Subsidiary; and (vii) any failure to comply with the bulk sale
laws with respect to transactions contemplated hereby; provided, however, that
(A) New World shall not have any liability under clause (i) of this Section 10.3
unless the aggregate of all Losses relating thereto for which New World would,
but for this proviso, be liable exceeds $5,000,000 on a cumulative basis, and
then only to the extent of any such excess; (B) New World shall not have any
liability under clause (i) of this Section 10.3 for any individual item or
series of related items where the Loss relating to such item or series of
related items is less than $50,000 and such items and the alleged Loss related
thereto shall not be aggregated for purposes of the first proviso to this
Section 10.3; and (C) New World's aggregate liability under clause (i) of this
Section 10.3 shall in no event exceed 20% of the Final Transaction
Consideration.
10.4 Calculation of Losses. The amount of any and all Losses
under this Section 10 shall be determined net of any amounts recovered or
recoverable by the indemnified party under any insurance policies which may be
in effect with respect to such Losses. Each party hereby waives, to the extent
permitted under its applicable insurance policies, any subrogation rights that
its insurer may have with respect to any indemnifiable Losses. Any indemnity
payment under this Agreement shall be treated as an adjustment to the Final
Transaction Consideration for tax purposes.
10.5 Termination of Indemnification. The obligations to
indemnify and hold harmless a party hereto, pursuant to clauses (i) and (ii) of
Section 10.1 and clauses (i) and (ii) of
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Section 10.3, shall terminate when any such representation or warranty
terminates pursuant to Section 14 or, in the case of a covenant, three months
after the period of performance of any such covenant has expired; provided,
however, that such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the Person to be indemnified or
the related party thereto shall have, prior to the expiration of the applicable
period, previously made a claim by delivering a written notice (stating in
reasonable detail the nature of, and factual and legal basis for, any such claim
for indemnification, and the provisions of this Agreement upon which such claim
for indemnification is made) to the indemnifying party. The obligation to
indemnify and hold harmless a party hereto pursuant to the other clauses of
Sections 10.1 and 10.3 shall not terminate.
10.6 Procedures Relating to Indemnification.
10.6.1 In order for a party (the "indemnified party") to be
entitled to any indemnification provided for under this Agreement in
respect of, arising out of or involving a claim or demand made by any
Person against the indemnified party (a "Third Party Claim"), such
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim as promptly as reasonably
possible after receipt by such indemnified party of notice of the Third
Party Claim; provided, however, that failure to give such notification
on a timely basis shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure. Thereafter, the
indemnified party shall deliver to the indemnifying party, within five
business days after the indemnified party's receipt thereof, copies of
all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim.
10.6.2 Other than for a claim governed by Section 8.12.7, if a
Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense
thereof and, if it so chooses and acknowledges its indemnification
responsibility hereunder, to assume the defense thereof with counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party. Notwithstanding any acknowledgment made pursuant to
the immediately preceding sentence, the indemnifying party shall
continue to be entitled to assert any limitation on its indemnification
responsibility contained in the provisos to Section 10.1 or Section
10.3, as the case may be. Should the indemnifying party so elect to
assume the defense of a Third Party Claim, the indemnifying party shall
not be liable to the indemnified party for legal expenses subsequently
incurred by the indemnified party in connection with the defense
thereof. If the indemnifying party assumes such defense, the
indemnified party shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood,
however, that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel
employed by the indemnified party for any period during which the
indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend any Third Party Claim, all the
parties hereto shall cooperate in the defense or prosecution of such
Third
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Party Claim. Such cooperation shall include the retention and (upon the
indemnifying party's request) the provision to the indemnifying party
of records and information which are reasonably relevant to such Third
Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. Whether or not the indemnifying party shall have
assumed the defense of a Third Party Claim, the indemnified party shall
not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the indemnifying party's
prior written consent (which consent shall not be unreasonably
withheld).
11. Assignment. Except as set forth below, this Agreement and
any rights and obligations hereunder shall not be assignable or transferable by
New World or Transferors (except to a purchaser of all or substantially all of
the assets or stock of New World) without the prior written consent of the other
party and any purported assignment without such consent shall be void and
without effect; provided, that without the consent of Transferors, New World (i)
may assign its right to purchase any of the Assets hereunder to one or more
wholly-owned subsidiaries of New World upon written notice of such assignment to
Transferors (it being understood, however, that no such assignment shall limit
or otherwise affect New World's obligations hereunder) and (ii) may assign after
the Closing its rights, but not its obligations hereunder, as collateral under a
security interest in favor of the lenders under the Commitment Letters or any
other financing source of New World. Notwithstanding any of the foregoing, New
World acknowledges and agrees that CRE may be merged into a wholly owned
subsidiary of HFC, and New World hereby consents to such a merger with the
understanding that the merged entity would be bound by this Agreement.
12. No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein express or implied (including Section 8.9, Section 9 and Section 10)
shall give or be construed to give to any Person, other than the parties hereto
and such permitted assigns, any legal or equitable rights hereunder.
13. Termination.
13.1 Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
13.1.1 by the mutual written consent of Transferors and New
World;
13.1.2 by Transferors if any of the conditions set forth in
Section 3.2 shall have become incapable of fulfillment, and shall not
have been waived by Transferors;
13.1.3 by New World if any of the conditions set forth in
Section 3.1 shall have become incapable of fulfillment, and shall not
have been waived by New World;
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13.1.4 by Transferors if the Closing does not occur on or
before January 28, 1998; or
13.1.5 by Transferors or New World if the Closing does not
occur on or before March 31, 1999;
provided, however, that the party seeking termination pursuant to Sections
13.1.2, 13.1.3, or 13.1.4 above is not in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement.
13.2 In the event of termination by Transferors or New World
pursuant to this Section 13, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein:
13.2.1 New World shall return all documents and copies and
other materials received from or on behalf of Transferors relating to
the transactions contemplated hereby, whether so obtained before or
after the execution hereof, to Transferors; and
13.2.2 all confidential information received by New World with
respect to the Assets, the Assumed Liabilities and the Business shall
be treated in accordance with the Confidentiality Agreement, which
shall remain in full force and effect notwithstanding the termination
of this Agreement.
13.3 If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 13, this
Agreement shall become void and of no further force and effect, except for the
provisions of (i) Section 7.1 relating to the obligation of New World to keep
confidential certain information and data obtained by it, (ii) Section 8.3
relating to publicity, (iii) Section 15 relating to certain expenses, (iv)
Section 23 relating to finder's fees and broker's fees and (v) this Section 13.
Nothing in this Section 13 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or to impair the right of any party to compel specific performance by
another party of its obligations under this Agreement. Notwithstanding the
foregoing, (i) in the event that the Transferors terminate the Agreement
pursuant to Section 13.1.4 above, then New World shall reimburse Transferors for
all of their reasonable out-of-pocket fees and expenses incurred in connection
with their performance hereunder and the other transactions contemplated hereby
from the date hereof through the date of such termination, and (ii) in the event
that New World terminates this Agreement pursuant to Section 13.1.5 above due to
the Transferor's failure to close due to its material breach of this Agreement
by such date, then Transferors shall reimburse New World for all of its
reasonable out-of-pocket fees and expenses incurred in connection with its
performance hereunder and the other transactions contemplated hereby from the
date hereof through the date of such termination; provided, however, that as a
condition to the right of New World to be reimbursed by Transferors pursuant to
this clause (ii), New World shall not have failed to perform in all material
respects any
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<PAGE> 57
of its covenants hereunder and (iii) in the event that the Transferors terminate
this Agreement pursuant to Section 13.1.5 above due to New World's failure to
close due to its material breach of this Agreement, then New World shall
reimburse the Transferors for all of their reasonable out-of-pocket fees and
expenses incurred in connection with its performance hereunder and the other
transactions contemplated hereby from the date of such termination; provided,
however, that as a condition to the right of Transferors to be reimbursed by New
World pursuant to this clause (iii), the Transferors shall not have failed to
perform in all material respects any of its covenants hereunder.
14. Survival of Representations. The representations and
warranties of the parties in this Agreement and in any other document delivered
in connection herewith shall survive the Closing for purposes of Section 10.1
and Section 10.3 until the close of business on June 30, 2000 and shall then
terminate for all purposes; provided, however, that (i) the representations and
warranties provided in Section 4.1, 4.2, 4.4, 4.8.1(a) and 6.1 with respect to
the authority to enter into this Agreement and the related agreements and title
to the Assets shall survive the Closing indefinitely solely for purposes of
Sections 10.1 and 10.3, (ii) the representations and warranties set forth in
Section 4.14 (Taxes) shall survive until the statute of limitations with respect
thereto terminates, and (iii) the representations and warranties provided in
Section 4.13 (Environmental Matters) shall survive until the close of business
on June 30, 2001.
15. Expenses. Whether or not the transactions contemplated
hereby are consummated, and except as otherwise specifically provided in Section
8.6 or elsewhere in this Agreement, subject to Section 13.3, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs or expenses.
16. Amendment and Waiver. This Agreement may be amended, or
any provision of this Agreement may be waived; provided, that any such amendment
or waiver shall be binding upon Transferors only if set forth in a writing
executed by Transferors and referring specifically to the provision alleged to
have been amended or waived, and any such amendment or waiver shall be binding
upon New World only if set forth in a writing executed by New World and
referring specifically to the provision alleged to have been amended or waived.
No course of dealing between or among any persons having any interest in this
Agreement shall be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any Person under or by reason of
this Agreement.
17. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
17.1 if to New World,
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New World Pasta, LLC
c/o Joseph, Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Attention: David Y. Ying
Facsimile: 212-286-8686
with copies to:
Miller Milling Company
880 Grain Exchange Building
Minneapolis, Minnesota 55415
Attention: John C. Miller
Facsimile: 612-332-0810; and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York New York 10022
Attention: J. Gregory Milmoe
Facsimile: 212-735-2000; and
Maslon Edelman Borman & Brand
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Larry A. Koch
Facsimile: 612-672-8397
17.2 if to Transferors,
Hershey Foods Corporation
100 Crystal A Drive
Hershey, Pennsylvania 17033
Attention: William F. Christ
Robert M. Reese, Esq.
Facsimile: (717) 534-7873
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with a copy to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Glen E. Hess, P.C.
Facsimile: (212) 446-4900
18. Interpretation. The headings and captions contained in
this Agreement, in any Schedule or Exhibit hereto and in the table of contents
to this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Any capitalized terms used
in any Schedule or Exhibit hereto and not otherwise defined therein shall have
the meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation."
19. Specific Performance. Each party hereto acknowledges that
money damages would be both incalculable and an insufficient remedy for any
breach of this Agreement by such party and that any such breach would cause the
other party hereto irreparable harm. Accordingly, each party hereto also agrees
that, in the event of any breach or threatened breach of the provisions of this
Agreement by such party, the other party hereto shall be entitled to equitable
relief without the requirement of posting a bond or other security, including in
the form of injunctions and orders for specific performance.
20. No Strict Construction. Notwithstanding the fact that this
Agreement has been drafted or prepared by one of the parties, both New World and
Transferors confirm that both they and their respective counsel have reviewed,
negotiated and adopted this Agreement as the joint agreement and understanding
of the parties, and the language used in this Agreement shall be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any Person.
21. Counterparts. This Agreement may be executed in one or
more counterparts (including by means of telecopied signature pages), all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to the other party.
22. Entire Agreement. This Agreement and the other agreements
referred to herein (including the Confidentiality Agreement) and the other
agreements executed by the parties on the date hereof contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, relating to such subject matter.
- 50 -
<PAGE> 60
23. Brokerage. New World has not used a broker or finder in
connection with the transactions contemplated by this Agreement, and there are
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement by or on behalf of New World. Transferors have not
retained any broker or finder or incurred any liability or obligation for any
brokerage fees, commissions or finder's fees with respect to this Agreement or
the transactions contemplated hereby, except pursuant to an arrangement with
Goldman Sachs & Co., for which Transferors are solely responsible.
Notwithstanding anything to the contrary in Section 10, New World shall
indemnify and hold Transferors harmless for any breach of its representation in
this Section 23, and Transferors shall indemnify and hold New World harmless for
any breach of its representation in this Section 23.
24. Disclaimer Regarding Estimates and Projections. In
connection with New World's investigation of the Business, New World has
received certain projections, including projected statements of revenue, gross
profit, product contribution and operating profit of the Business for the fiscal
years ending in 1999, 2000 and 2001 and certain other business information for
such fiscal years and succeeding fiscal years. New World acknowledges that there
are uncertainties inherent in attempting to make such estimates, projections and
other forecasts and plans, that New World is familiar with such uncertainties,
that New World is taking full responsibility for making its own evaluation of
the adequacy and accuracy of all estimates and projections and other forecasts
and plans so furnished to it (including the reasonableness of the assumptions
underlying such estimates, projections and forecasts), and that New World shall
have no claim against Transferors with respect thereto. Accordingly, Transferors
make no representation or warranty with respect to such estimates and
projections and other forecasts and plans (including the reasonableness of the
assumptions underlying such estimates and projections and forecasts).
25. Schedules. The disclosures in the Schedules hereto are to
be taken as relating to the representations and warranties of Transferors as a
whole. The inclusion of information in the Schedules hereto shall not be
construed as an admission that such information is material to the Assets, the
Business or Transferors. Information reflected in the Schedules hereto is not
necessarily limited to matters required by this Agreement to be reflected in
such Schedules hereto. Such additional matters are set forth for informational
purposes only and do not necessarily include other matters of a similar nature.
Prior to the Closing, Transferors shall have the right and the obligation to
supplement, modify or update the Schedules hereto to reflect changes in the
ordinary course of the Business prior to the Closing; provided, however, that
any such supplements, modifications or updates shall not be deemed to cure any
breach of any representation or warranty made in this Agreement unless so
consented to by New World in writing.
26. Representation by Counsel; Interpretation. Transferors and
New World each acknowledges that it has been represented by counsel in
connection with this Agreement and the transactions contemplated hereby.
Accordingly, any rule of law or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived.
- 51 -
<PAGE> 61
27. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid and effective under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
28. Bulk Transfer Laws. New World hereby waives compliance by
Transferors with the provisions of and Transferors agree to indemnify and hold
New World harmless from any liability under, any so-called bulk transfer laws of
any jurisdiction which may be applicable in connection with the Reorganization
Transactions and Recapitalization Transactions.
29. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania (without giving effect to its conflict of law principles).
30. Schedules and Exhibits. All Schedules and Exhibits hereto
are hereby incorporated in and made a part of this Agreement as if set forth in
full herein.
31. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provisions of, or based on any matter arising out of or in
connection with, any of this Agreement any related agreement or the transactions
contemplated hereby shall be brought in the United States District Court for the
District of Pennsylvania located in Dauphin County Pennsylvania (or, if subject
matter jurisdiction is unavailable, any of the state courts of the Commonwealth
of Pennsylvania), and each of the parties hereby consents to the exclusive
jurisdiction of such court (and of the appropriate appellate court) in any such
suit, action or proceeding and waives any objection to venue laid therein.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the State of Pennsylvania.
Without limiting the foregoing, Transferors and New World agree that service of
process upon such party at the address referred to in Section 17, together with
written notice of such service to such party, shall be deemed effective service
of process upon such party.
32. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW THE RIGHT TO A JURY
TRIAL IN CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OF THE OTHER AGREEMENTS CONTEMPLATED HEREBY OR TO THE ENFORCEMENT OF ANY
PROVISION OF THIS AGREEMENT OR ANY SUCH OTHER AGREEMENT.
* * * * *
- 52 -
<PAGE> 62
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
HERSHEY FOODS CORPORATION
By: /s/ William F. Christ
________________________________
Name: William F. Christ
Title: Senior Vice President, Finance
and Chief Financial Officer
HERSHEY CRE, INC.
By: /s/ Robert M. Reese
________________________________
Name: Robert M. Reese
Title: Vice President
and Assistant Secretary
HOMESTEAD, INC.
By: /s/ Robert M. Reese
________________________________
Name: Robert M. Reese
Title: Vice President
and Assistant Secretary
HERSHEY PASTA MANUFACTURING
COMPANY
By: /s/ Robert M. Reese
________________________________
Name: Robert M. Reese
Title: Vice President
and Assistant Secretary
NEW WORLD PASTA, LLC
By: /s/ David Y. Ying
________________________________
Name: David Y. Ying
Title: President
<PAGE> 63
For purposes of Sections 7.7 and 7.8 only
JOSEPH LITTLEJOHN & LEVY FUND III,
L.P.
By: /s/ David Y. Ying
________________________________
Name: David Y. Ying
Title: Partner
<PAGE> 1
EXHIBIT 2.2
EXECUTION COPY
AMENDMENT NUMBER 1 TO THE
RECAPITALIZATION AGREEMENT
(DATED AS OF DECEMBER 15, 1998)
AMONG
HERSHEY FOODS CORPORATION,
HERSHEY CHOCOLATE & CONFECTIONERY CORPORATION (AS SUCCESSOR IN
INTEREST TO HERSHEY CRE, INC.),
HOMESTEAD, INC.,
NEW WORLD PASTA COMPANY
(FORMERLY KNOWN AS HERSHEY PASTA MANUFACTURING COMPANY),
NEW WORLD PASTA, LLC,
JOSEPH LITTLEJOHN & LEVY FUND III, L.P.
AND,
AS ADDITIONAL PARTIES THERETO
PASTA GROUP, L.L.C.
AND
WINCHESTER PASTA, L.L.C.
DATED AS OF JANUARY 28, 1999
<PAGE> 2
TABLE OF CONTENTS
PAGE
1. Definitions.................................................... 2
1.1 Amendment to the definition of "Subsidiaries"......... 2
2. Amendment to Parties........................................... 2
2.1 Amendment to Introductory Paragraph................... 2
2.2 Transferors........................................... 3
3. Amendment to Recitals.......................................... 3
4. Amendment to Section 2.3....................................... 3
5. Amendment to Section 2.4....................................... 3
6. Schedule 2.6................................................... 4
7. Amendment to Section 2.6.2..................................... 4
8. Amendment to Section 2.6.4..................................... 4
9. Amendment to Section 5.5....................................... 4
10. Amendment to Section 5.10...................................... 4
11. Amendment to Section 7.8.2..................................... 4
12. Amendment to Section 9.3....................................... 5
13. Amendment to Section 9.8....................................... 6
14. Amendment to Section 10.3...................................... 6
15. Amendment to Section 10.5...................................... 7
16. Amendment to Section 10.6.2.................................... 7
17. Limited Amendment.............................................. 7
18. Amendment and Waiver........................................... 7
19. Notices........................................................ 7
- i -
<PAGE> 3
20. Counterparts.................................... 7
21. Entire Agreement................................ 8
22. Severability.................................... 8
23. Governing Law................................... 8
24. Headings........................................ 8
SCHEDULE 2.6............................................. Schedule 2.6, Page 1
- ii -
<PAGE> 4
INDEX OF DEFINED TERMS
Accrued Vacation Benefits................................................. 6
Agreement ................................................................ 1
Company................................................................... 1
Amendment ................................................................ 1
CRE ...................................................................... 1
HCCCo .................................................................... 1
HFC ...................................................................... 1
Homestead ................................................................ 1
JLL ...................................................................... 1
New World ................................................................ 1
Pasta Group .............................................................. 1
Subsidiaries ............................................................. 2
Transferors .............................................................. 1
Winchester ............................................................... 1
- iii -
<PAGE> 5
This AMENDMENT Number 1 (the "Amendment") dated as of January
28, 1999 to the RECAPITALIZATION AGREEMENT (together with the Exhibits and
Schedules thereto, the "Agreement"), (dated as of December 15, 1998), by and
among HERSHEY FOODS CORPORATION, a Delaware corporation ("HFC"), HERSHEY
CHOCOLATE & CONFECTIONERY CORPORATION), a Delaware corporation ("HCCCo"), as the
successor in interest to HERSHEY CRE, INC., a Delaware corporation ("CRE"),
HOMESTEAD, INC., a Delaware corporation ("Homestead"), NEW WORLD PASTA COMPANY
(formerly known as HERSHEY PASTA MANUFACTURING COMPANY), a Delaware corporation
(the "Company"), NEW WORLD PASTA, LLC, a Delaware limited liability company
("New World"), JOSEPH LITTLEJOHN & LEVY FUND III, L.P., a Delaware limited
partnership ("JLL"), PASTA GROUP L.L.C., a Delaware limited liability company
("Pasta Group"), and WINCHESTER PASTA, L.L.C., a Delaware limited liability
company ("Winchester"). HCCCo, and HOMESTEAD are each a wholly owned subsidiary
of HFC, and together with HFC are referred to herein as the "Transferors,"
W I T N E S S E T H:
WHEREAS, HFC, CRE, Homestead, the Company, New World and, with
respect to Section 7.7 and 7.8 only, JLL entered into the Agreement as of
December 15, 1998;
WHEREAS, effective as of 11:59 p.m. Eastern Standard Time on
December 31, 1998, CRE was merged into HCCCo with HCCCo being the surviving
entity;
WHEREAS, on January 21, 1999, Hershey Pasta Manufacturing
Company amended its Certificate of Incorporation to change its name to New World
Pasta Company;
WHEREAS, HFC, HCCCo in its capacity as the successor in
interest to CRE, Homestead, the Company, New World and JLL desire to amend and
clarify certain terms contained in the Agreement, all as more fully set forth
herein;
WHEREAS, Pasta Group and Winchester, each desires to and each
of the parties thereto desire that Pasta Group and Winchester, each become a
party to the Agreement, all as more fully set forth herein;
WHEREAS, prior to the Execution of the Agreement, HFC
announced to the Transferred Employees that HFC would pay to each of them for
all accrued, but unused, vacation, vacation pay in connection with the sale of
the pasta business;
WHEREAS, pursuant to Section 9.8 of the Agreement, New World
announced to the Transferred Employees that each of them would be entitled to
receive paid vacation time accrued with the pasta business prior to the Closing;
and
<PAGE> 6
WHEREAS, New World requested that HFC refrain from paying any
of the Transferred Employees their accrued vacation pay prior to Closing;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not defined in this
Amendment shall have the meaning specified in the Agreement (including the
Schedules and Exhibits thereto).
1.1 Amendment to the definition of "Subsidiaries".
The definition of Subsidiaries set forth in the Agreement is hereby amended by
deleting Section 1.20 in its entirety and replacing it with the following:
1.20 "Subsidiaries" shall mean Winchester
Pasta, L.L.C., a Delaware limited liability
company (the successor in interest to
Hershey Pasta Group Winchester, Inc., a
Delaware corporation), New World Pasta
Company (formerly known as Hershey Pasta
Manufacturing Company), a Delaware
corporation, and Pasta Group, L.L.C., a
Delaware limited liability company, each
directly or indirectly a wholly owned
subsidiary of HFC.
2. Amendment to Parties. The parties to the Agreement are
hereby amended by adding HCCCo, Pasta Group and Winchester as parties to the
Agreement and HCCCo also as a Transferor thereunder as follows:
2.1 Amendment to Introductory Paragraph. The
introductory paragraph contained in the Agreement is hereby amended by deleting
the introductory paragraph and replacing it with the following:
This RECAPITALIZATION AGREEMENT (this
"Agreement"), dated as of December 15, 1998,
by and among HERSHEY FOODS CORPORATION
("HFC"), a Delaware corporation, HERSHEY
CHOCOLATE & CONFECTIONERY CORPORATION, a
Delaware corporation ("HCCCo"), HCCCo, as
the successor in interest to HERSHEY CRE,
INC., a Delaware corporation ("CRE"),
HOMESTEAD, INC., a Delaware corporation
("Homestead"), NEW WORLD PASTA COMPANY
(formerly known as HERSHEY PASTA
MANUFACTURING COMPANY), a Delaware
corporation, NEW WORLD PASTA, LLC, a
Delaware limited liability company ("New
World"), with respect to Sections 7.7 and
7.8 only, JOSEPH LITTLEJOHN & LEVY FUND III,
L.P. ("JLL"), PASTA GROUP, L.L.C., a
Delaware limited liability company ("Pasta
Group"), and WINCHESTER PASTA, L.L.C., a
- 2 -
<PAGE> 7
Delaware limited liability company ("Winchester");
HCCCo, and HOMESTEAD are each a wholly owned
subsidiary of HFC, and together with HFC are referred
to herein as the "Transferors,"
2.2 Transferors. For the avoidance of doubt, in determining
all obligations, covenants, warranties, representations and all rights and
benefits of the "Transferors" as contemplated by the Agreement, HCCCo shall be
included as a "Transferor." In addition, for all purposes of the Agreement, the
terms "HFC Company" and "HFC Companies" will include HCCCo.
3. Amendment to Recitals. The recital clauses contained on the first
page of the Agreement are hereby amended by adding as the fourth recital clause
the following:
"WHEREAS, following the execution of this Agreement, upon
completion of the Reorganization Transactions contemplated
hereby, HCCCo will own all of the outstanding capital stock of
the Company immediately prior to Closing."
4. Amendment to Section 2.3. Section 2.3 of the Agreement is hereby
amended by deleting the last paragraph of Section 2.3 and replacing it with the
following:
HFC or HCCCo may cause the Subsidiaries to assign and transfer
their right, title and interest in and to any Excluded Assets
held by such Subsidiaries to any of the Transferors or any
other Person designated by HFC or HCCCo at any time prior to
Closing without any consideration or value being received by
the Subsidiaries for such Excluded Assets.
5. Amendment to Section 2.4. Section 2.4 of the Agreement is hereby
amended by deleting the first paragraph of Section 2.4 and replacing it with the
following:
At or prior to the Closing, HFC or HCCCo shall cause one or
more of the Company, Pasta Group or Winchester to assume and
agree to be responsible for and to discharge or otherwise
satisfy the Assumed Liabilities, but only the Assumed
Liabilities, in accordance with the terms thereof. The Assumed
Liabilities shall consist of all Liabilities that have arisen
prior to or arise after the Closing in the conduct of or
relate to the Business or any of the Assets, including, but
not limited to, the following:
6. Schedule 2.6. Schedule 2.6 to the Agreement is hereby amended by
deleting such Schedule 2.6 in its entirety and replacing it with the Schedule
2.6 attached to this Amendment.
- 3 -
<PAGE> 8
7. Amendment to Section 2.6.2. Section 2.6.2 of the Agreement is hereby
amended by deleting clauses (D) and (E) thereof and replacing them respectively
with the following:
(D) resignations of the directors and officers of the
Subsidiaries, if any, effective as of the Closing, (E) a
short-form certificate of good standing of each Transferor and
the Subsidiaries, certified by the Secretary of State of
Delaware as of a date not more than three business days prior
to the Closing Date.
8. Amendment to Section 2.6.4. Section 2.6.4 of the Agreement is hereby
amended by deleting "HFC" and replacing it with "HCCCo" throughout Section
2.6.4.
9. Amendment to Section 5.5. Section 5.5 of the Agreement is hereby
amended by deleting "HFC will" and replacing it with "HFC will or will cause
HCCCo to."
10. Amendment to Section 5.10. Section 5.10 of the Agreement is hereby
amended by inserting in the fourth line thereof the following language
immediately prior to the closing parenthesis of the first parenthetical
statement in such section following the words: ". . . workmens' compensation
policies or coverage":
"(but including the Kemper Excess Liability Workmens'
Compensation Policy)"
11. Amendment to Section 7.8.2. Section 7.8.2 of the Agreement is
hereby amended by deleting Section 7.8.2 in its entirety and replacing it with
the following (it being understood that the JLL Guarantee referenced below will
terminate as of Closing Date):
Following the consummation of the transactions contemplated
hereby the Company will become a directly owned subsidiary of New
World, and Pasta Group and Winchester each will become an indirectly
owned subsidiary of New World. Therefore, as an inducement to the
Transferors to enter into this Agreement and the Transitional Services
Agreement and to undertake and consummate the transactions contemplated
hereby and thereby, subject to and effective immediately upon the
consummation of the Closing, the Company hereby guarantees (the
"Company Guarantee"), and Pasta Group and Winchester each guarantees
(each an LLC Guarantee") (the Company Guarantee and the LLC Guarantees
collectively the "Subsidiaries Guarantees"), absolutely and
unconditionally as a primary obligor and without limitation, all of the
New World Obligations and all of the New World Liabilities. The
Subsidiaries Guarantees shall be continuing guarantees and shall not
terminate until such time as all New World Obligations have been
completely performed and all New World Liabilities have been fully
identified and discharged.
- 4 -
<PAGE> 9
The JLL Guarantee and the Subsidiaries Guarantees are
guarantees of performance and payment not of collection and each of
them further waives any right to require that any action be brought
against New World or any other Person.
JLL, the Company, Pasta Group and Winchester hereby consent
that from time to time, with or without further notice to or assent
from JLL, the Company, Pasta Group or Winchester, any obligation or
liability of New World may be changed, altered, renewed, extended,
continued, surrendered, compromised, waived, discharged or released in
whole or in part or any default with respect thereto waived, and the
Transferors may generally deal or take action or no action with regard
to New World as the Transferors may see fit, and JLL, the Company,
Pasta Group and Winchester shall remain bound under their respective
guarantees notwithstanding any such change, alteration, renewal,
extension, continuance, compromise, waiver, discharge, inaction or
other dealing.
12. Amendment to Section 9.3. Section 9.3 of the Agreement is hereby
amended by adding at the end of Section 9.3 the following new paragraph:
Subject to the provisions of this Agreement, and in particular
Sections 10.3, 10.5 and 10.6.2, as soon as practicable
following the Closing Date, HFC shall take all actions as may
be necessary to permit each Transferred Employees who is a
participant in the HFC Employee Savings Stock Investment and
Ownership Plan and the HFC Retirement Plan (the "HFC Plans")
to make an election pursuant to the terms of such HFC Plan
during a thirty (30) day period with respect to his accrued
benefits under such HFC Plan, which possible elections shall
include (i) leaving such accrued benefits in such HFC Plan,
(ii) receiving distributions thereof, and (iii) transferring
such accrued benefits to a qualified defined contribution or
qualified defined benefit plan, as appropriate, maintained by
New World. In the event that any such Transferred Employee
does not make an affirmative election regarding the
disposition of his accrued benefit under an HFC Plan pursuant
to the procedures established by HFC, HFC shall direct that
such Transferred Employee's accrued benefit be transferred to
a qualified defined contribution or qualified defined benefit
plan, as appropriate, maintained by New World. Notwithstanding
any other provision of the Agreement, New World and the
Company after the Closing shall indemnify HFC and its
affiliates from all Losses related to any claim which is made
by or on behalf of or through any Transferred Employee against
HFC, any of its affiliates, the HFC Plans or any fiduciary
thereof as a result of the transfer of any Transferred
Employee's accrued benefit to an employee benefit plan of New
World in the absence of an affirmative election by such
Transferred Employee, as described in the immediately
preceding sentence.
13. Amendment to Section 9.8. Section 9.8 of the Agreement is hereby
amended by adding at the end of Section 9.8 the following new paragraph:
- 5 -
<PAGE> 10
Subject to the provisions of this Agreement, and in particular Sections
10.3, 10.5 and 10.6.2, HFC will refrain from making any payments to
Transferred Employees prior to Closing in lieu of any earned, but
unused, vacation time ("Accrued Vacation Benefits") that was accrued
for the benefit of any Transferred Employee as of the Closing Date and
is included on the Statement and New World will notify the Transferred
Employees of New World's request that HFC not pay such Accrued Vacation
Benefits.
14. Amendment to Section 10.3. Section 10.3 of the Agreement is hereby
amended by adding the following new paragraph at the end of Section 10.3:
New World and the Company after the Closing shall further indemnify HFC
and its affiliates from all Losses related to any claim which is made
by any Transferred Employee (i) against HFC or any of its affiliates
for any Accrued Vacation Benefits or HFC's or any of its affiliates'
failure to pay any such Accrued Vacation Benefits contemplated by
Section 9.8 above and in response to New World's request that HFC not
pay such Accrued Vacation Benefits or (ii) against HFC, any of its
affiliates, the HFC Plans or any fiduciary thereof as a result of the
transfer of any Transferred Employee's accrued benefit under an HFC
Plan to an employee benefit plan of New World in the absence of an
affirmative election by such Transferred Employee as described in
Section 9.3. The obligation of New World and the Company to indemnify
HFC, its affiliates, and the HFC Plans and fiduciaries thereof as
contemplated by the preceding sentence shall not be subject to the
basket, the cap or other limitations of this Section 10.3.
15. Amendment to Section 10.5. Section 10.5 of the Agreement is hereby
amended by adding the following new paragraph at the end of Section 10.5:
The obligation of New World and the Company after the Closing to
indemnify HFC and its affiliates for Losses related to Accrued Vacation
Benefit claims and claims relating to the transfer of accrued benefits
under the HFC Plans to an employee benefit plan of New World pursuant
to the second paragraph of Section 10.3 shall terminate 60 days after
the longest applicable statute of limitations period has expired for
such claims.
16. Amendment to Section 10.6.2. Section 10.6.2 of the Agreement is
hereby amended by adding the following new paragraph at the end of Section
10.6.2:
Notwithstanding the foregoing, with respect to any claim by a
Transferred Employee for Accrued Vacation Benefits or relating to
- 6 -
<PAGE> 11
the transfer of accrued benefits under the HFC Plans to an employee
benefit plan of New World, New World and the Company hereby acknowledge
their indemnification obligations therefor and agree to assume the
defense thereof in accordance with this Section 10.
17. Limited Amendment. Except as amended by this Amendment and as the
context may otherwise require to give effect to the intent and purpose of this
Amendment, the Agreement shall remain in full force and effect without any other
amendments or modifications.
18. Amendment and Waiver. Subject to the provisions of Section 16 of
the Agreement, this Amendment may be amended, or any provision of this Amendment
may be waived; provided, that any such amendment or waiver shall be binding upon
Transferors only if set forth in a writing executed by Transferors and referring
specifically to the provision alleged to have been amended or waived, and any
such amendment or waiver shall be binding upon New World only if set forth in a
writing executed by New World and referring specifically to the provision
alleged to have been amended or waived.
19. Notices. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be delivered in accordance
with Section 17 of the Agreement.
20. Counterparts. This Amendment may be executed in one or more
counterparts (including by means of telecopied signature pages), all of which
shall be considered one and the same agreement, and shall become effective when
one or more such counterparts have been signed by each of the parties and
delivered to the other party.
21. Entire Agreement. The Agreement and the other agreements referred
to therein (including the Confidentiality Agreement) and the other agreements
executed by the parties on the date thereof, as amended by this Amendment,
contain the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, whether written or oral, relating to such subject matter.
22. Severability. Whenever possible, each provision of this Amendment
shall be interpreted in such manner as to be valid and effective under
applicable law, but if any provision of this Amendment or the application of any
such provision to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
23. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Pennsylvania (without
giving effect to its conflict of law principles). Any dispute arising from or in
connection with this Amendment shall be subject to the terms of Sections 31 and
32 of the Agreement.
- 7 -
<PAGE> 12
24. Headings. The headings herein are included for convenience of
reference only and shall be ignored in the construction and interpretation
hereof.
* * * * *
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed as of the date first written above.
HERSHEY FOODS CORPORATION
By: /s/ William F. Christ
----------------------------
Name: William F. Christ
Title: Senior Vice President,
Finance and Chief Financial
Officer
HERSHEY CHOCOLATE &
CONFECTIONERY CORPORATION
By: /s/ Robert M. Reese
-------------------------------
Name: Robert M. Reese
Title: Vice President
HOMESTEAD, INC.
By: /s/ Burton H. Snyder
-------------------------------
Name: Burton H. Snyder
Title: Vice President and
Assistant Secretary
NEW WORLD PASTA COMPANY
By: /s/ William F. Christ
-------------------------------
Name: William F. Christ
Title: President and Vice President
NEW WORLD PASTA, LLC
By: /s/ David Y. Ying
--------------------------------
Name: David Y. Ying
Title: President
<PAGE> 14
JOSEPH LITTLEJOHN & LEVY FUND III,
L.P.
By: /s/ David Y. Ying
--------------------------------
Name: David Y. Ying
Title: Partner
PASTA GROUP, L.L.C.
By: HERSHEY FOODS CORPORATION,
as Member and Manager
/s/ Robert M. Reese
---------------------------------
Name: Robert M. Reese
Title: Senior Vice President, General
Counsel and Secretary
WINCHESTER PASTA, L.L.C.
By: HERSHEY FOODS CORPORATION,
as Member and Manager
/s/ Robert M. Reese
---------------------------------
Name: Robert M. Reese
Title: Senior Vice President, General
Counsel and Secretary
<PAGE> 15
SCHEDULE 2.6
THE RECAPITALIZATION
OF NEW WORLD PASTA COMPANY
Reference is made to the Amendment, dated as of January 28, 1999, among Hershey
Foods Corporation, Hershey Chocolate & Confectionery Corporation, New World
Pasta Company, New World Pasta, LLC and certain other parties (the "Amendment").
The terms used herein which are defined in the Recapitalization Agreement (the
"Agreement"), dated as of December 15, 1998 shall have the meaning ascribed to
them in the Agreement.
The Recapitalization referred to in the Agreement shall mean the following
actions:
1. HFC or HCCCo shall cause the Company to recapitalize its outstanding
capital stock to provide that the then outstanding shares of Company
common stock shall be converted into 100,636.31 shares of redeemable
non-convertible, non-voting preferred stock which pays a market
dividend rate (liquidation preference of $1,000 per share) and
35,236,369 shares of common stock. The preferred stock shall have such
terms and conditions as New World shall determine and HFC shall approve
(which approval will not be unreasonably withheld).
2. The Company shall repurchase 30,768,500 common shares from HCCCo for a
demand promissory note in the amount of $307,685,000 (the "Note").
3. New World will acquire from HCCCo 100,636.31 shares of preferred stock
of the Company for $100,636,310 in cash and 4,167,869 shares of common
stock of the Company for $41,678,690 in cash; provided, however, New
World may assign to other investors (the "New World Investors") the
right to purchase a portion of such preferred and common stock if such
involvement will not delay the Closing.
4. New World and the New World Investors will appoint a new Board of
Directors of the Company immediately prior to approval of and the
borrowing of the amounts contemplated by the Debt Commitment Letters,
pursuant to the Debt Commitment Letters or otherwise.
5. The Company shall approve the borrowing of and shall borrow the amounts
contemplated by the Debt Commitment Letters, pursuant to the Debt
Commitment Letters or otherwise (the "Funds").
6. The Company shall use the Funds to pay off the Note.
7. None of the transactions set forth in paragraphs 2 through 6 shall
occur unless all such transactions occur. Immediately after giving
effect to the transactions set forth in
Schedule 2.6, Page 1
<PAGE> 16
paragraphs 2 through 6 above, HCCCo shall own not less than 6% of the
fully diluted common stock of the Company.
Schedule 2.6, Page 2
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEW WORLD PASTA COMPANY
Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware
New World Pasta Company, a Delaware corporation (hereinafter
called the "Corporation"), does hereby certify as follows:
1. The name of the Corporation is New World Pasta Company.
2. The Corporation was originally incorporated under the name
of Hershey Pasta Manufacturing Company. The Corporation changed its name to New
World Pasta Corporation on January 21, 1999. The date of the filing of its
original certificate of incorporation with the Secretary of State of the State
of Delaware was December 13, 1996.
3. This Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors of the Corporation and adopted by the
sole stockholder of the Corporation in accordance with Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware.
<PAGE> 2
4. Upon the filing with the Secretary of State of the State of
Delaware this Amended and Restated Certificate of Incorporation (the "Effective
Time"), each outstanding share of common stock, par value $1.00 per share, of
the Corporation ("Existing Common Stock") shall be reclassified and become,
without further action by the Corporation or any stockholder, 35,236.369 shares
of common stock, par value $.01 per share, of the Corporation ("New Common
Stock") and 100.63631 shares of 12% Cumulative, Redeemable Preferred Stock of
the Corporation ("Preferred Stock") so that immediately following the Effective
Time, the Corporation shall have an aggregate of 35,236,369 shares of New Common
Stock and 100,636.31 shares of Preferred Stock outstanding.
5. At the Effective Time, the Corporation's Certificate of
Incorporation, is hereby amended, restated and integrated to read in its
entirety as follows:
FIRST: The name of the Corporation is NEW WORLD PASTA
COMPANY (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
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FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is 35,900,000 shares of common stock,
each having a par value of one penny ($.01) ("Common Stock"), and 115,000 shares
of 12% Cumulative, Redeemable Preferred Stock, each having a par value of one
penny ($.01) which shall have the designations, preferences and rights set forth
in Article FIFTH (the "12% Preferred Stock"), subject to the qualifications,
limitations and restrictions set forth therein.
FIFTH: The 12% Preferred Stock shall have the designations,
preferences and rights, subject to the qualifications, limitations and
restrictions, set forth in this Article FIFTH:
1. Liquidation Preference; Rank.
The maximum number of shares of 12% Preferred Stock shall be
115,000 and no more. The 12% Preferred Stock shall have a liquidation
preference of $1,000 per share (the "Liquidation Preference").
The 12% Preferred Stock ranks, with respect to rights to
receive dividends and distributions upon Liquidation (as defined in
Section 4(a) of this Article FIFTH): (a) senior to the Corporation's
Common Stock and any class or series of Preferred Stock issued by the
Corporation whose terms provide specifically that such class or series
will rank junior to the 12% Preferred Stock with respect to rights to
receive payment of dividends and distributions upon Liquidation or
fail to specify the ranking of such class or series relative to the 12%
Preferred Stock with respect to rights to receive payment of dividends
and distributions upon Liquidation (together with the Common Stock, the
"Junior Securities"); (b) on a parity with any class or series of
Preferred Stock issued by the Corporation whose terms provide
specifically that such class or series shall rank on a parity with the
12% Preferred Stock with respect to rights to receive payment of
dividends and distributions upon Liquidation (the "Parity Securities");
and (c) junior to any class or series of Preferred Stock issued by the
Corporation whose terms provide specifically that such class or series
shall rank senior to the 12% Preferred Stock with respect to rights to
receive payment of dividends and distributions upon Liquidation (the
"Senior Securities").
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2. Dividends.
(a) Each holder of 12% Preferred Stock shall be
entitled to receive, out of the funds of the Corporation legally avail
able therefor, cumulative dividend payments, payable in accordance with
this Section 2 of this Article FIFTH.
(b) The dividend on each share of 12% Preferred Stock
on each Dividend Payment Date (the "Dividend") shall be payable when,
as and if declared by the Board of Directors of the Corporation at an
annual rate of 12% per share multiplied by the Liquidation Preference.
Dividends payable on the 12% Preferred Stock for any period less than a
full year shall be computed on the basis of the actual number of days
elapsed and the actual number of days for such year.
(c) Dividends on each share of 12% Preferred Stock
shall accrue and be cumulative (whether or not declared and paid) from
the applicable Dividend Payment Date, except that with respect to the
first Dividend, such Dividend shall accrue from the date of original
issuance of the 12% Preferred Stock (the "Original Issue Date"). Each
fractional share of 12% Preferred Stock outstanding shall be entitled
to a ratably proportionate amount of the Dividend accruing with respect
to each outstanding share of the 12% Preferred Stock, and all of such
Dividends with respect to such fractional shares shall accrue and shall
be cumulative (whether or not declared and paid) and shall be payable
in the same manner and at such times as provided for herein with
respect to Dividends on each outstanding whole share of 12% Preferred
Stock.
(d) Dividends shall be paid to the holders of record
of shares of 12% Preferred Stock as each appears in the stock register
of the Corporation at the close of business on the record date
therefor, which record date shall be set by the Board of Directors of
the Corporation, in its sole discretion, subject to the requirements
of applicable law.
3. Redemption.
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(a) Mandatory Redemption. Except as may be, and
solely to the extent, prohibited by any instrument relating to indebted
ness of the Corporation then outstanding, on January 28, 2010 or as
soon thereafter as not prohibited by any such instrument (the
"Redemption Date"), the Corporation shall redeem, out of funds legally
available therefor, all of the then outstanding shares of 12% Preferred
Stock. The redemption pursuant to this Section 3(a) shall be made upon
not less than 30 days' prior notice (which notice shall comply with the
provisions of Section 3(b) of this Article FIFTH) mailed to each holder
of 12% Preferred Stock at his address as shown in the stock register of
the Corporation; provided, however, that the Corporation's failure to
give such notice shall in no way affect its obligation to redeem the
shares of 12% Preferred Stock as provided in this Section 3(a) of this
Article FIFTH. The redemption price for each share of 12% Preferred
Stock redeemed pursuant to this Section 3(a) of this Article FIFTH
shall be equal to the Liquidation Preference per share together with an
amount equal to all accrued and unpaid Dividends on such share (the
"Redemption Payment") through the Redemption Date.
(b) Redemption Notices. Notice of redemption (a
"Redemption Notice") of shares of 12% Preferred Stock pursuant to
Section 3(a) of this Article FIFTH shall be given by the Corporation by
mailing a copy of such notice to each holder of record of the shares of
12% Preferred Stock at his address appearing in the stock register of
the Corporation. The Redemption Notice shall specify the amount of the
Redemption Payment and the Redemption Date on which the shares of 12%
Preferred Stock will, upon presentation and surrender of the
certificates of stock evidencing such shares, be redeemed. From and
after the Redemption Date, unless default shall be made by the
Corporation in providing monies at the time and place specified for the
payment of the Redemption Payment pursuant to said notice, all
Dividends on the shares of 12% Preferred Stock shall cease to accrue
and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the Redemption Payment, shall
cease and terminate. In addition, all Dividends shall be deemed to have
ceased accruing or cumulating from and after the Final Payment Date on
any shares of 12% Preferred Stock, unless default shall be made by the
Corporation in providing monies at the time and place specified for the
payment of the Redemption Payment pursuant to
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<PAGE> 6
terms hereof and the Redemption Notice delivered in connection
therewith. All shares of 12% Preferred Stock redeemed by the
Corporation shall be retired and cancelled and shall not thereafter
be reissued.
(c) Insufficient Funds for Redemption. If the funds
of the Corporation legally available for redemption of the 12%
Preferred Stock on the Redemption Date in respect of its redemption
obligations pursuant to Section 3(a) of this Article FIFTH are
insufficient to redeem the shares of 12% Preferred Stock to be so
redeemed pursuant to Section 3(a) of this Article FIFTH, each holder
of the 12% Preferred Stock shall share ratably in any funds legally
available for redemption of such shares according to the amount which
would be payable with respect to the number of shares owned by such
holder if the shares to be so redeemed on such Redemption Date were
redeemed in full. The shares of 12% Preferred Stock not redeemed shall
remain outstanding and entitled to all rights and preferences provided
herein. At any time thereafter, when additional funds of the
Corporation are legally available for the redemption of such shares
of 12% Preferred Stock, such funds will be used, as soon as
practicable but no later than the end of the next succeeding fiscal
quarter, to redeem the balance of such shares, or such portion thereof
for which funds are then legally available, on the basis set forth
above.
4. Liquidation Rights; Priority.
(a) In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or
involuntary (a "Liquidation"), the holders of shares of 12% Preferred
Stock shall be entitled to receive, after payment or provision for
payment of the debts and other liabilities of the Corporation and after
payment of the liquidation preference of any Senior Securities, out of
the remaining net assets of the Corporation, whether such assets are
capital or surplus and whether or not any dividends as such are
declared, the Liquidation Preference of $1,000 per share (and the pro
rata portion thereof in the case of fractional shares), together with
an amount equal to all accrued and unpaid dividends thereon through the
date fixed for distribution (collectively, the "Liquidation Amount"),
before any distribution shall be made with respect to any Junior
Securities. In the event of any change in the Corporation's 12%
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Preferred Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the
Liquidation Preference per share of 12% Preferred Stock shall be
appropriately adjusted by the Board of Directors so as to protect the
rights of the holders of shares of 12% Preferred Stock.
(b) Except as otherwise provided in this Section 4 of
this Article FIFTH, holders of 12% Preferred Stock shall not be
entitled to any participation in any distribution of assets in the
event of any Liquidation. For purposes of this Section 4 of this
Article FIFTH, neither the voluntary sale, lease, conveyance, exchange
or transfer (for cash, securities or other consideration) of all or
substantially all of the assets of the Corporation, nor the
consolidation or merger of the Corporation with one or more Persons (as
defined in Section 8 of this Article FIFTH), shall be deemed to be a
voluntary or involuntary Liquidation.
(c) If, upon any Liquidation, the Liquidation Amount
is not paid in full, the holders of Preferred Stock shall share in such
distribution in accordance with the respective certificates of
designation, rights and preferences of such stock. If, upon any
Liquidation, the amounts payable with respect to the 12% Preferred
Stock and any Parity Securities are not paid in full, holders of the
12% Preferred Stock and holders of any Parity Securities will share
ratably in any distribution of the assets of the Corporation in
proportion to the respective amounts that would be payable per share
if such assets were sufficient to permit payment in full of such
amounts.
(d) Written notice of any Liquidation stating a
payment date and the place where the Liquidation Amount shall be
payable, shall be given by mail, postage prepaid, not less than 30 days
prior to the payment date stated therein, to each holder of record of
the 12% Preferred Stock at his address as the same shall appear in the
stock register of the Corporation.
(e) The amount payable upon Liquidation with respect
to each fractional share of the 12% Preferred Stock outstanding shall
be equal to a ratably proportionate amount of the Liquidation Amount.
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5. Restricted Payments.
The Corporation may not directly or indirectly declare, pay or
set apart for payment dividends on, or make any payment on account of,
or set apart for payment money for a sinking or other similar fund for
the purchase, redemption or other acquisition of, or make any
distribution in respect of, whether in cash, obligations or shares of
the Corporation or other property, any Parity Securities or Junior
Securities (or options, rights or warrants to acquire shares of Parity
Securities or Junior Securities) if at the time of such action, the
Corporation is in arrears in the payment of Dividends on the 12%
Preferred Stock, meaning that the amount of accrued and cumulated
dividends deter mined in accordance with Section 2(b) of this Article
FIFTH on the 12% Preferred Stock has not, in full, been declared and
paid in cash. None of the foregoing restrictions shall apply to: (i)
the acquisition of Parity Securities or Junior Securities (or options,
rights or warrants to acquire shares of Parity Securities or Junior
Securities) in exchange for or upon conversion thereof into shares of
Capital Stock (as defined in Section 8 of this Article FIFTH) of the
Corporation (other than Senior Securities) or upon the exercise of
options, rights or warrants to acquire such shares; (ii) the repurchase
of Capital Stock of the Corporation from employees or former employees
of the Corporation pursuant to employee benefit plans, employment
agreements or securityholder agreements; (iii) the acquisition of any
shares of Capital Stock of the Corporation or options, rights or
warrants to acquire such shares in connection with a purchase price
adjustment arising out of acquisitions by the Corporation pursuant to
which such shares of Capital Stock or options, rights or warrants to
acquire such shares were issued; (iv) the rescission of any agreement
by the Corporation pursuant to which shares of Capital Stock of the
Corporation or options, rights or warrants to acquire such shares were
issued; or (v) a dividend on Parity Securities or Junior Securities at
any time in additional shares of the respective Parity Security or
Junior Security.
6. Business Combinations.
(a) Without the prior approval of the holders of at
least a majority of the then outstanding shares of 12% Preferred Stock,
the Corporation will not consummate a Business Combination or permit a
Business Combination to occur unless the Corporation
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shall have redeemed (a "Business Combination Purchase Offer") all of
the outstanding shares of 12% Preferred Stock for cash at a purchase
price equal to $1,000 per share (and the pro rata portion thereof in
the case of fractional shares), together with an amount equal to
accrued and unpaid dividends through the date of purchase (the
"Business Combination Amount") prior to or at the closing of such
Business Combination in accordance with the procedures set forth in
Section 6(b) of this Article FIFTH.
(b) At the commencement of a Business Combination
Purchase, a written notice (the "Business Combination Purchase Notice")
of such Business Combination Purchase shall be mailed to each holder of
record of shares of 12% Preferred Stock addressed to such holder at his
mailing address as it appears in the stock register of the Corporation.
Each such Business Combination Purchase Notice shall contain all
instructions and materials necessary to enable such holder of 12%
Preferred Stock to submit his shares for redemption pursuant to the
Business Combination Purchase and shall state:
(i) that the Business Combination Purchase
is being made pursuant to this Section 6 of this Article FIFTH and that
all shares of 12% Preferred Stock will be redeemed;
(ii) the parties to the Business
Combination and the terms and timing of the Business Combination;
(iii) the aggregate Business Combination
Amount of all of the outstanding shares, including fractional shares,
of 12% Preferred Stock;
(iv) the Business Combination Amount and
the date (the "Business Combination Purchase Date") on which the
Corporation shall redeem shares pursuant to the Business Combination
Purchase;
(v) that, unless the Corporation defaults in
making the payment pursuant to the Business Combination Purchase, all
shares of 12% Preferred Stock shall cease to accrue and cumulate
Dividends from and after the Business Combination Purchase Date;
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(vi) that stockholders will be required to
surrender the certificate or certificates representing such shares,
together with a form entitled "Option of Stockholder to Elect Purchase"
(or other appropriate form letter of transmittal) to be mailed to the
holders with such Business Combination Purchase Notice, to the
Corporation at the address specified in the Business Combination
Purchase Notice prior to the close of business on the Business Day next
preceding the Business Combination Purchase Date; and
(vii) such other information as the
Corporation, in its sole discretion, deems appropriate.
(c) In the event of a change in the parties to, or
any material change in the terms or the timing of, any Business
Combination, the Corporation shall give the holders of the 12%
Preferred Stock written notice in accordance with Section 6(b) of this
Article FIFTH describing such change at least ten Business Days prior
to the Business Combination Purchase Date (subject, with respect to
such ten Business Day limitation, to any applicable law or regulation
requiring a longer notice or waiting period).
(d) The Business Combination Purchase Date shall be a
date occurring no earlier than 20 Business Days and no later than 40
Business Days after the mailing of the Business Combination Purchase
Notice (subject, with respect to such limitations, to Section 6(c) of
this Article FIFTH and any applicable law or regulation requiring a
longer notice or waiting period).
(e) On the Business Combination Purchase Date, the
Corporation shall (i) redeem shares of the 12% Preferred Stock
(including fractional shares) pursuant to the Business Combination
Purchase Offer and (ii) set aside in a separate account, for the
benefit of holders of shares of 12% Preferred Stock, at a federally
insured bank or savings institution doing business in the Borough of
Manhattan in the City of New York and having consolidated capital and
surplus of not less than $100 million, money sufficient to pay the
aggregate Business Combination Amount of all outstanding shares
(including fractional shares) of 12% Preferred Stock. The Corporation
shall promptly mail or deliver to the holders of 12% Preferred
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Stock so redeemed, payment in an amount equal to the purchase price
payable in respect of such shares owned by such holders.
7. Voting.
Except as required by the GCL or as set forth herein, the
holders of shares of 12% Preferred Stock shall not be entitled to any
voting rights.
8. Certain Definitions.
For purposes of this Section 8 of this Article FIFTH, the
following terms shall have the meanings set forth below:
"Affiliate" means, when used with reference to any Person, any
Person directly or indirectly controlling, controlled by, or under
direct or indirect common control with that Person. For the purposes of
this definition, "control," when used with respect to any specified
Person, means the power to direct or cause the direction of the
management or 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.
"Business Combination" means any consolidation, merger, share
exchange or other similar transaction, involving the Corporation or any
Subsidiary of the Corporation, or the transfer (by lease, assignment,
sale or otherwise) of all or substantially all of the properties and
assets of the Corporation, in a single transaction or through a series
of related transactions, to another Person or group of affiliated
Persons, or the entering into any such transaction or transactions by
the Corporation or any Subsidiary of the Corporation if such
transaction or transactions in the aggregate would result in a sale,
transfer or other disposition of (i) Capital Stock having more than 50%
of the voting power of the Corporation or (ii) all or substantially all
of the assets of the Corporation and its Subsidiaries on a consolidated
basis.
"Business Day" means any day other than a Saturday, a
Sunday, any day on which the New York Stock Exchange is closed or
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any other day on which banking institutions in New York, New York are
authorized or required by law to be closed.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of corporate
stock or any and all equivalent ownership interests in a Person.
"Person" means any individual, partnership, corporation,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency
or political subdivision thereof.
"Subsidiary" means, with respect to any Person, any
corporation, limited or general partnership, limited liability company,
trust, association or other business entity of which an aggregate of
50% or more of the outstanding Capital Stock or other interests
entitled to vote in the election of the board of directors of such
corporation (irrespective of whether, at the time, Capital Stock of any
other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers,
trustees or other controlling Persons, or an equivalent controlling
interest therein, of such Person is, at the time, directly or
indirectly, owned by such Person and/or one or more Affiliates of such
Person.
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
1. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
2. The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
3. The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
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4. No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the GCL or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
5. In addition to the powers and authority herein or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Amended and Restated Certificate of
Incorporation, and any By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid
if such By-Laws had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation shall indemnify its directors and
officers to the fullest extent authorized or permitted by the GCL, as the same
exists or may hereafter be amended, and such right to indemnification shall
continue as to a person who has ceased to be a director or officer of the
Corporation and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except for proceedings to enforce
rights to indemnification, the Corporation shall not be obligated to indemnify
any director or officer (or his or her heirs, executors or administrators) in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Article
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EIGHTH shall include the right to be paid by the Corporation the expenses
incurred in defending or otherwise participating in any proceeding in advance of
its final disposition.
The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation who are not
directors or officers similar to those conferred in this Article EIGHTH to
directors and officers of the Corporation.
The rights to indemnification and to the advancement of
expenses conferred in this Article EIGHTH shall not be exclusive of any other
right which any person may have or hereafter acquire under this Amended and
Restated Certificate of Incorporation, the By-Laws, any statute, agreement,
vote of stockholders or disinterested directors, or otherwise.
Any repeal or modification of this Article EIGHTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and advancement of expenses of a director or officer of the
Corporation existing pursuant to this Article EIGHTH with respect to any acts or
omissions occurring prior to such repeal or modification.
NINTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
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IN WITNESS WHEREOF, New World Pasta Company has caused this
Amended and Restated Certificate of Incorporation to be duly executed this 28th
day of January, 1999.
NEW WORLD PASTA COMPANY
By: /s/ Burton H. Snyder
Burton H. Snyder
Vice President and Assistant Secretary
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EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
NEW WORLD PASTA COMPANY
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
<PAGE> 2
Section 2. Annual Meetings. The Annual Meetings of
Stockholders for the election of directors shall be held on such date and at
such time as shall be designated from time to time by the Board of Directors.
Any other proper business may be transacted at the Annual Meeting of
Stockholders.
Section 3. Special Meetings. Unless otherwise required by law
or by the certificate of incorporation of the Corporation, as amended and
restated from time to time (the "Certificate of Incorporation"), Special
Meetings of Stockholders, for any purpose or purposes, may be called by either
(i) the Chairman, if there be one, or (ii) the President, (iii) any Vice
President, if there be one, (iv) the Secretary or (v) any Assistant Secretary,
if there be one, and shall be called by any such officer at the request in
writing of (i) the Board of Directors, (ii) a committee of the Board of
Directors that has been duly designated by the Board of Directors and whose
powers and authority include the power to call such meetings or (iii)
stockholders owning a majority of the capital stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. At a Special Meeting of Stockholders, only
such business shall be conducted as shall be specified in the notice of meeting
(or any supplement thereto).
Section 4. Notice. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special
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meeting, the purpose or purposes for which the meeting is called. Unless
otherwise required by law, the written notice of any meeting shall be given not
less than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 5. Adjournments. Any meeting of the stockholders may
be adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been trans acted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 6. Quorum. Unless otherwise required by law or the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to
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vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, in the manner provided in Section 5,
until a quorum shall be present or represented.
Section 7. Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-laws, any question brought before any
meeting of stockholders, other than the election of directors, shall be decided
by the vote of the holders of a majority of the total number of votes of the
capital stock represented and entitled to vote thereat, voting as a single
class. Unless otherwise provided in the Certificate of Incorporation, and
subject to Section 5 of Article V hereof, each stockholder represented at a
meeting of stockholders shall be entitled to cast one vote for each share of the
capital stock entitled to vote thereat held by such stockholder. Such votes may
be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in such officer's discretion, may require that any
votes cast at such meeting shall be cast by written ballot.
Section 8. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
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vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or an officer or
agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. Every written consent shall bear the date of signature of
each stockholder who signs the consent and no written consent shall be effective
to take the corporate action referred to therein unless, within sixty days of
the earliest dated consent delivered in the manner required by this Section 8 to
the Corporation, written consents signed by a sufficient number of holders to
take action are delivered to the Corporation by delivery to its registered
office in the state of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing and who, if the
action had been taken at a meeting, would have been entitled to notice of the
meeting if the record date for such meeting had
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been the date that written consents signed by a sufficient number of holders to
take the action were delivered to the Corporation as provided above in this
section.
Section 9. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the 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. Such list shall be open to
the examination of any stock holder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder of the Corporation who is present.
Section 10. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 9 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 11. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of
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the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) the determination of when the polls
shall open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at or participation in the meeting
to stockholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (v) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (vi) limitations on the time allotted to questions or
comments by participants.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of
Directors shall consist of not less than one nor more than fifteen members, the
exact number of
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which shall initially be fixed by the Incorporator and thereafter from time to
time by the Board of Directors. Except as provided in Section 2 of this Article
III, directors shall be elected by a plurality of the votes cast at the Annual
Meetings of Stockholders and each director so elected shall hold office until
the next Annual Meeting of Stockholders and until such director's successor is
duly elected and qualified, or until such director's earlier death, resignation
or removal. Any director may resign at any time upon written notice to the
Corporation. Directors need not be stockholders.
Section 2. Vacancies. Unless otherwise required by law or the
Certificate of Incorporation, vacancies arising through death, resignation,
removal, an increase in the number of directors or otherwise may be filled only
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal.
Section 3. Duties and Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws required to be exercised or done by the stockholders.
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Section 4. Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Regular meetings of the Board of Directors may be held without notice at such
time and at such place as may from time to time be determined by the Board of
Directors. Special meetings of the Board of Directors may be called by the
Chairman, if there be one, the President, or by any director. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight (48) hours before the date of the
meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
Section 5. Quorum. Except as otherwise required by law or the
Certificate of Incorporation, at all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting of the time and
place of the adjourned meeting, until a quorum shall be present.
Section 6. Actions by Written Consent. Unless otherwise
provided in the Certificate of Incorporation, or these By-Laws, any action
required or permitted
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to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided in the Certificate of Incorporation, members of the Board of
Directors of the Corporation, or any committee thereof, may participate in a
meeting of the Board of Directors or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 7 shall constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a designation
by the Board of Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously
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appoint another member of the Board of Directors to act at the meeting in the
place of any absent or disqualified member. Any committee, to the extent
permitted by law and provided in the resolution establishing such committee,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it. Each committee shall keep regular minutes and report to the Board of
Directors when required.
Section 9. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director, payable in cash or securities. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of
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Directors or committee thereof which authorizes the contract or transaction, or
solely because the director or officer's vote is counted for such purpose if (i)
the material facts as to the director or officer's relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to the director or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stock holders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the Board
of Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The
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Board of Directors, in its discretion, also may choose a Chairman of the Board
of Directors (who must be a director) and one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices may
be held by the same person, unless otherwise prohibited by law or the
Certificate of Incorporation. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors, at its first
meeting held after each Annual Meeting of Stockholders (or action by written
consent of stock holders in lieu of the Annual Meeting of Stockholders), shall
elect the officers of the Corporation who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors; and all officers of the
Corporation shall hold office until their successors are chosen and qualified,
or until their earlier death, resignation or removal. Any officer elected by the
Board of Directors may be removed at any time by the affirmative vote of the
Board of Directors. Any vacancy occurring in any office of the Corporation shall
be filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments
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relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President or any
other officer authorized to do so by the Board of Directors and any such officer
may, in the name of and on behalf of the Corporation, take all such action as
any such officer may deem advisable to vote in person or by proxy at any meeting
of security holders of any corporation in which the Corporation may own
securities and at any such meeting shall possess and may exercise any and all
rights and power incident to the ownership of such securities and which, as the
owner thereof, the Corporation might have exercised and possessed if present.
The Board of Directors may, by resolution, from time to time confer like powers
upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Corporation, unless the
Board of Directors designates the President as the Chief Executive Officer, and,
except where by law the signature of the President is required, the Chairman of
the Board of Directors shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board of Directors. During the absence or disability of the
President, the Chairman of the Board of Directors shall exercise all the powers
and discharge all the duties of the President. The Chairman
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of the Board of Directors shall also perform such other duties and may exercise
such other powers as may from time to time be assigned by these By-Laws or by
the Board of Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the Corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall execute all bonds, mortgages, contracts
and other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-Laws, the Board of Directors or
the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings of
the stockholders and the Board of Directors. If there be no Chairman of the
Board of Directors, or if the Board of Directors shall otherwise designate, the
President shall be the Chief Executive Officer of the Corporation. The President
shall also perform such other duties and may exercise such other powers as may
from time to time be assigned to such officer by these By-Laws or by the Board
of Directors.
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Section 6. Vice Presidents. At the request of the President or
in the President's absence or in the event of the President's inability or
refusal to act (and if there be no Chairman of the Board of Directors), the Vice
President, or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors), shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Each Vice President shall perform such
other duties and have such other powers as the Board of Directors from time to
time may prescribe. If there be no Chairman of the Board of Directors and no
Vice President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for committees of the Board of
Directors when required. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, the Chairman of the Board of
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Directors or the President, under whose supervision the Secretary shall be. If
the Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then either the Board of Directors or the
President may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Corporation and the Secretary or
any Assistant Secretary, if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest to the affixing by such officer's
signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or filed
are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the
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President and the Board of Directors, at its regular meetings, or when the Board
of Directors so requires, an account of all transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of Directors,
the Treasurer shall give the Corporation a bond in such sum and with such surety
or sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the office of the Treasurer and for the restoration
to the Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Secretary, and in the absence of the
Secretary or in the event of the Secretary's disability or refusal to act, shall
perform the duties of the Secretary, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of
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the Treasurer's disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of the office of Assistant Treasurer and
for the restoration to the Corporation, in case of the Assistant Treasurer's
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the Assistant Treasurer's
possession or under the Assistant Treasurer's control belonging to the
Corporation.
Section 11. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i)
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by the Chairman of the Board of Directors, the President or a Vice President and
(ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
such stockholder in the Corporation.
Section 2. Signatures. Any or all of the signatures on a
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, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or the owner's legal representative, to advertise the
same in such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the
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certificate alleged to have been lost, stolen or destroyed or the issuance of
such new certificate.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be issued. No transfer of stock shall be valid as
against the Corporation for any purpose until it shall have been entered in the
stock records of the Corporation by an entry showing from and to whom
transferred.
Section 5. Record Date.
(a) 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 of directors 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 of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, 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
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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; providing, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors 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 of Directors, and which record date shall not be more than ten days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by 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 this State,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a 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 of Directors and prior action by the Board of Directors
is required by law, the
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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 day on
which the Board of Directors adopts the resolutions taking such prior action.
(c) 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 of Directors 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 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 of Directors adopts the resolution relating
thereto.
Section 6. Record Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise required by
law.
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ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required
by law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance of
a person at a meeting, present in person or represented by proxy, shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting at the beginning of the meeting
to the transaction of any business because the meeting is not lawfully called or
convened.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the requirements of the DGCL and the provisions of the
Certificate of Incorporation, if any, may be declared by the Board of Directors
at any regular or special meeting of the Board of Directors (or any action by
written consent in lieu thereof in accordance with Section 6 of Article III
hereof), and may be paid in cash, in property, or in shares of the Corporation's
capital stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
25
<PAGE> 26
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings
other than Those by or in the Right of the Corporation. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
26
<PAGE> 27
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
27
<PAGE> 28
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iv) by the stockholders. Such
determination shall be made, with respect to former directors and officers, by
any person or persons having the authority to act on the
28
<PAGE> 29
matter on behalf of the Corporation. To the extent, however, that a present or
former director or officer of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith, without the necessity of authorization in
the specific case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article VIII, a person shall be deemed to
have acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
such person's conduct was unlawful, if such person's action is based on the
records or books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation or
another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was
29
<PAGE> 30
serving at the request of the Corporation as a director, officer, employee or
agent. The provisions of this Section 4 shall not be deemed to be exclusive or
to limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Section 1 or 2 of this
Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery in the State of Delaware
for indemnification to the extent otherwise permissible under Sections 1 and 2
of this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or
30
<PAGE> 31
in part, the director or officer seeking indemnification shall also be entitled
to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation, any By-Law, 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
such office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the
31
<PAGE> 32
Corporation has the power or obligation to indemnify under the provisions of the
General Corporation Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partner ship, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power or
the obligation to indemnify such person against such liability under the
provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partner ship,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the
32
<PAGE> 33
same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for proceedings
to enforce
33
<PAGE> 34
rights to indemnification (which shall be governed by Section 5 hereof), the
Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses
to employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice of
such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case may
be. All such amendments must be approved by either the holders of a majority of
the outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
34
<PAGE> 35
Section 2. Entire Board of Directors. As used in this Article
IX and in these By-Laws generally, the term "entire Board of Directors" means
the total number of directors which the Corporation would have if there were no
vacancies.
* * *
Last Amended as of: January 28, 1999
35
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF FORMATION
OF
WINCHESTER PASTA, L.L.C.
This Certificate of Formation of Winchester Pasta, L.L.C. (the "LLC")
has been duly executed and is being filed by the undersigned, as an authorized
person, to form a limited liability company under the Delaware Limited Liability
Act (6 Del. C. Section 18-101, et. seq).
FIRST. The name of the limited liability company formed hereby is Win
chester Pasta, L.L.C.
SECOND. The address of the registered office of the LLC in the State of
Delaware is c/o Corporation Service Company, 1013 Centre Road, Wilmington, New
Castle County, Delaware 19805.
THIRD. The name and address of the registered agent for service of
process on the LLC in the State of Delaware is Corporation Service Company, 1013
Centre Road, Wilmington, New Castle County, Delaware 19805.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
of Formation as of this 17th day of December, 1998.
/s/ Burton H. Snyder
---------------------
Burton H. Snyder
Authorized Person
<PAGE> 1
EXHIBIT 3.4
EXECUTION COPY
LIMITED LIABILITY COMPANY AGREEMENT
OF
WINCHESTER PASTA, L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") is
made effective as of the 17th day of December, 1998, by and between Hershey
Foods Corporation, a Delaware corporation, as the sole member (the "Member"),
and Winchester Pasta, L.L.C., a Delaware limited liability company.
1. Formation of the Company. By execution of this Agreement,
the Member ratifies and confirms the actions of Eileen Carrig, as its duly
authorized agent in connection with the filing of a certificate of formation
(the "Certificate") with the Secretary of State of the State of Delaware for the
purpose of forming Winchester Pasta, L.L.C. (the "Company"), a limited liability
company formed under the Delaware Limited Liability Company Act, 6 Del. C
Section 18-101, et seq. ("Act").
2. Name of the Company. The name of the Company stated in the
Certificate and the limited liability company governed by this Agreement is
"Winchester Pasta, L.L.C."
3. Purpose. This Company is formed for the object and purpose
of, and the nature of the business to be conducted and promoted by the Company
is, engaging in any lawful act or activity for which limited liability companies
may be formed under the Act and engaging in any and all activities necessary or
incidental to the foregoing.
4. Registered Office; Registered Agent. The registered office
of the Company in the State of Delaware is located at Corporation Service
Company, 1013 Centre Road, Wilmington, Delaware 19805, and the registered agent
of the Company at such address is Corporation Service Company.
5. Interests. The Company shall be authorized to issue one
thousand (1,000) interests ("Interests"), all of which shall be issued to the
Member. Interests shall for all purposes be personal property.
<PAGE> 2
6. Capital Contributions by the Member. The Member shall not
be obligated to make capital contributions to the Company, and the Interests
shall be nonassessable.
7. Allocation of Profits and Losses. The Company's profits
and losses shall be allocated entirely to the Member.
8. Distributions. Distributions shall be made to the Member
at the times and in the aggregate amounts determined by the Manager (as defined
below).
9. Appointment and Removal of Manager. The Member is hereby
appointed as the sole manager of the Company (the "Manager") as provided in
Sections 18-402 and 18-403 of the Act. The Manager shall have such rights
and duties as are provided by the Act, and shall have the power and authority to
delegate to the officers of the Company, if any, its rights and powers, or any
portion thereof, to manage and control the business and affairs of the Company.
10. Officers. The officers of the Company, if any, shall be
appointed by the Manager in its sole discretion. Unless such appointment
provides otherwise, each officer so appointed shall have such powers and duties
as are provided in the following:
(a) President. The President shall be the Chief
Executive Officer of the Company. Subject to the direction of the Manager, the
President shall have, and exercise, direct charge of, and general supervision
over, the business and affairs of the Company, and shall perform all duties
incident to the office of a President in a corporation organized under the
Delaware General Corporation Law. No person may hold the office of President, or
act in place of the President in the case of absence or disability, unless such
person is a citizen of the United States.
(b) Vice Presidents. The powers, duties, and
responsibilities of the Vice Presidents shall be fixed by the Manager or the
President, with the approval of the Manager. A Vice President may be designated
as an Executive Vice President, a Senior Vice President or a Vice President with
a functional title.
(c) General Counsel. The General Counsel shall have
general charge of the legal affairs of the Company, and shall cause to be kept
adequate records of all suits or actions, of every nature, to which the Company
may be a party, or in which it has an interest, with sufficient data to show the
nature of the case and the proceedings therein. The General Counsel shall
prepare, or cause to be prepared,
2
<PAGE> 3
legal opinions on any subject necessary for the affairs of the Company, and
shall perform such other duties as the Manager, or the President, may designate.
(d) Secretary. The Secretary shall attend all meetings of
the members of the Company and record their proceedings, unless a temporary
secretary be appointed. The Secretary shall give due notice, as required, of all
meetings of the members of the Company, shall keep, or cause to be kept, at a
place or places required by law, a record of the members and managers of the
Company, giving the names and addresses of all such members and managers. The
Secretary shall be the custodian of all records, contracts, leases, and other
papers and documents of the Company, unless otherwise directed by the manager,
and shall perform such other duties as the Manager, or the President, may
designate. In the case of the Secretary's absence or incapacity, the President
may designate an appropriate officer to perform the duties of Secretary.
(e) Treasurer. The Treasurer shall receive, keep and
disburse all moneys belonging to or coming to the Company, shall keep regular,
true and full accounts of all receipts and disbursements, and make detailed
reports thereof, shall keep a true record of expenses, losses, gains, assets,
and liabilities of the Company, and shall perform such other duties in
connection with the administration of the financial affairs of the Company as
the Manager, or the President, may designate. In the case of the Treasurer's
absence or incapacity, the President may designate an appropriate officer to
perform the duties of Treasurer.
(f) Subordinate Officers. Each subordinate officer shall
hold office for such period, have such authority, and perform such duties as the
Manager may prescribe. The Manager may, from time to time, authorize any officer
to appoint and remove subordinate officers and to prescribe the powers and
duties thereof.
Each such officer shall also have such additional powers and
duties as from time to time may be conferred by the Manager. Any number of
offices may be held by the same person. Each officer shall hold office until his
or her successor shall be duly appointed and shall qualify or until his or her
death, until he or she shall resign, or until he or she shall have been removed,
either with or without cause, by the manager in its sole discretion. The
salaries or other compensation, if any, of the officers and agents of the
Company shall be fixed by the Manager. Any appointment pursuant to this Section
11 may be revoked at any time by the Manager.
3
<PAGE> 4
11. Execution of Contracts, Assignments, etc. All contracts,
agreements, endorsements, assignments, transfers, stock powers, or other
instruments shall be signed by the President, or any Vice President, and
attested by the Secretary, or an Assistant Secretary, except where required or
permitted by law to be otherwise signed, and except when the signing and
execution thereof shall be expressly delegated by the manager to some other
officer or agent of the Company. In the event that the Manager has not appointed
any officer of the Company or at such time no officer of the Company is serving
than any such contract, agreement or other document will be executed by the
Manager.
12. Limitations on Authority. The authority of the Manager
over the conduct of the business and affairs of the Company shall be subject
only to such limitations as are expressly stated in this Agreement or in the
Act.
13. Indemnification. The Company shall, to the fullest extent
authorized by the Act as in effect from time to time, indemnify and hold
harmless any member, manager, officer, employee or agent of the Company from and
against any and all claims and demands arising by reason of the fact that such
person is, or was, a member, manager, officer, employee or agent of the Company.
Expenses incurred by any member, manager, officer, employee or agent of the
Company in defending a proceeding shall be paid by the Company in advance of
such proceeding's final disposition unless otherwise determined by the Manager
or the President in the specific case upon receipt of an undertaking by or on
behalf of the member, manager or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Company. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions if any, as the Manager or the President deems
appropriate.
14. Dissolution. The Company shall dissolve, and its affairs
shall be wound up, upon the first to occur of the following: (a) the written
consent of the Member to such effect; and (b) the entry of a decree of judicial
dissolution under Section 18-802 of the Act.
15. Consents. Any action that may be taken by the Member at a
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, is signed by the Member.
16. Amendments. Except as otherwise provided in this Agreement
or in the Act, this Agreement may be amended only by the written consent of the
Member to such effect.
4
<PAGE> 5
17. Governing Law. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of Delaware.
18. Tax Elections. The Manager shall have the power to cause
the Company to make all elections required or permitted to be made for income
tax purposes.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have made this
Agreement effective as of the date and year first above-written.
WINCHESTER PASTA, L.L.C.
By: HERSHEY FOODS CORPORATION, as
Manager
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
HERSHEY FOODS CORPORATION
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
6
<PAGE> 1
EXHIBIT 3.5
EXECUTION COPY
AMENDMENT NO. 1
TO
LIMITED LIABILITY COMPANY AGREEMENT
OF WINCHESTER PASTA, L.L.C.
This Amendment No. 1 to Limited Liability Company Agreement is
made this 28th day of January, 1999 among HERSHEY FOODS CORPORATION (the
"Original Member"), NEW WORLD PASTA COMPANY (the "Successor Member") and
WINCHESTER PASTA, L.L.C., a Delaware limited liability company (the "Company").
RECITALS
The Company was formed on December 17, 1998.
The Original Member and the Company are party to that certain
Limited Liability Company Agreement of the Company effective as of December 17,
1998 (the "Agreement"). On the date hereof, the Original Member is transferring
all of its interest in the Company to the Successor Member.
The parties desire to amend the Agreement as provided herein.
Therefore, in consideration of the mutual covenants,
agreements and representations set forth below, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Rights and Duties. The Original Member hereby irrevocably
transfers, assigns, conveys and delivers all of its right, title and interest
under the Agreement and in and to its interests as the sole member of the
Company to the Successor Member, and the Successor Member hereby accepts such
transfer, assignment, conveyance and delivery (the "Assignment"). For all
purposes of the Agreement from this time forward, the Successor Member shall
have all rights,
<PAGE> 2
duties and obligations of a member of the Company and a reference to the Member
shall be deemed to be a reference to the Successor Member. From this time
forward, the Original Member shall have no further rights, duties or obligations
as a member of the Company.
2. Manager. Effective upon full execution and delivery of this
Amendment No. 1, the Original Member resigns as Manager of the Company and the
Successor Member is hereby appointed Manager of the Company.
3. Representatives. The Original Member represents and
warrants that (i) immediately prior to giving effect to the Assignment, the
Original Member is the sole member and Manager of the Company, (ii) the member
interests transferred, assigned, conveyed and delivered hereby are the sole
member interests of the Company, (iii) immediately prior to giving effect to the
Assignment, such member interests are owned by the Original Member free and
clear of any and all liens, encumbrances and restrictions of any kind whatsoever
and (iv) no other person or entity, directly or indirectly, owns or has any
right, title or interest in or to the membership interests of the Company, any
other equity interest, or any right to acquire any member interest or other
equity interest, in the Company, or any security or interest that may be
exercisable or exchangeable for, or convertible into, any such interest,
including without limitation, any pre-emptive or other similar right.
4. Limited Amendment. Except as amended by this Amendment No.
1 and as the context may otherwise require to give effect to the intent and
purpose of this Amendment No. 1, the Agreement, as amended hereby, shall remain
in full force and effect without any other amendments or modifications.
5. Counterparts. This Amendment No. 1 may be executed in one
or more counterparts (including by means of telecopied signature pages), all of
which shall be considered one and the same Amendment No. 1, and shall become
effective when one or more such counterparts have been signed by each of the
parties and delivered to the other parties.
6. Entire Agreement. The Agreement, as amended by this
Amendment No. 1, contains the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, whether written or oral, relating to such
subject matter. The Original Member represents and warrants that prior to this
Amendment No. 1, the Agreement has not been amended, supplemented or otherwise
modified in any respect.
2
<PAGE> 3
7. Governing Law. This Amendment No. 1 shall be governed by
and construed in accordance with the internal laws of the State of Delaware
(without giving effect to its conflict of law principles).
8. Headings. The headings herein are included for convenience
of reference only and shall be ignored in the construction and interpretation
hereof.
* * * * *
IN WITNESS WHEREOF, the parties have caused this Amendment No.
1 to be duly executed as of the date first written above.
NEW WORLD PASTA COMPANY
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
NEW WORLD PASTA COMPANY
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
WINCHESTER PASTA, L.L.C.
By: HERSHEY FOODS CORPORATION
Its: Manager
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Authorized Person
3
<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF FORMATION
OF
PASTA GROUP, L.L.C.
This Certificate of Formation of Pasta Group, L.L.C. (the
"LLC") has been duly executed and is being filed by the undersigned, as an
authorized person, to form a limited liability company under the Delaware
Limited Liability Act (6 Del C. Section 18-101, et.seq.)
FIRST. The name of the limited liability company formed hereby
is Pasta Group, L.L.C.
SECOND. The address of the registered office of the LLC in the
State of Delaware is c/o Corporation Service Company, 1013 Centre Road,
Wilmington, New Castle County, Delaware 19805.
THIRD. The name and address of the registered agent for
service of process on the LLC in the State of Delaware is Corporation Service
Company, 1013 Centre Road, Wilmington, New Castle County, Delaware 19805.
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate of Formation as of this 17th day of December, 1998.
/s/ Burton H. Snyder
--------------------
Burton H. Snyder
Authorized Person
<PAGE> 1
EXHIBIT 3.7
EXECUTION COPY
LIMITED LIABILITY COMPANY AGREEMENT
OF
PASTA GROUP, L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") is
made effective as of the 17th day of December 1998, by and between Hershey Foods
Corporation, a Delaware corporation, as the sole member (the "Member"), and
Pasta Group, L.L.C., a Delaware limited liability company.
1. Formation of the Company. By execution of this Agreement,
the Member ratifies and confirms the actions of Eileen Carrig, as its duly
authorized agent in connection with the filing of a certificate of formation
(the "Certificate") with the Secretary of State of the State of Delaware for the
purpose of forming Pasta Group, L.L.C. (the "Company"), a limited liability
company formed under the Delaware Limited Liability Company Act, 6 Del. C.
Section 18-101, et seq. ("Act").
2. Name of the Company. The name of the Company stated in the
Certificate and the limited liability company governed by this Agreement is
"Pasta Group, L.L.C.".
3. Purpose. This Company is formed for the object and purpose
of, and the nature of the business to be conducted and promoted by the Company
is, engaging in any lawful act or activity for which limited liability companies
may be formed under the Act and engaging in any and all activities necessary or
incidental to the foregoing.
4. Registered Office; Registered Agent. The registered office
of the Company in the State of Delaware is located at Corporation Service
Company, 1013 Centre Road, Wilmington, Delaware 19805, and the registered agent
of the Company at such address is Corporation Service Company.
5. Interests. The Company shall be authorized to issue one
thousand (1,000) interests ("Interests"), all of which shall be issued to the
Member. Interests shall for all purposes be personal property.
<PAGE> 2
6. Capital Contributions by the Member. The Member shall not
be obligated to make capital contributions to the Company, and the Interests
shall be nonassessable.
7. Allocation of Profits and Losses. The Company's profits
and losses shall be allocated entirely to the Member.
8. Distributions. Distributions shall be made to the Member
at the times and in the aggregate amounts determined by the Manager (as defined
below).
9. Appointment and Removal of Manager. The Member is hereby
appointed as the sole manager of the Company (the "Manager") as provided in
Sections 18-402 and 18-403 of the Act. The Manager shall have such rights
and duties as are provided by the Act, and shall have the power and authority to
delegate to the officers of the Company, if any, its rights and powers, or any
portion thereof, to manage and control the business and affairs of the Company.
10. Officers. The officers of the Company, if any, shall be
appointed by the Manager in its sole discretion. Unless such appointment
provides otherwise, each officer so appointed shall have such powers and duties
as are provided in the following:
(a) President. The President shall be the Chief Executive
Officer of the Company. Subject to the direction of the Manager, the President
shall have, and exercise, direct charge of, and general supervision over, the
business and affairs of the Company, and shall perform all duties incident to
the office of a President in a corporation organized under the Delaware General
Corporation Law. No person may hold the office of President, or act in place of
the President in the case of absence or disability, unless such person is a
citizen of the United States.
(b) Vice Presidents. The powers, duties and
responsibilities of the Vice Presidents shall be fixed by the Manager or the
President, with the approval of the Manager. A Vice President may be designated
as an Executive Vice President, a Senior Vice President or a Vice President with
a functional title.
(c) General Counsel. The General Counsel shall have
general charge of the legal affairs of the Company, and shall cause to be kept
adequate records of all suits or actions, of every nature, to which the Company
may be a party, or in which it has an interest, with sufficient data to show the
nature of the
2
<PAGE> 3
case and the proceedings therein. The General Counsel shall prepare, or cause to
be prepared, legal opinions on any subject necessary for the affairs of the
Company, and shall perform such other duties as the Manager, or the President,
may designate.
(d) Secretary. The Secretary shall attend all meetings of
the members of the Company and record their proceedings, unless a temporary
secretary be appointed. The Secretary shall give due notice, as required, of all
meetings of the members of the Company, shall keep, or cause to be kept, at a
place or places required by law, a record of the members and managers of the
Company, giving the names and addresses of all such members and managers. The
Secretary shall be the custodian of all records, contracts, leases and other
papers and documents of the Company, unless otherwise directed by the Manager,
and shall perform such other duties as the Manager, or the President, may
designate. In the case of the Secretary's absence or incapacity, the President
may designate an appropriate officer to perform the duties of Secretary.
(e) Treasurer. The Treasurer shall receive, keep and
disburse all moneys belonging to or coming to the Company, shall keep regular,
true and full accounts of all receipts and disbursements, and make detailed
reports thereof, shall keep a true record of expenses, losses, gains, assets,
and liabilities of the Company, and shall perform such other duties in
connection with the administration of the financial affairs of the Company as
the Manager, or the President, may designate. In the case of the Treasurer's
absence or incapacity, the President may designate an appropriate officer to
perform the duties of Treasurer.
(f) Subordinate Officers. Each subordinate officer shall
hold office for such period, have such authority, and perform such duties as the
Manager may prescribe. The Manager may, from time to time, authorize any officer
to appoint and remove subordinate officers and to prescribe the powers and
duties thereof.
Each such officer shall also have such additional powers
and duties as from time to time may be conferred by the Manager. Any number of
offices may be held by the same person. Each officer shall hold office until his
or her successor shall be duly appointed and shall qualify or until his or her
death, until he or she shall resign, or until he or she shall have been removed,
either with or without cause, by the Manager in its sole discretion. The
salaries or other compensation, if any, of the officers and agents of the
Company shall be fixed by the Manager. Any appointment pursuant to this Section
10 may be revoked at any time by the Manager.
3
<PAGE> 4
11. Execution of Contracts, Assignments, etc. All contracts,
agreements, endorsements, assignments, transfers, stock powers, or other
instruments shall be signed by the President, or any Vice President, and
attested by the Secretary, or an Assistant Secretary, except where required or
permitted by law to be otherwise signed, and except when the signing and
execution thereof shall be expressly delegated by the Manager to some other
officer or agent of the Company. In the event that the Manager has not appointed
any officer of the Company or at such time no officer of the Company is serving,
then any such contract, agreement or other document will be executed by the
Manager.
12. Limitations on Authority. The authority of the Manager
over the conduct of the business and affairs of the Company shall be subject
only to such limitations as are expressly stated in this Agreement or in the
Act.
13. Indemnification. The Company shall, to the fullest extent
authorized by the Act as in effect from time to time, indemnify and hold
harmless any member, manager, officer, employee or agent of the Company from and
against any and all claims and demands arising by reason of the fact that such
person is, or was, a member, manager, officer, employee or agent of the Company.
Expenses incurred by any member, manager, officer, employee or agent of the
Company in defending a proceeding shall be paid by the Company in advance of
such proceeding's final disposition unless otherwise determined by the Manager
or the President in the specific case upon receipt of an undertaking by or on
behalf of the member, manager or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Company. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Manager or the President deems
appropriate.
14. Dissolution. The Company shall dissolve, and its affairs
shall be wound up, upon the first to occur of the following: (a) the written
consent of the Member to such effect; and (b) the entry of a decree of judicial
dissolution under Section 18-802 of the Act.
15. Consents. Any action that may be taken by the Member at a
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, is signed by the Member.
16. Amendments. Except as otherwise provided in this
Agreement or in the Act, this Agreement may be amended only by the written
consent of the Member to such effect.
4
<PAGE> 5
17. Governing Law. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of Delaware.
18. Tax Elections. The Manager shall have the power to cause
the Company to make all elections required or permitted to be made for income
tax purposes.
IN WITNESS WHEREOF, the parties hereto have made this
Agreement effective as of the date and year first above-written.
PASTA GROUP, L.L.C.
By: HERSHEY FOODS CORPORATION,
as Manager
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
HERSHEY FOODS CORPORATION
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
5
<PAGE> 1
EXHIBIT 3.8
EXECUTION COPY
AMENDMENT NO. 1
TO
LIMITED LIABILITY COMPANY AGREEMENT
OF PASTA GROUP, L.L.C.
This Amendment No. 1 to Limited Liability Company Agreement is
made this 28th day of January, 1999 among HERSHEY FOODS CORPORATION (the
"Original Member"), NEW WORLD PASTA COMPANY (the "Successor Member") and PASTA
GROUP, L.L.C., a Delaware limited liability company (the "Company").
RECITALS
The Company was formed on December 17, 1998.
The Original Member and the Company are party to that certain
Limited Liability Company Agreement of the Company effective as of December 17,
1998 (the "Agreement"). On the date hereof, the Original Member is transferring
all of its interest in the Company to the Successor Member.
The parties desire to amend the Agreement as provided herein.
Therefore, in consideration of the mutual covenants,
agreements and representations set forth below, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Rights and Duties. The Original Member hereby irrevocably
transfers, assigns, conveys and delivers all of its right, title and interest
under the Agreement and in and to its interests as the sole member of the
Company to the Successor Member and the Successor Member hereby accepts such
transfer, assign-
<PAGE> 2
ment, conveyance and delivery (the "Assignment"). For all purposes of the
Agreement from this time forward, the Successor Member shall have all rights,
duties and obligations of a member of the Company and a reference to the Member
shall be deemed to be a reference to the Successor Member. From this time
forward, the Original Member shall have no further rights, duties or obligations
as a member of the Company.
2. Manager. Effective upon full execution and delivery of this
Amendment No. 1, the Original Member resigns as Manager of the Company and the
Successor Member is hereby appointed Manager of the Company.
3. Representations. The Original Member represents and
warrants that (i) immediately prior to giving effect to the Assignment, the
Original Member is the sole member and Manager of the Company, (ii) the member
interests transferred, assigned, conveyed and delivered hereby are the sole
member interests of the Company, (iii) immediately prior to giving effect to the
Assignment, such member interests are owned by the Original Member free and
clear of any and all liens, encumbrances and restrictions of any kind whatsoever
and (iv) no other person or entity, directly or indirectly, owns or has any
right, title or interest in or to the membership interests of the Company, any
other equity interest, or any right to acquire any member interest or other
equity interest, in the Company, or any security or interest that may be
exercisable or exchangeable for, or convertible into, any such interest,
including without limitation, any pre-emptive or other similar right.
4. Limited Amendment. Except as amended by this Amendment No.
1 and as the context may otherwise require to give effect to the intent and
purpose of this Amendment No. 1, the Agreement, as amended hereby, shall remain
in full force and effect without any other amendments or modifications.
5. Counterparts. This Amendment No. 1 may be executed in one
or more counterparts (including by means of telecopied signature pages), all of
which shall be considered one and the same Amendment No. 1, and shall become
effective when one or more such counterparts have been signed by each of the
parties and delivered to the other parties.
6. Entire Agreement. The Agreement, as amended by this
Amendment No. 1, contains the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, whether written or oral, relating to such
subject matter. The Original Member represents and warrants that prior to this
Amendment
2
<PAGE> 3
No. 1, the Agreement has not been amended, supplemented or otherwise modified in
any respect.
7. Governing Law. This Amendment No. 1 shall be governed by
and construed in accordance with the internal laws of the State of Delaware
(without giving effect to its conflict of law principles).
8. Headings. The headings herein are included for convenience
of reference only and shall be ignored in the construction and interpretation
hereof.
* * * * *
IN WITNESS WHEREOF, the parties have caused this Amendment No.
1 to be duly executed and delivered as of the date first written above.
HERSHEY FOODS CORPORATION
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
NEW WORLD PASTA COMPANY
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
PASTA GROUP, L.L.C.
By: HERSHEY FOODS CORPORATION
Its: Manager
By: /s/ Burton H. Snyder
--------------------------------
Name: Burton H. Snyder
Title: Assistant General Counsel
3
<PAGE> 1
EXHIBIT 4.1
SENIOR SUBORDINATED INDENTURE
among
NEW WORLD PASTA COMPANY,
THE GUARANTORS NAMED HEREIN
and
THE BANK OF NEW YORK,
as Trustee
dated as of February 19, 1999
$160,000,000
9 1/4% Senior Subordinated Notes due 2009
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE......................................1
SECTION 1.01 Definitions.................................................................. 1
SECTION 1.02 Incorporation by Reference of Trust Indenture Act............................26
SECTION 1.03 Rules of Construction........................................................26
ARTICLE TWO THE NOTES .....................................................................27
SECTION 2.01 Form and Dating..............................................................27
SECTION 2.02 Execution and Authentication.................................................28
SECTION 2.03 Registrar and Paying Agent...................................................29
SECTION 2.04 Paying Agent to Hold Assets in Trust.........................................29
SECTION 2.05 Holder Lists.................................................................29
SECTION 2.06 Transfer and Exchange........................................................30
SECTION 2.07 Replacement Notes............................................................30
SECTION 2.08 Outstanding Notes............................................................30
SECTION 2.09 Treasury Notes...............................................................31
SECTION 2.10 Temporary Notes..............................................................31
SECTION 2.11 Cancellation.................................................................31
SECTION 2.12 Defaulted Interest...........................................................32
SECTION 2.13 CUSIP Number.................................................................32
SECTION 2.14 Deposit of Moneys............................................................32
SECTION 2.15 Book-Entry Provisions for Global Notes.......................................32
SECTION 2.16 Registration of Transfers and Exchanges......................................33
ARTICLE THREE REDEMPTION...................................................................37
SECTION 3.01 Notices to Trustee............................................................37
SECTION 3.02 Selection of Notes To Be Redeemed.............................................37
SECTION 3.03 Notice of Redemption..........................................................37
SECTION 3.04 Effect of Notice of Redemption................................................38
SECTION 3.05 Deposit of Redemption Price...................................................38
SECTION 3.06 Notes Redeemed in Part........................................................39
SECTION 3.07 Optional Redemption...........................................................39
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE FOUR COVENANTS................................................................40
SECTION 4.01 Payment of Notes........................................................40
SECTION 4.02 Maintenance of Office or Agency.........................................40
SECTION 4.03 Limitation on Incurrence of Indebtedness................................40
SECTION 4.04 Prohibition on Incurrence of Senior Subordinated Debt...................44
SECTION 4.05 Limitation on Liens.....................................................44
SECTION 4.06 Limitation on Restricted Payments.......................................44
SECTION 4.07 Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.................................................47
SECTION 4.08 Limitation of Guarantees by Restricted Subsidiaries.....................49
SECTION 4.09 Limitation on Transactions with Shareholders and Affiliates.............50
SECTION 4.10 Limitation on Asset Sales...............................................52
SECTION 4.11 Change of Control.......................................................53
SECTION 4.12 Compliance with Laws....................................................53
SECTION 4.13 Payment of Taxes and Other Claims.......................................54
SECTION 4.14 Notice of Defaults......................................................54
SECTION 4.15 Maintenance of Properties and Insurance.................................54
SECTION 4.16 Compliance Certificate..................................................55
SECTION 4.17 Reports to Holders and Trustee..........................................55
SECTION 4.18 Waiver of Stay, Extension or Usury Laws.................................56
SECTION 4.19 Conduct of Business.....................................................56
ARTICLE FIVE MERGER, CONSOLIDATION AND SALE OF ASSETS.................................56
SECTION 5.01 Merger, Consolidation and Sale of Assets................................56
SECTION 5.02 Successor Substituted...................................................58
ARTICLE SIX DEFAULTS AND REMEDIES.....................................................58
SECTION 6.01 Events of Default.......................................................58
SECTION 6.02 Acceleration............................................................60
SECTION 6.03 Control by Majority.....................................................60
SECTION 6.04 Other Remedies..........................................................61
SECTION 6.05 Waiver of Past Default..................................................61
SECTION 6.06 Limitation on Suits.....................................................61
SECTION 6.07 Rights of Holders to Receive Payment....................................62
SECTION 6.08 Collection Suit by Trustee..............................................62
SECTION 6.09 Trustee May File Proofs of Claim........................................62
SECTION 6.10 Priorities..............................................................62
SECTION 6.11 Undertaking for Costs...................................................63
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE SEVEN TRUSTEE..................................................................63
SECTION 7.01 Duties of Trustee........................................................63
SECTION 7.02 Rights of Trustee........................................................64
SECTION 7.03 Individual Rights of Trustee.............................................65
SECTION 7.04 Trustee's Disclaimer.....................................................65
SECTION 7.05 Notice of Defaults.......................................................65
SECTION 7.06 Reports by Trustee to Holders............................................66
SECTION 7.07 Compensation and Indemnity...............................................66
SECTION 7.08 Replacement of Trustee...................................................67
SECTION 7.09 Successor Trustee by Merger, etc.........................................68
SECTION 7.10 Eligibility; Disqualification............................................68
SECTION 7.11 Preferential Collection of Claims Against the Company....................68
ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE.......................................68
SECTION 8.01 Termination of the Company's Obligations.................................68
SECTION 8.02 Legal Defeasance and Covenant Defeasance.................................70
SECTION 8.03 Conditions to Legal Defeasance or Covenant Defeasance....................71
SECTION 8.04 Application of Trust Money...............................................72
SECTION 8.05 Repayment to Company.....................................................72
SECTION 8.06 Reinstatement............................................................73
ARTICLE NINE SUBORDINATION OF NOTES....................................................73
SECTION 9.01 Notes Subordinated to Senior Indebtedness................................73
SECTION 9.02 No Payment on Notes in Certain Circumstances.............................73
SECTION 9.03 Payment Over of Proceeds upon Dissolution, etc...........................74
SECTION 9.04 Subrogation..............................................................76
SECTION 9.05 Obligations of the Company Unconditional.................................76
SECTION 9.06 Notice to Trustee........................................................77
SECTION 9.07 Reliance on Judicial Order or Certificate of Liquidating Agent...........77
SECTION 9.08 Trustee's Relation to Senior Indebtedness................................77
SECTION 9.09 Subordination Rights Not Impaired by Acts or Omissions of the Company
or Holders of Senior Indebtedness........................................78
SECTION 9.10 Holders Authorize Trustee To Effectuate Subordination of Notes 78
SECTION 9.11 This Article Not To Prevent Events of Default............................78
SECTION 9.12 Trustee's Compensation Not Prejudiced....................................78
SECTION 9.13 No Waiver of Subordination Provisions....................................78
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
SECTION 9.14 Subordination Provisions Not Applicable to Money Held in Trust
for Holders.............................................................79
SECTION 9.15 Reliance by Holders of Senior Indebtedness on Subordination Provisions..79
SECTION 9.16 Reinstatement...........................................................79
SECTION 9.17 Filing of Claims........................................................79
ARTICLE TEN AMENDMENTS, SUPPLEMENTS AND WAIVERS.......................................80
SECTION 10.01 Without Consent of Holders..............................................80
SECTION 10.02 With Consent of Holders.................................................81
SECTION 10.03 Compliance with Trust Indenture Act.....................................82
SECTION 10.04 Revocation and Effect of Consents.......................................82
SECTION 10.05 Notation on or Exchange of Notes........................................82
SECTION 10.06 Trustee to Sign Amendments, etc.........................................82
ARTICLE ELEVEN SUBSIDIARY GUARANTEE...................................................83
SECTION 11.01 Unconditional Guarantee.................................................83
SECTION 11.02 Severability............................................................84
SECTION 11.03 Contribution............................................................84
SECTION 11.04 Limitation of Guarantor's Liability.....................................84
SECTION 11.05 Execution of Subsidiary Guarantee.......................................85
SECTION 11.06 Subordination of Subrogation and Other Rights...........................85
SECTION 11.07 Additional Guarantors; Releases of Guarantors...........................85
SECTION 11.08 Successors and Assigns..................................................86
SECTION 11.09 Waiver of Stay, Extension or Usury Laws.................................86
ARTICLE TWELVE SUBORDINATION OF SUBSIDIARY GUARANTEE .................................86
SECTION 12.01 Subsidiary Guarantee Obligations Subordinated to Senior Indebtedness....86
SECTION 12.02 Payment Over of Proceeds Upon Dissolution, etc.; No Payment in Certain
Circumstances...........................................................87
SECTION 12.03 Subrogation.............................................................88
SECTION 12.04 Obligations of Guarantors Unconditional.................................89
SECTION 12.05 Notice to Trustee.......................................................89
SECTION 12.06 Reliance on Judicial Order or Certificate of Liquidating Agent..........90
</TABLE>
<PAGE> 6
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Legend for Global Notes
Exhibit C Form of Subsidiary Guarantee
Exhibit D Option of Holder to Elect Purchase
Exhibit E Certificate to be Delivered Upon Exchange or Registration of
Transfer of Notes
Exhibit F Form of Transferee Letter of Representation
<PAGE> 7
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
<S> <C>
310(a)(1)......................................................................................7.10
(a)(2)......................................................................................7.10
(a)(3)......................................................................................N.A.
(a)(4)......................................................................................N.A.
(a)(5)......................................................................................N.A.
(b)...................................................................................7.10;13.02
(b)(1)......................................................................................7.10
(c)..........................................................................................N.A
311(a).........................................................................................7.11
(b).........................................................................................7.11
(c).........................................................................................N.A.
312(a).........................................................................................N.A.
(b)........................................................................................13.03
(c)........................................................................................13.03
313(a).........................................................................................7.06
(b).........................................................................................7.06
(b)(1)......................................................................................N.A.
(b)(2)......................................................................................N.A.
(c)..................................................................................7.06; 13.02
(d).........................................................................................7.06
314(a)........................................................................................13.02
(a)(4)......................................................................................N.A.
(b).........................................................................................N.A.
(c)(1)......................................................................................N.A.
(c)(2)......................................................................................N.A.
(c)(3)......................................................................................N.A.
(d).........................................................................................N.A.
(e).........................................................................................N.A.
(f).........................................................................................N.A.
315(a).........................................................................................N.A.
(b)..................................................................................7.05; 13.02
(c).........................................................................................N.A.
(d).........................................................................................N.A.
(e).........................................................................................N.A.
316(a)(1)(A)...................................................................................N.A.
(a)(1)(B)...................................................................................6.05
(a)(2)......................................................................................N.A.
(b).........................................................................................N.A.
(c).........................................................................................N.A.
317(a)(1)......................................................................................N.A.
(a)(2)......................................................................................N.A.
(b).........................................................................................N.A
318(a).........................................................................................N.A.
(b).........................................................................................N.A.
(c).........................................................................................N.A.
*This Cross-Reference Table is not part of the Indenture. N.A. means not applicable.
</TABLE>
<PAGE> 8
INDENTURE dated as of February 19, 1999, among NEW WORLD PASTA
COMPANY, a Delaware corporation (the "Company"), the GUARANTORS from time to
time party hereto, and THE BANK OF NEW YORK, a New York banking corporation, as
trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each
other party hereto and for the equal and ratable benefit of the Holders from
time to time of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Acceleration Notice" shall have the meaning provided in
Section 6.02.
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company or any of its 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 of the Company or such acquisition, merger or
consolidation; provided that Indebtedness of such Person which is redeemed,
defeased, retired or otherwise repaid at the time of or immediately upon
consummation of the transaction by which such Person becomes a Restricted
Subsidiary or at the time of such merger or consolidation or acquisition of
assets shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined in conformity with GAAP and before any reduction in
respect of preferred stock dividends; provided that (x) there shall be added to
such aggregate net income (or loss) the amount of any decrease in the deferred
tax asset for such period relating to the actual cash tax benefit realized by
the Company (or the consolidated tax group of which the Company is a member)
resulting from the election under Section 338(h)(10) of the Code in respect of
the Recapitalization so long as the aggregate amounts added back in determining
Adjusted Consolidated Net Income pursuant to this clause (x) at no time exceed
the actual amount of tax savings realized by the Company and its Restricted
Subsidiaries as a result of the Section 338(h)(10) election referenced above,
and (y) the following items shall be excluded in computing Adjusted Consolidated
Net Income (without duplication):
2
<PAGE> 9
(i) the net income of any Person that is not a
Restricted Subsidiary, except to the extent of the amount of dividends
or other distributions actually paid to the Company or any of its
Restricted Subsidiaries by such Person during such period;
(ii) solely for the purposes of calculating the
amount of Restricted Payments that may be made pursuant to clause (C)
of Section 4.06(a) (and in such case, except to the extent includable
pursuant to clause (i) above), the net income (or loss) of any Person
accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with the Company or any of its Restricted
Subsidiaries or all or substantially all of the property and assets of
such Person are acquired by the Company or any of its Restricted
Subsidiaries;
(iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not
at the time permitted by the operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales;
(v) all extraordinary, non-recurring and unusual
gains and losses (on an after-tax basis) and, without duplication, all
restructuring charges (on an after-tax basis);
(vi) write-offs of intangible assets, including
research and development, relating to assets acquired by the Company
and its Restricted Subsidiaries if such write-offs are done at the
time of, or within three months after, such acquisition;
(vii) any non-cash compensation expense incurred in
connection with the exercise of or paid or payable solely with
Qualified Capital Stock of the Company or any options, warrants or
other rights to acquire Qualified Capital Stock of the Company;
(viii) in the case of any successor to the referent
Person by consolidation or merger or as a transferee of the referent
Person's assets, any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets;
(ix) the fees, expenses or other costs incurred in
connection with the Recapitalization;
3
<PAGE> 10
(x) any net after-tax earnings (or losses) from
discontinued operations and any net after-tax gains or losses on any
disposal of discontinued operations; and
(xi) the cumulative effect of changes in accounting
principles after the Issue Date.
"Adjusted Net Worth" shall have the meaning provided in
Section 11.03.
"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, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Aggregate Deficit Amount" shall have the meaning provided in
Section 11.03.
"Aggregate Excess Amount" shall have the meaning provided in
Section 11.03.
"Asset Acquisition" means (a) an Investment by the Company or
any Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or any
Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) which constitute all
or substantially all of the assets of such Person or comprises any division or
line of business of such Person.
"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 for value by the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business;
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<PAGE> 11
provided, however, that Asset Sales shall not include (i) a transaction or
series of related transactions for which the Company or its Restricted
Subsidiaries receive aggregate consideration of less than $1,000,000, (ii) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Company, or the consolidation or merger of the Company
with any other Person, in each case as permitted under Article Five, (iii) any
disposition of property of the Company or any of its Restricted Subsidiaries
that, in the reasonable judgment of the Company, has become uneconomic, damaged,
obsolete or worn out, (iv) the sale of inventory in the ordinary course of
business, (v) the sale or discount, in each case without recourse (other than
recourse for a breach of a representation or warranty) of accounts receivable
arising in the ordinary course of business, but only in connection with the
compromise or collection thereof, (vi) sales of Cash Equivalents, (vii)
surrender or waiver of contract rights or the settlement, release or surrender
of contract, tort or other claims of any kind, (viii) granting of Liens not
otherwise prohibited by this Indenture, (ix) the licensing of intellectual
property, (x) the sale, lease, conveyance, disposition or other transfer of
Permitted Investments or the Capital Stock of or any Investment in any
Unrestricted Subsidiary, (xi) leases or subleases to third persons not
interfering in any material respect with the business of the Company or any of
its Restricted Subsidiaries, (xii) the Miller Real Property Transactions and
(xiii) the making of any Permitted Investments or other Restricted Payments
described in Section 4.06.
"Bankruptcy Law" means title 11 of the U.S. Code, or any
similar Federal, state or foreign law for the relief of debtors.
"Board of Directors" means the board of directors of the
Company or any duly authorized committee thereof.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means the day that is not a Saturday, a Sunday
or a day in which banking institutions in New York, New York are not required to
be open.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, 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,
membership or other equity interests of such Person.
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"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 S&P or Moody's; (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having one of the two highest ratings obtainable from S&P
or 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; (vi) investments in
money market funds with assets of $5,000,000 or greater; and (vii) Indebtedness
(issued by Persons other than the Company and its Subsidiaries), which
Indebtedness matures within one year from the date of the acquisition thereof
and has a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"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 and its Restricted Subsidiaries, taken as a whole, 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 a
Subsidiary of the Company, the Principals and their Related Parties; (ii) 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 Principals and their Related Parties) 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
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<PAGE> 13
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.
"Code" means the Internal Revenue Code of 1986, as amended.
"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 party named as such in the first paragraph
of this Indenture until a successor replaces it and, thereafter, means the
successor and, for purposes of any provision contained herein and required by
the TIA, each other obligor on the Notes.
"Consolidated EBITDA" means, for any period, Adjusted
Consolidated Net Income for such period plus (A) to the extent such amount was
deducted in calculating such Adjusted Consolidated Net Income: (i) consolidated
interest expense, (ii) income taxes (other than income taxes or income tax
effects (either positive or negative) attributable to extraordinary, unusual
and non-recurring gains or losses or sales of assets and all restructuring
charges), (iii) depreciation expense, (iv) amortization expense, (v) any
out-of-pocket costs and transaction expenses relating to any issuance of Capital
Stock or incurrence of Indebtedness or Asset Acquisition or Permitted Investment
and (vi) all other non-cash items reducing Adjusted Consolidated Net Income,
less (B) (i) all non-cash items increasing Adjusted Consolidated Net Income
(excluding reversals of accruals or reserves referred to in the following clause
(ii)) and (ii) the amount of all reversals of accruals or reversals of reserves
established in the ordinary course of business, and all amortizations of prepaid
cash expenses from prior periods, occurring during the respective period, all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Consolidated EBITDA attributable to
such Restricted Subsidiary multiplied by (B) the percentage ownership interest
in the income of such Restricted Subsidiary not owned on the last day of such
period by the Company or any of its Restricted Subsidiaries.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of
(i) Consolidated EBITDA 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") for which financial statements are available to (ii) 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
repayment of any
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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 or Preferred
Stock (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
repayment, 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
other dispositions 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 the case may be, any Consolidated EBITDA (including any pro
forma expense and cost reductions calculated on a basis consistent with
Regulation S-X under the Exchange Act) attributable to the assets which are the
subject of the Asset Acquisition or Asset Sale or other disposition 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 other disposition or Asset
Acquisition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the Four Quarter Period.
Furthermore, if the Company has categorized any of its Subsidiaries or
operations as discontinued operations in accordance with GAAP, and if there is
any Indebtedness or Preferred Stock relating solely to such discontinued
operations for which no recourse is available, whether pursuant to direct
obligations, Guarantees or otherwise, to the non-discontinued operations (or
related Assets) of the Company and its Restricted Subsidiaries (in any event
excluding Indebtedness incurred pursuant to the New Credit Facility or other
Indebtedness with direct liability on the part of the Company which survives
such discontinuation), "Consolidated Fixed Charges" shall be calculated giving
pro forma effect to the deemed retirement of such Indebtedness or Preferred
Stock, as the case may be. If such Person or any of its Restricted Subsidiaries
directly or indirectly Guarantees Indebtedness of a third Person, the second
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. If since
the beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period) shall have made any Asset Acquisition or
Asset Sale or other disposition that would have required adjustment pursuant to
this definition, then the Consolidated Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect thereto as if such Asset Acquisition or Asset
Sale or other disposition had occurred at the beginning of the applicable Four
Quarter Period. 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
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<PAGE> 15
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the average rate of interest on such Indebtedness
in effect on the 30 business days preceding the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Rate Agreements with a
remaining term at the Transaction Date of at least 12 months, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of the Company
and its Restricted Subsidiaries for such period, whether paid or
accrued, including, without limitation, original issue discount,
non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or banker's
acceptance financings, and net payments, if any, pursuant to Interest
Rate Agreements or Currency Agreements, but excluding amortization or
write-off debt issuance costs; plus
(2) the consolidated interest expense of the Company
and its Restricted Subsidiaries that was capitalized during such
period; plus
(3) any interest expense on Indebtedness of another
Person that is Guaranteed by the Company or one of its Restricted
Subsidiaries or secured by a Lien on assets of such person or one of
its Restricted Subsidiaries, whether or not such Guarantee or Lien is
called upon; plus
(4) the product of (a) all dividend accruals, whether
or not paid or payable in cash, during such period on any Disqualified
Capital Stock of the Company or any of its Restricted Subsidiaries, and
on any Preferred Stock of Restricted Subsidiaries of the Company, times
(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of the Company, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP; plus
(5) the product of (a) all dividends actually paid,
whether paid in cash or in any other consideration (but excluding any
dividends to the extent paid
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through the issuance of additional shares of Qualified Capital Stock of
the Company), during such period with respect to any Preferred Stock
(not constituting Disqualified Capital Stock) of the Company, times (b)
a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local
statutory tax rate of the Company, expressed as a decimal, in each on a
consolidated basis and in accordance with GAAP.
"Contribution Percentage" shall have the meaning provided in
Section 11.03.
"Corporate Trust Office" means the office of the Trustee
specified in Section 13.02 or such other office as the Trustee shall advise the
Company in writing.
"Covenant Defeasance" shall have the meaning provided in
Section 8.02(c).
"Credit Facilities" means, with respect to the Company and its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the New Credit Facility) or commercial paper facilities or
indentures providing for revolving credit loans, term loans, receivables
financing (including through the sale of receivables to lenders or to special
purpose entities formed to borrow from lenders against receivables), letters of
credit or other long-term indebtedness, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"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.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the person specified in Section 2.03
as the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
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"Designated Guarantor Senior Indebtedness" shall mean as to
any Guarantor, all Guarantor Senior Indebtedness of such Guarantor constituting
Guarantees of Designated Senior Indebtedness.
"Designated Noncash Consideration" means any non-cash
consideration received by the Company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is designated as Designated Noncash
Consideration pursuant to an officer's certificate executed by the principal
executive officer or the principal financial officer of the Company. Such
officer's certificate shall state the basis of valuation, and the fair market
value of the Designated Noncash Consideration being received in the respective
Asset Sale (which shall be determined in good faith by the Board of Directors).
A particular item of Designated Noncash Consideration shall no longer be
considered outstanding when it has been sold for cash or redeemed or paid in
full in the case of non-cash consideration in the form of promissory notes or
equity.
"Designated Preferred Stock" means Preferred Stock (not
constituting Disqualified Capital Stock) of the Company (excluding the Company's
12% Cumulative Redeemable Preferred Stock, any other Preferred Stock issued on
or prior to the Issue Date and any Preferred Stock issued in exchange or
substitution for any of the foregoing) that is designated as Designated
Preferred Stock pursuant to an officer's certificate executed by the principal
executive officer or the principal financial officer of the Company, on the
issuance date thereof, the cash proceeds of which are excluded from the
calculation set forth in clause (C)(2) of Section 4.06(a).
"Designated Senior Indebtedness" means (i) Indebtedness under
or in respect of the New Credit Facility and (ii) any other Indebtedness
constituting Senior Indebtedness which, at the time of determination, has an
aggregate principal amount of at least $25,000,000 and is specifically
designated in the instrument evidencing such Senior Indebtedness as "Designated
Senior Indebtedness" by the Company.
"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 at the option of the holder), 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 Stated Maturity of the Notes; provided
that any Capital Stock that would not constitute Disqualified Capital Stock but
for provisions therein giving holders thereof the right to cause the issuer
thereof to repurchase or redeem such Capital Stock upon the occurrence of an
"Asset Sale" or "Change of Control" occurring prior to the final stated maturity
of the Notes will not constitute Disqualified Capital Stock if the "Asset Sale"
or "Change of Control" provisions applicable to such Capital Stock, taken as a
whole, are not materially more favorable to the holders of such Capital Stock
than the provisions described under Sections 4.10 and 4.11; provided further
that if such Capital Stock
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is issued pursuant to any plan for the benefit of employees of the Company or
its Subsidiaries or by any such plan to such employees, such Capital Stock shall
not constitute Disqualified Capital Stock solely because it may be required to
be repurchased by the Company in order to satisfy applicable statutory or
regulatory obligations.
"Equity Offering" means an issuance or sale after the Issue
Date by the Company of its Qualified Capital Stock.
"Event of Default" shall have the meaning provided in Section
6.01.
"Excess Proceeds" shall have the meaning provided in Section
4.10.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" means the 9 1/4% Senior Subordinated Notes
due 2009 of the Company to be issued in exchange for the Initial Notes pursuant
to the Registration Rights Agreement and any similar securities issued in
compliance with Section 2.02 in accordance with any other registration rights
agreement.
"Exchange Offer Registration Statement" shall have the meaning
provided in 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 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 February 15, 2009.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
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"Global Note" means a Note that bears a legend in the form of
Exhibit B.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services (unless such purchase arrangements are on arm's-length
terms and are entered into in the ordinary course of business), to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Obligations" shall have the meaning provided in
Section 11.01.
"Guarantor" means each of (i) Winchester Pasta, L.L.C., a
Delaware limited liability company, and Pasta Group, L.L.C., a Delaware limited
liability company and (ii) each of the Company's Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Restricted 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 Subsidiary Guarantee is released in accordance
with the terms of this Indenture.
"Guarantor Senior Indebtedness" means, with respect to any
Guarantor, the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of a
Guarantor, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Indebtedness" shall also include the principal
of, premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing by the respective Guarantor in
respect of, (x) all obligations (including
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<PAGE> 20
Guarantees thereof) of every nature under the New Credit Facility, including,
without limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities, (y) all
obligations under Interest Rate Agreements (including Guarantees thereof) and
(z) all obligations (including Guarantees thereof) under Currency Agreements, in
each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
(i) any Indebtedness of such Guarantor to the Company or any other Subsidiary of
the Company or to any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any director,
officer or employee of such Guarantor or any Restricted Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, commodities, materials or services, (iv) Indebtedness
represented by Preferred Stock or Disqualified Capital Stock, (v) any liability
for federal, state, local or other taxes owed or owing by such Guarantor, (vi)
that portion of any Indebtedness incurred in violation of Section 4.03, (vii)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company and (viii) any Indebtedness which is, by its express terms, subordinated
in right of payment to any other Indebtedness of such Guarantor.
"Holder" means a holder of a Note, registered on the books of
the Registrar.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication):
(i) all indebtedness of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(iii) all obligations of such Person in respect of letters of
credit, bankers' acceptances or other similar instruments (including
reimbursement obligations with respect thereto);
(iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, which purchase price is
due more than two
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<PAGE> 21
months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services;
(v) all Capitalized Lease Obligations;
(vi) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed
by such Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness;
(vii) all Indebtedness of other Persons Guaranteed by such
Person to the extent such Indebtedness is Guaranteed by such Person;
(viii) all Disqualified Capital Stock and, in the case of a
Restricted Subsidiary, all Preferred Stock issued by such Person; and
(ix) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided (A) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP, (B) that the
amount of Indebtedness at any time of any Disqualified Capital Stock or
Preferred Stock shall be the greater of its voluntary or involuntary liquidation
preference and the maximum fixed redemption or repurchase price in respect
thereof, and (C) that Indebtedness shall not include (x) trade accounts payable,
contingent liabilities (excluding contingent liabilities of the types described
in clauses (iii), (iv), (vi), (vii) and (ix) above) and accrued liabilities
arising in the ordinary course of business and (y) any liability for federal,
state, local or other taxes.
"Indenture" means this Indenture, as amended, modified or
supplemented from time to time.
"Initial Notes" means the 9 1/4% Senior Subordinated Notes due
2009 of the Company issued on the Issue Date or thereafter in accordance with
the requirements of Section 2.02 of this Indenture; provided that the term
Initial Notes shall not include any Exchange Notes issued in exchange for
theretofore outstanding Initial Notes.
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<PAGE> 22
"Initial Purchasers" means Morgan Stanley & Co. Incorporated
and Scotia Capital Markets (USA) Inc.
"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 Payment Date" means each interest payment date on
February 15 and August 15 of each year, commencing on August 15, 1999.
"Interest Record Date" for the interest payable on any
Interest Payment Date (except a date for payment of defaulted interest) means
the February 1 or August 1 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, interest rate option or interest rate
future contract or other similar agreement or arrangement.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers or
suppliers in the ordinary course of business that are, in conformity with GAAP,
recorded as accounts receivable, prepaid expenses or deposits on the balance
sheet of the Company or its Restricted Subsidiaries) 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 of Capital Stock, bonds, notes, debentures or other similar
instruments issued by, such Person and shall include (i) the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary (which shall be deemed to
constitute an Investment made on the date of such designation) and (ii) an
amount equal to the fair market value of the Capital Stock (or any other
Investment), held by the Company or any of its Restricted Subsidiaries, of (or
in) any Person that was a Restricted Subsidiary and that has ceased for any
reason to be a Restricted Subsidiary, including without limitation, by reason of
any Asset Sale or any other issuance of Capital Stock by such Restricted
Subsidiary (with an Investment in the amount described above being deemed made
on the date the respective Person ceases to be a Restricted Subsidiary, for any
reason). For purposes of the definition of "Unrestricted Subsidiary" and Section
4.06, (i) "Investment" shall include the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value
of the assets (net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is
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designated a Restricted Subsidiary shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, with the fair market value of the various items as required to be
determined pursuant to the foregoing provisions of this sentence to be
determined, in each case, in good faith by the Board of Directors.
"Investment Company Act" means the Investment Company Act of
1940, as amended, and any successor statute thereto.
"Issue Date" means the date of original issuance of the Notes.
"JLL" means Joseph Littlejohn & Levy Fund III, L.P., a
Delaware limited partnership.
"Legal Defeasance" shall have the meaning as provided in
Section 8.02(b).
"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).
"Liquidated Damages" shall have the meaning provided in the
Registration Rights Agreement.
"Management Investor" means Miller Pasta LLC, a Delaware
limited liability company.
"Miller Milling" shall mean Miller Milling Company, a
Minnesota corporation.
"Miller Real Property Transactions" means (a) the lease by the
Company to Miller Milling of real property in Winchester, Virginia underlying
Miller Milling's flour milling facility (the "Miller Property"), and (b) the
transfer for $1.00 by the Company to Miller Milling of the Miller Property.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
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Subsidiary) and proceeds from the conversion of other property received when
converted to cash or Cash Equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company and
its Restricted Subsidiaries, taken as a whole, (iii) payments made to
permanently repay Indebtedness or any other obligation (excluding Indebtedness
and obligations pursuant to the Credit Facilities) outstanding at the time of
such Asset Sale that either (A) is secured by a Lien on the property or assets
sold or (B) is required to be paid as a result of such sale and (iv) appropriate
amounts to be provided by the Company or any Restricted Subsidiary as a reserve
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with GAAP and (b) with respect to any issuance or sale of Capital Stock, the
proceeds of such issuance or sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or Cash Equivalents, net of attorneys' fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Net Worth" shall have the meaning provided in Section 11.03.
"New Credit Facility" means the Credit Agreement dated as of
January 28, 1999, among the Company, the lenders party thereto in their
capacities as lenders thereunder and The Bank of Nova Scotia, as administrative
agent and a lender, together with the related documents thereto (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 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, lender or group of lenders.
"Note Purchase Agreement" means the Note Purchase Agreement,
dated as of January 28, 1999, among the Company, Morgan Stanley & Co.
Incorporated, as paying agent and calculation agent, and Morgan Stanley & Co.
Incorporated and Scotiabanc Inc., as initial purchasers.
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"Noteholder" means a holder of a Note, registered on the books
of the Registrar.
"Notes" means the Initial Notes and the Exchange Notes treated
as a single class of securities, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offer to Purchase" means an offer to purchase Notes by the
Company from the Holders commenced by mailing a notice to the Trustee and each
Holder stating:
(i) the Section pursuant to which the offer is being made and
that all Notes validly tendered will be accepted for payment on a pro
rata basis;
(ii) the purchase price and the date of purchase (which shall
be a Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed) (the "Purchase Offer Payment Date");
(iii) that any Note not tendered will continue to accrue
interest pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the
purchase price, any Note accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest on and after the Purchase Offer
Payment Date;
(v) that Holders electing to have a Note purchased pursuant to
the Offer to Purchase will be required to surrender the Note, together
with the form entitled "Option of the Holder to Elect Purchase" in
substantially the form of Exhibit D annexed hereto, completed, to the
Paying Agent at the address specified in the notice prior to the close
of business on the Business Day immediately preceding the Purchase
Offer Payment Date;
(vi) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business on
the third Business Day immediately preceding the Purchase Offer Payment
Date, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Notes purchased; and
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<PAGE> 26
(vii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of
$1,000 or integral multiples thereof.
On the Purchase Offer Payment Date, the Company shall (i)
accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Trustee shall act as the Paying Agent for an
Offer to Purchase. The Company will comply with 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 the event that the Company is required
to repurchase Notes pursuant to an Offer to Purchase.
"Offering" means the initial offering of the Notes.
"Offering Memorandum" means the Offering Memorandum, dated
February 11, 1999, relating to the Notes.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" of any Person means a certificate
signed on behalf of such Person or the general partner, in the case of a limited
partnership, or member, in the case of a limited liability company, of such
Person by the Chairman of the Board, the President, any Executive Vice
President, Senior Vice President or Vice President (whether or not such title is
preceded or followed by one or more words or phrases) and by the Treasurer or
any Assistant Treasurer or the Secretary or any Assistant Secretary of such
Person, that meets the requirements set forth in Sections 13.04 and 13.05 of
this Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or Trustee.
"Participants" shall have the meaning provided in Section
2.15.
"Paying Agent" shall have the meaning provided in Section
2.03.
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"Payment Blockage Notice" shall have the meaning provided in
Section 9.02.
"Payment Blockage Period" shall have the meaning provided in
Section 9.02.
"Permitted Indebtedness" shall have the meaning provided in
Section 4.03.
"Permitted Investments" means:
(i) Investments by the Company or any Restricted Subsidiary of
the Company in any Person that is or will become immediately after such
Investment a Restricted Subsidiary of the Company or that will merge or
consolidate into the Company or a Restricted Subsidiary of the Company;
(ii) Investments in the Company by any Restricted Subsidiary
of the Company; provided that any Indebtedness evidencing such
Investment to the extent held by a Restricted Subsidiary that is not a
Guarantor is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Notes 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 in the ordinary course of
business for bona fide business purposes;
(v) Currency Agreements and Interest Rate Agreements 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
or in good faith settlement of delinquent obligations of such trade
creditors or customers;
(vii) Investments made pursuant to the Recapitalization;
(viii) Guarantees of Indebtedness and other obligations
otherwise permitted under this Indenture;
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(ix) obligations of one or more officers or other employees of
the Company or any of its Restricted Subsidiaries in connection with
such officer's or employee's acquisition of shares of Common Stock of
the Company so long as no cash is paid by the Company or any of its
Restricted Subsidiaries to such officers or employees in connection
with the acquisition of any such obligations;
(x) 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 4.10;
(xi) commission, travel, payroll, entertainment, relocation
and similar advances to officers and employees of the Company or any
Restricted Subsidiary made in the ordinary course of business;
(xii) advances or payments to individuals in an amount equal
to any income taxes payable by such individuals resulting solely from
imputed income attributable to Preferred Stock of the Company owned by
them or the Management Investor; provided that the aggregate amount of
advances and payments made pursuant to this clause (xii) in any fiscal
year of the Company shall not exceed $775,000;
(xiii) Investments acquired in exchange for, or out of the Net
Cash Proceeds (which have not, and will not, be included pursuant to
clause (C)(2) of Section 4.06(a)) of a substantially concurrent
offering of, shares of Qualified Capital Stock (which is not Designated
Preferred Stock) of the Company (or options, warrants or other rights
to acquire such Qualified Capital Stock);
(xiv) Investments in Unrestricted Subsidiaries not to exceed
an amount equal to (A) $10,000,000 plus (B) to the extent not
previously reinvested under this clause (xiv), any cash return of
capital (whether realized as a result of payments from the respective
Unrestricted Subsidiary, the receipt of Net Cash Proceeds from the sale
of the respective Permitted Investment or otherwise) realized on a
Permitted Investment made after the Issue Date pursuant to this clause
(xiv) (but with the total return of capital for purposes of this clause
(xiv) not to exceed the amount Invested pursuant to this clause (xiv));
and
(xv) additional Investments not to exceed an amount equal to
(A) the greater of $25,000,000 or 10% of Total Assets, as determined on
the date of the making of each Investment, plus (B) to the extent not
previously reinvested under this clause (xv), any cash return of
capital (whether realized as a result of payments from the respective
Person in which the Permitted Investment was made, the receipt of Net
Cash Proceeds from the sale of the respective Permitted Investment or
otherwise) realized on a Permitted Investment made after the Issue Date
pursuant to this clause
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(xv) (but with the total return of capital for purposes of this clause
(xv) not to exceed the amount Invested pursuant to this clause (xv)).
"Permitted Payments" shall have the meaning provided in
Section 9.02.
"Person" means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust or joint venture,
or a governmental agency or political subdivision thereof.
"Physical Notes" means one or more certificated Notes 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.
"Principals" means (i) JLL and each Affiliate of JLL as of the
Issue Date; and (ii) each officer or employee of JLL or any such member referred
to in clause (i) as of the Issue Date.
"Private Exchange Notes" means the Private Exchange Notes as
defined in the Registration Rights Agreement and any similar notes issued in
compliance with Section 2.02 in accordance with any other registration rights
agreement.
"Private Placement Legend" means the legend substantially to
the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE THAT IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER
OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE ISSUER OR ANY SUBSID-
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<PAGE> 30
IARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR (AS DEFINED
IN RULE 501(a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
"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 or equipment.
"Purchase Offer Payment Date" shall have the meaning assigned
that term in the definition of "Offer to Purchase".
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
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<PAGE> 31
"QIB" shall mean a "qualified institutional buyer" as defined
in Rule 144A.
"Recapitalization" shall mean the transactions contemplated by
the Recapitalization Agreement and the incurrence of Indebtedness under the New
Credit Facility and the Note Purchase Agreement in connection therewith.
"Recapitalization Agreement" shall mean that certain
Recapitalization Agreement, dated as of December 15, 1998 (as amended, modified
or supplemented from time to time), among Hershey Foods Corporation, Hershey
Chocolate and Confectionery Corporation (as the successor in interest to Hershey
CRE, Inc.) and Homestead, Inc., the Company, New World Pasta LLC, JLL (with
respect to Sections 7.7 and 7.8 only), Pasta Group, L.L.C. and Winchester Pasta,
L.L.C.
"Redemption Date" when used with respect to any Note to be
redeemed or repurchased, means the date fixed for such redemption or repurchase
pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture.
"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 (whose proceeds are applied within 90
days after the incurrence thereof) in exchange or replacement for, such security
or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the
Company or any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with Section 4.03 (other than pursuant to clauses (ii), (iii), (iv),
(v), (vi), (vii), (viii), (ix), (xii), (xiv), (xv) or (xvi) of Section 4.03(b)),
in each case that does not (1) result in an increase in the aggregate principal
amount (or accreted value, if applicable) of Indebtedness of such Person as of
the date of such proposed Refinancing (provided that the amount of any
penalties, interest or premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable fees,
discounts, commissions and other expenses incurred by the Company in connection
with such Refinancing may also be Refinanced) or (2) create Indebtedness with
(A) a Weighted Average Life to Maturity that is less than the Weighted Average
Life to Maturity of the Indebtedness being Refinanced or (B) a Stated Maturity
earlier than the Stated Maturity of the Indebtedness being Refinanced; provided
that (x) if such Indebtedness being Refinanced is solely Indebtedness of the
Company, then such Refinancing Indebtedness shall be Indebtedness solely of the
Company, (y) if such Indebtedness being Refinanced is subordinate or junior to
the Notes or any Subsidiary Guarantee, then such Refinancing Indebtedness shall
be subordinate or junior to the Notes and/or the respective
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<PAGE> 32
Subsidiary Guarantees at least to the same extent and in substantially the same
manner as the Indebtedness being Refinanced and (z) if such Indebtedness being
Refinanced constitutes Preferred Stock of a Restricted Subsidiary or
Disqualified Capital Stock, then the refinancing Indebtedness shall also
constitute Capital Stock of the respective issuer of the Capital Stock being
refinanced.
"Registrar" shall have the meaning provided in Section 2.03.
"Registration" means a registered exchange offer for the Notes
by the Company or other registration of the Notes under the Securities Act
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of February 19, 1999 by and among the Company, the
Guarantors and the Initial Purchasers.
"Reg. S Legend" means a legend to substantially the following
effect:
THIS SECURITY AND INTERESTS IN THIS SECURITY MAY NOT BE OFFERED OR SOLD
TO A U.S. PERSON (AS SUCH TERM IS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO
THE EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE),
AND NO TRANSFER OR EXCHANGE OF THIS NOTE OR INTEREST IN THIS NOTE MAY
BE MADE FOR A PHYSICAL SECURITY OR AN INTEREST IN A PHYSICAL SECURITY
UNTIL AFTER THE LATER OF THE DATE OF EXPIRATION OF THE RESTRICTED
PERIOD AND THE DATE ON WHICH THE PROPER REQUIRED CERTIFICATION RELATING
TO SUCH TRANSFER OR EXCHANGE HAS BEEN PROVIDED IN ACCORDANCE WITH THE
TERMS OF THE INDENTURE, TO THE EFFECT THAT THE BENEFICIAL OWNER OR
OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS.
"Related Party" with respect to any Principal means (A) any
controlling stockholder or 80% (or more) owned Subsidiary of such Principal or
(B) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (A).
"Relevant Payment" shall have the meaning provided in Section
11.03.
"Representative" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Indebtedness;
provided that if, and for so
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<PAGE> 33
long as, any Designated Senior Indebtedness lacks such a representative, then
the Representative for such Designated Senior Indebtedness shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Indebtedness in respect of any Designated Senior Indebtedness.
"Restricted Note" means a Note that bears the Private
Placement Legend.
"Restricted Payments" shall have the meaning provided in
Section 4.06.
"Restricted Period" means, with respect to Notes, the period
of 40 consecutive days beginning on and including the later of (i) the day on
which such Notes are first offered to Persons other than distributors (as
defined in Regulation S under the Securities Act) and (ii) the Issue Date.
"Restricted Subsidiary" of any Person means any Subsidiary of
such Person which at the time of determination is not an Unrestricted
Subsidiary. Unless otherwise indicated, or unless the context otherwise
requires, each reference herein to a "Restricted Subsidiary" shall mean a
Restricted Subsidiary of the Company.
"Rule 144A" means Rule 144A under the Securities Act, as
amended from time to time.
"Rule 144A Global Note" shall have the meaning provided in
Section 2.01.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, and its successors.
"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 U.S. Securities and Exchange
Commission, or any successor organization.
"Secured Indebtedness" shall have the meaning as provided in
Section 4.05.
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"Securities Act" means the Securities Act of 1933, as amended,
or any successor statute or statutes thereto.
"Senior Indebtedness" means the principal of, premium, if any,
and interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on any Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing by the Company in respect of, (x) all obligations (including guarantees
thereof) of every nature under the New Credit Facility, including, without
limitation, obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities, (y) all obligations
under Interest Rate Agreements (including guarantees thereof) and (z) all
obligations (including guarantees thereof) under Currency Agreements, in each
case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company or any Affiliate of
the Company or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or
guaranteed on behalf of, any director, officer or employee of the Company or any
Subsidiary of the Company (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, commodities, materials or services, (iv)
Indebtedness represented by Preferred Stock or Disqualified Capital Stock, (v)
any liability for federal, state, local or other taxes owed or owing by the
Company, (vi) that portion of any Indebtedness incurred in violation of Section
4.03, (vii) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of the
Company.
"Shelf Registration Statement" shall have the meaning provided
in the Registration Rights Agreement.
"Significant Restricted Subsidiary" means, at any date of
determination, any Restricted Subsidiary that, together with its Subsidiaries,
(i) for the most recent period of four full fiscal quarters (or, if shorter, the
period beginning on the Issue Date and) ending on or prior to the date of any
determination pursuant to this definition for which financial statements are
available, accounted for more than 10% of the consolidated revenues of the
Company and its Restricted Subsidiaries for such period or (ii) as of the end of
such fiscal
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quarter or year, was the owner of more than 10% of the consolidated assets of
the Company and its Restricted Subsidiaries, all as set forth on the most
recently available consolidated financial statements of the Company for such
fiscal quarter or year.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"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. Unless otherwise indicated, or unless the context otherwise
requires, each reference herein to a "Subsidiary" shall mean a Subsidiary of the
Company.
"Subsidiary Guarantee" means the Guarantee of the Obligations
of the Company with respect to the Notes by each Guarantor pursuant to the terms
of this Indenture.
"Surviving Entity" shall have the meaning provided in Section
5.01.
"Temporary Reg. S Global Note" shall have the meaning provided
in Section 2.01.
"TIA" means the Trust Indenture Act of 1939, as amended, as in
effect on the Issue Date, except as provided in Section 10.03 hereof.
"Total Assets" means the total consolidated assets of the
Company and its Restricted Subsidiaries, as set forth on the Company's most
recent consolidated balance sheet.
"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, assistant treasurer 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 such person's
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 Notes" means one or more Notes that do not and
are not required to bear the Private Placement Legend, including without
limitation, the Exchange Notes and any Notes registered under the Securities Act
pursuant to and in accordance with the Registration Rights Agreement.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of the Company in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors of the Company may at any time and from time to time after
the Issue Date designate any Subsidiary (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the Company
or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) the Company certifies to the
Trustee that such designation complies with Section 4.06 and (y) each Subsidiary
to be so designated and each of its Subsidiaries has not at the time of
designation, and does not thereafter, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to any Indebtedness
pursuant to which the lender has recourse to any of the assets of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors 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. The Board of Directors of the Company may at any time and
from time to time after the Issue Date designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided that (i) no Default or Event of Default
shall occur or result from such designation and (ii) all Liens and Indebtedness
of such Unrestricted Subsidiary outstanding immediately after such designation
would, if Incurred or issued at such time, have been permitted to be Incurred or
issued (and shall be deemed to have been Incurred or issued) for all purposes of
this Indenture. Any such designation by the Board of Directors of 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.
"U.S. Government Obligations" means direct non-callable
obligations of the United States for the payment of which the full faith and
credit of the United States is pledged.
"U.S. Legal Tender" means such coin or currency of the United
States as at the time of payment shall be legal tender for the payment of public
and private debts.
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"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. This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.03 Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) as used herein, accounting terms relating to the Company
and its Subsidiaries not defined in Section 1.01 and accounting terms
partly defined in
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Section 1.01 to the extent not defined, shall have the respective
meanings given to them under GAAP. All computations determining
compliance with financial covenants or terms, including definitions
used therein, shall be prepared in accordance with generally accepted
accounting principles in effect at the time of the preparation of, and
in conformity with those used to prepare, the Company's historical
financial statements included in the Offering Memorandum. If at any
time the computations for determining compliance with financial
covenants or provisions relating thereto utilize generally accepted
accounting principles different than those then being utilized in the
financial statements then being delivered to the Holders, such
financial statements shall be accompanied by a reconciliation statement
with respect to such computations;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular; and
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness.
ARTICLE TWO
THE NOTES
SECTION 2.01 Form and Dating. The Initial Notes and the
Exchange Notes and the Trustee's certificate of authentication thereof shall be
substantially in the form of Exhibit A hereto with appropriate inserts and
deletions. Exhibit A is hereby incorporated in and expressly made a part of this
Indenture. The Notes may have notations, legends or endorsements required by
law, stock exchange rule or usage. The Company shall approve the forms of the
Notes and any notation, legend or endorsement on them. Each Note shall be dated
the date of its authentication. Global Notes shall bear the legend set forth in
Exhibit B hereto.
Notes initially offered and sold in reliance on Rule 144A
shall initially be issued in the form of a permanent Global Note in registered
form (the "Rule 144A Global Note"), deposited with the Trustee as custodian for
the Depositary. Notes initially offered and sold in offshore transactions
pursuant to Regulation S under the Securities Act shall initially be issued in
the form of a temporary Global Note in registered form, deposited with the
Trustee as custodian for the Depositary (the "Temporary Reg. S Global Note").
Upon the expiration of the Restricted Period, and upon receipt by the Trustee of
the certification required by
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Regulation S under the Securities Act, the Temporary Reg. S Global Note shall be
exchanged for a permanent Global Note in equal principal amount.
Notwithstanding the foregoing, Notes may also be issued as
Physical Notes in registered form, rather than as Global Notes, as set forth in
Section 2.02. The aggregate principal amount of the Global Notes may from time
to time be increased or decreased as hereinafter provided.
SECTION 2.02 Execution and Authentication. Two Officers,
including no more than one signing solely as Assistant Secretary, shall sign, or
one Officer (other than as an Assistant Secretary) shall sign and the Secretary
or an Assistant Secretary (each of whom shall, in each case, have been duly
authorized by all requisite corporate actions) shall attest to such Officer's
signature, the Notes of the Company by manual or facsimile signature.
If an Officer whose signature is on a Note was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Note, the Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in an unlimited principal amount; provided that the aggregate principal
amount of Initial Notes issued on the Issue Date shall not exceed $160,000,000;
and, provided further, that in connection with any Initial Notes originally
issued after the Issue Date, the Company complies with Section 4.03, (ii)
Private Exchange Notes from time to time only in exchange for a like principal
amount of the same type of Initial Notes and (iii) Unrestricted Notes from time
to time (A) in exchange for a like principal amount of the same type of Initial
Notes or a like principal amount of the same type of Private Exchange Notes or
(B) as the Company may determine in accordance with this Indenture, 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 and the type of Notes to be
authenticated and the date on which the Notes are to be authenticated, whether
the Notes are to be Initial Notes, Private Exchange Notes or Unrestricted Notes
and whether the Notes are to be issued as Physical Notes or Global Notes and
such other information as the Trustee may reasonably request. The aggregate
principal amount of Notes outstanding at any time may not exceed the sum of (x)
the aggregate principal amount of Initial Notes issued on the Issue Date
pursuant to clause (i) of the first sentence of this paragraph and (y) the
aggregate principal amount of Initial Notes originally issued after the Issue
Date in accordance with the requirements of clause (i) of the first sentence of
this paragraph, except as provided in Sections 2.07 and 2.08.
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Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Notes may vote or consent) as one class and no series of Notes 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 Notes. Unless otherwise provided in
the appointment, an authenticating agent may authenticate Notes 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.
Each time a Note is issued, each Guarantor shall execute a
Subsidiary Guarantee with respect thereto in accordance with Section 11.05.
The Notes 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 in the Borough of Manhattan, The City of New York,
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange (the "Registrar"), (b) Notes may be presented or surrendered for
payment (the "Paying Agent") and (c) notices and demands in respect of the Notes
and this Indenture may be served. The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Company, upon 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 and the
term "Registrar" includes any co-Registrar. Except as provided herein, the
Company or any Guarantor may act as Paying Agent, Registrar or co-Registrar.
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 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 Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Global Notes.
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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 Notes, 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 Guarantor or any of their respective Affiliates acts as Paying Agent, it
shall, on or before each due date of the principal of or interest on the Notes,
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 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 at least five days 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 Notes are presented to the Registrar with a
request to register the transfer of such Notes or to exchange such Notes for an
equal principal amount of Notes of other authorized Notes of the same series,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however, that the Notes
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, duly executed by the Holder thereof or his attorney duly authorized
in writing. To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Notes at the 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 payable by the transferor of such Notes (other than any such transfer
taxes or other governmental charge payable upon exchanges or transfers pursuant
to Section 2.10, 3.06, 4.10, 4.11, or 10.05). The Registrar shall not be
required to register the transfer or exchange of any Note (i) during a period
beginning at the opening of business 15 days before the mailing of a notice of
redemption of Notes 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 Note being redeemed in part.
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Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee and any Agent shall treat the person
in whose name the Note is registered as the owner thereof for all purposes
whether or not the Note shall be overdue, and none of the Company, the Trustee
or any Agent shall be affected by notice to the contrary. Any Holder of a
beneficial interest in a Global Note shall, by acceptance of such beneficial
interest in a Global Note, agree that transfers of beneficial interests in such
Global Note may be effected only through a book-entry system maintained by the
Depositary (or its agent), and that ownership of a beneficial interest in a
Global Note shall be required to be reflected in a book entry.
SECTION 2.07 Replacement Notes. If a mutilated Note is
surrendered to the Trustee or if the Holder of a Note claims that the Note has
been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Note if the Trustee's requirements for
replacement of Notes are met. Such Holder must provide an indemnity bond or
other indemnity, sufficient in the judgment of both 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 Note is replaced. The Company may charge such Holder for
its reasonable out-of-pocket expenses in replacing a Note, including reasonable
fees and expenses of counsel.
Every replacement Note is an additional obligation of the
Company and the Guarantors.
SECTION 2.08 Outstanding Notes. Notes outstanding at any time
are all the Notes 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 Note does not
cease to be outstanding because the Company or any of its Affiliates holds the
Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date, Purchase Offer Payment Date or the
Final Maturity Date, the Paying Agent holds money sufficient to pay all of the
principal and interest due on the Notes 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 Notes cease to be outstanding and
interest on them ceases to accrue.
SECTION 2.09 Treasury Notes. In determining whether the
Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent,
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Notes owned by the Company, a Guarantor 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 Notes 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, a Guarantor or any of their respective Affiliates repurchases or
otherwise acquires Notes and of the aggregate principal amount of such Notes
repurchased or otherwise acquired.
SECTION 2.10 Temporary Notes. Until definitive Notes are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Notes 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 Notes to be authenticated and the date on which the temporary Notes
are to be authenticated.
Temporary Notes shall be substantially in the form of
definitive Notes but may have variations that the Company considers appropriate
for temporary Notes. 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 Notes in exchange for temporary Notes.
Notwithstanding the foregoing, this Section 2.10 shall not affect the Company's
obligations with respect to the Temporary Reg. S Global Note set forth in
Section 2.01.
SECTION 2.11 Cancellation. The Company at any time may deliver
Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Notes 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 dispose of such canceled Notes
in accordance with its customary procedures. Subject to Section 2.07, the
Company may not issue new Notes to replace Notes that it has paid or delivered
to the Trustee for cancellation. If the Company or any Guarantor shall acquire
any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Notes 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 applicable rate
of interest then borne by the Notes. The Company shall, to the extent lawful,
pay interest on overdue installments of interest (including Liquidated Damages,
if any), without regard to any applicable grace periods, at the rate of interest
then borne by the Notes.
If the Company defaults in a payment of interest (including
Liquidated Damages, if any) on the Notes, 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
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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 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(2) 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 Notes
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
Notes, and that reliance may be placed only on the other identification numbers
printed on the Notes. The Company shall promptly notify the Trustee of any
changes in "CUSIP" numbers.
SECTION 2.14 Deposit of Moneys. Prior to 10:00 a.m., New York
City time, on each Interest Payment Date, Purchase Offer Payment 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, Purchase Offer Payment 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, Purchase Offer
Payment Date or Final Maturity Date, as the case may be.
SECTION 2.15 Book-Entry Provisions for Global Notes. (a) The
Global Notes initially shall (i) be registered in the name of the Depositary or
the nominee of such Depositary, (ii) be delivered to the Trustee as custodian
for such Depositary and (iii) bear legends as set forth in Exhibit B.
Members of, or participants in, the Depositary
("Participants") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depositary, or the Trustee as its
custodian, or under the Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of the Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and Participants, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
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(b) Transfers of Global Notes shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depositary and the provisions of Section 2.16, provided, however, that
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in Global Notes if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for any Global
Note and a successor Depositary is not appointed by the Company within 90 days
of such notice or (ii) an Event of Default has occurred and is continuing and
the Registrar has received a request from the Depositary to issue Physical
Notes.
(c) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Notes 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 Depositary in exchange for its beneficial interest in the
Global Notes, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(d) Any Physical Note constituting a Restricted Note delivered
in exchange for an interest in a Global Note pursuant to paragraph (b) 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 Note 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 Notes.
(f) The Temporary Reg. S. Global Note shall bear the Reg. S
Legend.
SECTION 2.16 Registration of Transfers and Exchanges. (a)
Transfer and Exchange of Physical Notes. When Physical Notes are presented to
the Registrar with written instructions:
(i) to register the transfer of the Physical Notes; or
(ii) to exchange such Physical Notes for an equal principal
amount of Physical Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as
requested; provided, however, that the Physical Notes presented or
surrendered for registration of transfer or exchange:
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(I) shall be duly endorsed or accompanied by
a written instrument of transfer in form satisfactory to the
Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(II) in the case of Physical Notes bearing
the Private Placement Legend, the offer and sale of which have
not been registered under the Securities Act, such Physical
Notes shall be accompanied, in the sole discretion of the
Company, by the following additional information and
documents, as applicable:
(A) if such Physical Note is being
delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (substantially in the form of Exhibit E
hereto); or
(B) if such Physical Note is being
transferred to a QIB in accordance with Rule 144A, a
certification to that effect (substantially in the
form of Exhibit E hereto); or
(C) if such Physical Note is being
transferred to an Institutional Accredited Investor,
a certification to that effect (substantially in the
form of Exhibit E hereto) and a transferee letter of
representation 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
(D) if such Physical Note is being
transferred in reliance on Rule 144 under the
Securities Act, a certification to that effect
(substantially in the form of Exhibit E hereto); or
(E) if such Physical Note is being
transferred to the Company or a Subsidiary of the
Company, a certification to that effect
(substantially in the form of Exhibit E hereto).
(b) Restrictions on Transfer of a Physical Note for a
Beneficial Interest in a Global Note. When Physical Notes are presented to the
Registrar with written instructions that they be exchanged for a beneficial
interest in a Global Note, the Registrar shall register the transfer as
requested; provided, however, that the Physical Notes presented or surrendered
for registration of transfer:
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<PAGE> 47
(I) shall be duly endorsed or accompanied by
a written instrument of transfer in form satisfactory to the
Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(II) in the case of Physical Notes bearing
the Private Placement Legend, the offer and sale of which have
not been registered under the Securities Act, shall be
accompanied by a certification, in the form of Exhibit E
hereto, that such Physical Notes are being transferred (I) to
a QIB or (II) in an offshore transaction in compliance with
Rule 904 under the Securities Act.
Upon receipt of the foregoing, the Registrar shall cancel such Physical Notes
and cause, or direct the Depositary to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Registrar,
the principal amount of Notes represented by the applicable Global Note to be
increased accordingly. If no Global Note 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 Note in the
appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The
transfer and exchange of Global Notes or beneficial interests therein shall be
effected through the Depositary in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor. Upon receipt by the Registrar of written instructions, or such other
instruction as is customary for the Depositary, from the Depositary or its
nominee, requesting the registration of transfer of an interest in a Global Note
to another type of Global Note, together with the applicable Global Notes (or,
if the applicable type of Global Note required to represent the interest as
requested to be transferred is not then outstanding, only the Global Note
representing the interest being transferred), the Registrar will cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Registrar, the aggregate principal amount of the applicable
Global Notes (or Global Note) to be reduced or increased, as applicable, to give
effect to such transfer. If an applicable Global Note is not 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 Note in the appropriate principal amount. Notwithstanding the
foregoing, interests in the Temporary Reg. S Global Note may only be exchanged
for beneficial interests in the Rule 144A Global Note if the transferor
certifies to the Trustee in writing that it reasonably believes the transferee
to be a QIB and that the proposed transfer meets the requirements of Rule 144A.
(d) Transfer of a Beneficial Interest in a Global
Note for a Physical Note. Any Person having a beneficial interest in a Global
Note may upon request exchange
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such beneficial interest for a Physical Note. Upon receipt by the Registrar of
written instructions, or such other form of instructions as is customary for the
Depositary, from the Depositary or its nominee on behalf of any Person (subject
to the previous sentence) having a beneficial interest in a Global Note and upon
receipt by the Trustee of
(I) a written order or such other form of instructions as is
customary for the Depositary or the Person designated by the
Depositary as having such a beneficial interest containing
registration instructions, and
(II) in the case of any such transfer or exchange of a
beneficial interest in Notes bearing the Private Placement
legend, the offer and sale of which have not been registered
under the Securities Act, the documentation required by
Section 2.16(a)(II),
the Registrar will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Registrar, the aggregate
principal amount of the applicable Global Note 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 Note in the
appropriate principal amount. Notwithstanding the foregoing, interests in the
Temporary Reg. S Global Note shall not be exchangeable for Physical Notes until
after the later of the date of expiration of the Restricted Period and the date
on which the proper required certification relating to such interest has been
provided in accordance with the terms of the Indenture, to the effect that the
beneficial owner or owners of such interest are not U.S. persons (as such term
is used in Regulation S under the Securities Act).
Notes issued in exchange for a beneficial interest in
a Global Note pursuant to this Section 2.16(d) shall be registered in such names
and in such authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Registrar in writing. The Registrar shall deliver such Physical Notes to the
Persons in whose names such Physical Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global
Notes. Notwithstanding any other provisions of this Indenture, a Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Private Placement Legend. Upon the transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless, and the Trustee is hereby authorized to
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<PAGE> 49
deliver Notes 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 Note 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 Notes (or any predecessor thereto).
(g) General. By its acceptance of any Note bearing
the Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture and in the Private Placement Legend.
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 Note (including any transfers between or among
Participants or beneficial owners of interest in any Global Note) 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.
ARTICLE THREE
REDEMPTION
SECTION 3.01 Notices to Trustee. If the Company
elects to redeem Notes pursuant to Section 3.07, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Notes to be redeemed.
The Company shall give such notice to the Trustee at least 60 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.
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SECTION 3.02 Selection of Notes To Be Redeemed. If less than
all of the Notes are to be redeemed, the Trustee shall select the Notes to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed or, if such Notes
are not so listed, on a pro rata basis, by lot or in such other manner as the
Trustee shall deem fair and appropriate.
The Trustee may select for redemption portions of the
principal amount of Notes that have denominations equal to or larger than $1,000
principal amount. Notes 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 Notes called for redemption also apply to portions
of Notes 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 Notes are to be redeemed at
such Holder's registered address.
Each notice of redemption shall identify the Notes to be
redeemed (including the CUSIP number thereon) and shall state:
(1) the paragraph of the Notes pursuant to which the Notes are
being redeemed;
(2) the Redemption Date;
(3) the redemption price;
(4) the name and address of the Paying Agent to which the
Notes are to be surrendered for redemption;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that, unless the Company default in making the redemption
payment, interest on Notes 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; and
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be
issued.
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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, Notes called for redemption become due and payable on the
Redemption Date and at the redemption price. Upon surrender to the Paying Agent,
such Notes shall be paid at the redemption price, plus accrued interest thereon,
if any, to the Redemption Date, but interest installments whose maturity is on
or prior to such Redemption Date shall be payable to the Holders of record at
the close of business on the relevant Interest Record 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 Paying Agent, shall, on or before the Redemption Date,
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on
that date other than Notes or portions thereof called for redemption on that
date which have been delivered by the Company to the Trustee for cancellation.
If the Company complies with the provisions of the preceding paragraph,
and so long as the money deposited with the Paying Agent (or segregated by the
Company and held in trust) is permitted pursuant to the terms of this Indenture
to be paid to the Holders on the Redemption Date, on and after the Redemption
Date, interest shall cease to accrue on the Notes or the portions of Notes
called for redemption. If a Note is redeemed on or after an Interest Record Date
but prior to the related Interest Payment Date, then any unpaid interest accrued
through such Interest Payment Date shall be paid to the Person in whose name
such Note was registered at the close of business on such Interest Record Date.
Upon surrender of a Note for redemption in accordance with the notice given
pursuant to Section 3.03 hereof, such Note shall be purchased by the Company at
the redemption price, together with accrued and unpaid interest to the
redemption date.
If any Note surrendered for redemption in the manner provided in the
Notes 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, or because monies so deposited are prohibited by the terms of
this Indenture to be paid to the Holders, 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 Notes Redeemed in Part. Upon surrender of a Note that is
redeemed in part, the Company shall issue and the Trustee shall authenticate for
the Holder a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
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SECTION 3.07 Optional Redemption. (a) Except as provided in
Section 3.07(b), the Notes will not be redeemable at the option of the Company
prior to February 15, 2004. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at the following
redemption prices (expressed in percentages of principal amount), if redeemed
during the 12-month period commencing on February 15 of the years set forth
below, plus accrued and unpaid interest and Liquidated Damages, if any, to the
Redemption Date:
<TABLE>
<CAPTION>
Redemption
Period Price
<S> <C>
2004........................................................ 104.6250%
2005........................................................ 103.0833%
2006........................................................ 101.5417%
2007 and thereafter......................................... 100.0000%
</TABLE>
(b) At any time, or from time to time, on or prior to February 15,
2002, the Company may, at its option, redeem up to 35% of sum of (i) the initial
aggregate principal amount of Notes issued in the Offering and (ii) the
respective initial aggregate principal amount of Initial Notes originally issued
under this Indenture after the Issue Date pursuant to clause (i) of the first
sentence of the fourth paragraph of Section 2.02 of this Indenture with Net Cash
Proceeds of one or more Equity Offerings, at a redemption price equal to 109.25%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, if any, to the date of redemption; provided, however,
that at least 65% of the sum of (i) initial aggregate principal amount of Notes
issued in the Offering and (ii) the respective initial aggregate principal
amounts of Initial Notes issued under this Indenture after the Issue Date
pursuant to clause (i) of the first sentence of the fourth paragraph of Section
2.02 of this Indenture, remain outstanding immediately after each such
redemption. In order to effect the foregoing redemption with the proceeds of any
Equity Offering, the Company shall make such redemption not more than 120 days
after the consummation of any such Equity Offering.
ARTICLE FOUR
COVENANTS
SECTION 4.01 Payment of Notes. The Company shall pay the
principal of and interest and Liquidated Damages on the Notes in the manner
provided in the Notes and the Registration Rights Agreement. An installment of
principal or interest (including
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any Liquidated Damages) shall be considered paid on the date due if the Trustee
or Paying Agent (other than the Company, a Guarantor or any of their respective
Affiliates) 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 Notes 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 applicable Notes. The Company shall pay
cash interest on overdue installments of interest (including any Liquidated
Damages) at the same rate per annum borne by the applicable Notes, to the extent
lawful, as provided in Section 2.12.
SECTION 4.02 Maintenance of Office or Agency. The Company
shall maintain in the Borough of Manhattan, The City of New York, the office or
agency required under Section 2.03. The Company shall give prompt written notice
to the Trustee of the location, and any change in the location, of such office
or agency. 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 Section 13.02 The Company hereby initially
designates the Trustee at its address set forth in Section 13.02 as its office
or agency in the Borough of Manhattan, The City of New York, for such purposes.
SECTION 4.03 Limitation on Incurrence of Indebtedness. (a) The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, Incur any Indebtedness; provided, however, that the
Company may Incur Indebtedness (including, without limitation, Acquired
Indebtedness incurred by the Company), if in each case on the date of the
Incurrence of such Indebtedness and after giving effect thereto, the
Consolidated Fixed Charge Coverage Ratio is greater than 2.0 to 1.0.
(b) Notwithstanding the provisions of Section 4.03(a), this
covenant will not prohibit the Incurrence of any of the following items of
Indebtedness (collectively, "Permitted Indebtedness"):
(i) Indebtedness under the Notes issued in the Offering in an
aggregate principal amount of $160,000,000 and the related Subsidiary
Guarantees;
(ii) Indebtedness of the Company incurred pursuant to one or
more Credit Facilities in an aggregate principal amount at any time
outstanding not to exceed the sum of (A) $200,000,000 and (B) the
greater of (x) $50,000,000 and (y) 60% of inventory plus 85% of
accounts receivable (each as determined in accordance with GAAP, but
excluding accounts receivable that are past due by more than 60 days)
of the Company and its Restricted Subsidiaries determined on a
consolidated basis as of the end of the last fiscal quarter for which
financial statements have been prepared (with the amount of all
principal payments and commitment reductions under one or more Credit
Facilities made with the Net Cash Proceeds of one or more Asset Sales
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pursuant to Section 4.10 be applied, at the option of the Company, to
reduce the amounts specified in clause (A) and/or (B) (and in the case
of any application to reduce clause (B), the amount so applied shall
reduce both the amounts specified in subclauses (x) and (y) thereof) so
long as the aggregate amount so applied to the amounts of Indebtedness
permitted pursuant to preceding clauses (A) and (B) equals the amount
of the principal payments and commitment reductions so made to the
Credit Facilities (until such time as the aggregate amount of
Indebtedness permitted under this clause (ii) has been reduced to $0);
(iii) Indebtedness arising from any agreement entered
into by the Company or any of its Restricted Subsidiaries providing for
indemnification, purchase price adjustment or similar obligations
(other than Guarantees of Indebtedness incurred by any Person acquiring
all or any portion of the assets disposed of pursuant to the respective
Asset Sale), in each case incurred or assumed in connection with any
Asset Sale;
(iv) Indebtedness under Interest Rate Agreements of
the Company or any of its Restricted Subsidiaries; provided, however,
that such Interest Rate Agreements are entered 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 Indebtedness under
Interest Rate Agreements does not exceed the principal amount of the
Indebtedness to which such Interest Rate Agreements relate;
(v) Indebtedness under Currency Agreements designed
to protect the Company or its Restricted Subsidiaries against
fluctuations in foreign currency exchange rates and not for speculative
purposes;
(vi) Indebtedness of a Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of
the Company for so long as such Indebtedness is held by the Company, a
Wholly Owned Restricted Subsidiary of the Company or the lenders or
collateral agent under one or more Credit Facilities in each case
subject to no Lien held by a Person other than the Company, a Wholly
Owned Restricted Subsidiary of the Company or such lenders or
collateral agent; provided that if as of any date any Person other than
the Company, a Wholly Owned Restricted Subsidiary of the Company or the
lenders or collateral agent under one or more Credit Facilities 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 pursuant to this clause (vi);
(vii) Indebtedness of the Company to a Wholly Owned
Restricted Subsidiary of the Company for so long as such Indebtedness
is held by a Wholly
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Owned Restricted Subsidiary of the Company or the lenders or collateral
agent under the Credit Facilities, in each case subject to no Lien held
by a Person other than a Wholly Owned Restricted Subsidiary or such
other lenders or collateral agent; provided that (A) any Indebtedness
of the Company to any Wholly Owned Restricted Subsidiary of the Company
which is not a Guarantor is unsecured and subordinated (on
substantially the same terms as the Company's obligations under this
Indenture and the Notes are subordinated to the Senior Indebtedness),
pursuant to a written agreement, to the Company's obligations under
this Indenture and the Notes and (B) if as of any date any Person other
than a Wholly Owned Restricted Subsidiary of the Company or such
lenders or collateral agent 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 Permitted
Indebtedness by the Company pursuant to 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 ten
business days of incurrence;
(ix) Indebtedness of the Company or any of its
Restricted Subsidiaries represented by letters of credit for the
account of the Company or such Restricted Subsidiary, as the case may
be, issued in the ordinary course of business of the Company or such
Restricted Subsidiary, including, without limitation, in order to
provide security for workers' compensation claims or payment
obligations in connection with self-insurance or similar requirements
in the ordinary course of business and other Indebtedness with respect
to workers' compensation claims, self-insurance obligations,
performance, surety and similar bonds and completion guarantees
provided by the Company or any Restricted Subsidiary in the ordinary
course of business;
(x) Indebtedness (A) consisting of Capitalized Lease
Obligations and (B) consisting of Purchase Money Indebtedness of the
Company and its Restricted Subsidiaries or under purchase money
mortgages or secured by purchase money security interests, in the case
of (A) or (B) incurred for the purpose of leasing or financing or
refinancing all or any part of the purchase price or cost of
construction or improvement of any property (real or personal) or other
assets that are used or useful in the business of the Company or such
Restricted Subsidiary (whether through the direct purchase of assets or
the Capital Stock of any Person owning such assets and whether such
Indebtedness is owed to the seller or Person carrying out such
construction or improvement or to any third party), so long as (I) such
Indebtedness is not secured by any property or assets of the Company or
any Restricted Subsidiary other than the property or assets so leased,
acquired (directly or indirectly), constructed
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<PAGE> 56
or improved and (II) such Indebtedness is created within 90 days of the
acquisition or completion of construction or improvement of the related
property or asset; provided that the aggregate principal amount of
Indebtedness at any time outstanding pursuant to this clause (x), when
added to the aggregate principal amount of any Refinancing Indebtedness
incurred in respect of Indebtedness originally incurred pursuant to
this clause (x) or subsequent refinancings thereof, shall at no time
exceed the greater of (1) $25,000,000 and (2) 10% of Total Assets, at
the time of any incurrence thereof;
(xi) Refinancing Indebtedness;
(xii) Guarantees of Indebtedness otherwise permitted
under this Indenture, provided that the Guarantee of such Indebtedness
is permitted by and made in accordance with Section 4.08;
(xiii) Acquired Indebtedness of Restricted
Subsidiaries acquired by the Company after the Issue Date, or resulting
from the merger of one or more Persons into one or more Restricted
Subsidiaries of the Company after the Issue Date; provided that the
respective Acquired Indebtedness is not incurred in contemplation of
the respective acquisition or merger; and, provided further, that after
giving effect to any Indebtedness Incurred, acquired or assumed
pursuant to this clause (xiii), the Company would be permitted to incur
at least $1.00 of additional Indebtedness pursuant to Section 4.03(a);
(xiv) Obligations in respect of performance and
surety bonds and completion guarantees provided by the Company or any
Restricted Subsidiary in the ordinary course of business;
(xv) Indebtedness consisting of deferred payment
obligations under Section 2.7 of the Recapitalization Agreement; and
(xvi) additional Indebtedness of the Company and its
Restricted Subsidiaries in an aggregate principal amount not to exceed
$40,000,000 at any one time outstanding (which amount may, but need
not, be incurred in whole or in part under the New Credit Facility).
(c) Notwithstanding any other provision in this
Section 4.03, (i) all Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date shall be deemed Incurred on the Issue
Date (and shall only be permitted to be outstanding on such date if same would
be permitted to be Incurred on such date pursuant to the provisions of this
Section 4.03) and (ii) the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this Section 4.03 shall not be
deemed to be exceeded, with respect to any outstanding Indebtedness, due solely
to the result of fluctuations in the exchange rates of currencies. For the
purposes of determining compliance with this Section 4.03, (x)
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Indebtedness Incurred under the New Credit Facility on or prior to the Issue
Date shall be treated as Incurred pursuant to Section 4.03(b)(ii) and (y)
subject to the provisions of preceding clause (i), in the event that an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Indebtedness or is otherwise entitled to be incurred pursuant to this Section
4.03, the Company shall, in its sole discretion, classify (or reclassify) such
item of Indebtedness in any manner that complies with this Section 4.03 and such
items of Indebtedness will be treated as having been Incurred pursuant to only
one of such clauses or pursuant to the first paragraph hereof. Accrual of
interest or accretion of accreted value will not be deemed to be an Incurrence
of Indebtedness for purposes of this Section 4.03. Accruals of dividends or the
payment of dividends through the issuance of additional shares of the same class
of Capital Stock in accordance with the provisions thereof permitting such
pay-in-kind dividends will not be deemed an issuance of Capital Stock for
purposes of this Section 4.03.
SECTION 4.04 Prohibition on Incurrence of Senior Subordinated Debt.
Neither the Company nor the Guarantors will incur or suffer to exist
Indebtedness that is senior in right of payment to the Notes or the Subsidiary
Guarantees, as the case may be, and subordinate in right of payment to any other
Indebtedness of the Company or the Guarantors, as the case may be.
SECTION 4.05 Limitation on Liens. Neither the Company nor any Guarantor
shall Incur or suffer to exist any Indebtedness secured by a Lien ("Secured
Indebtedness") which is not Senior Indebtedness or Guarantor Senior
Indebtedness, as the case may be, unless contemporaneously therewith effective
provision is made to secure the Notes or the Subsidiary Guarantee, as the case
may be, equally and ratably with (or, if the Secured Indebtedness is
subordinated in right of payment to the Notes, or the Subsidiary Guarantee, as
the case may be, prior to) such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
SECTION 4.06 Limitation on Restricted Payments. (a) The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or make any distribution on or with respect to
its Capital Stock held by Persons other than the Company or any of its
Restricted Subsidiaries (other than (x) dividends or distributions payable
solely in shares of its Qualified Capital Stock or in options, warrants or other
rights to acquire shares of such Qualified Capital Stock (so long as, in the
case of any Restricted Subsidiary, the Qualified Capital Stock is issued in
accordance with the other relevant requirements of this Indenture) and (y) pro
rata dividends or distributions on Common Stock of Restricted Subsidiaries held
by minority stockholders), (ii) purchase, redeem, retire or otherwise acquire
for value any shares of Capital Stock of (x) the Company or an Unrestricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by any Person (other than the Company or a Wholly Owned
Restricted Subsidiary) or (y) a Restricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary) or
any holder (or any Affiliate of such holder) of 5% or more of
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the Capital Stock of the Company, (iii) make any voluntary or optional principal
payment, or voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company or any
Guarantor that is subordinated in right of payment to the Notes or a Subsidiary
Guarantee or (iv) make any Investment (including, without limitation, any
Investment deemed made upon (x) the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary or (y) any Restricted Subsidiary ceasing to constitute a
Restricted Subsidiary, in each case in accordance with the definition of
Investment contained herein), other than a Permitted Investment, in any Person
(such payments or any other actions described in clauses (i) through (iv) above
being collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing,
(B) the Company could not Incur at least $1.00 of Indebtedness
under Section 4.03(a), or
(C) the aggregate amount of all Restricted Payments (the
amount, if other than in cash, to be determined in good faith by the
Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) made after the Issue Date shall exceed
the sum of:
(1) 50% of the aggregate amount of the Adjusted Consolidated
Net Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss) (determined by excluding income
resulting from transfers of assets by the Company or a Restricted
Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis
during the period (taken as one accounting period) beginning on the
Issue Date and ending on the last day of the last fiscal quarter
preceding the date of the respective Restricted Payment for which
annual or quarterly financial statements, as the case may be, are
available; plus
(2) the aggregate Net Cash Proceeds received by the Company
after the Issue Date from the issuance and sale otherwise permitted
hereby of its Qualified Capital Stock to (or, without duplication, from
the receipt of capital contributions (so long as the equity in respect
of which the capital contributions are made constitutes Qualified
Capital Stock of the Company) from) a Person who is not a Subsidiary of
the Company, including an issuance or sale otherwise permitted hereby
of Indebtedness of the Company for cash subsequent to the Issue Date
upon the conversion of such Indebtedness into Qualified Capital Stock
of the Company and including any additional proceeds received by the
Company upon such conversion, or from the issuance to a Person who is
not a Subsidiary of the Company of any options, warrants or other
rights to acquire Qualified Capital Stock of the Company (in each case,
exclusive of any options, warrants or other rights that are redeemable
at the
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option of the holder, or are required to be redeemed, prior to the
Stated Maturity of the Notes); provided that there shall not be
included pursuant to this clause (2) any Net Cash Proceeds (x) of any
issuance of Designated Preferred Stock (or options, warrants or other
rights to acquire same), (y) which are, or will be, used to make
Permitted Investments pursuant to clause (xiii) of the definition of
Permitted Investment contained herein ; plus
(3) an amount equal to the net reduction in
Investments made after the Issue Date (other than reductions
in Permitted Investments) in any Person resulting from
payments of interest on Indebtedness, dividends, repayments of
loans or advances, or other transfers of assets, in each case
to the Company or any Restricted Subsidiary or from the Net
Cash Proceeds from the sale of any such Investment (except, in
each case, to the extent any such payment or proceeds are
included in the calculation of Adjusted Consolidated Net
Income), or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in
the definition of "Investments"), not to exceed, in each case,
the amount of Investments previously made by the Company or
any Restricted Subsidiary in such Person or Unrestricted
Subsidiary.
(b) The foregoing provisions shall not be violated by reason
of:
(i) the payment of any dividend within 60 days after the date
of declaration thereof if, at said date of declaration, such payment
would comply with Section 4.06(a);
(ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Notes including premium, if
any, and accrued and unpaid interest, with the proceeds of, or in
exchange for, subordinated Refinancing Indebtedness Incurred under
clause (xi) of Section 4.03(b);
(iii) the repurchase, redemption or other acquisition of
Capital Stock of the Company, an Unrestricted Subsidiary or a
Restricted Subsidiary (or options, warrants or other rights to acquire
such Capital Stock) in exchange for, or out of the proceeds of, a
substantially concurrent offering of, shares of Qualified Capital Stock
of the Company (or options, warrants or other rights to acquire such
Qualified Capital Stock);
(iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment
to the Notes in exchange for, or out of the proceeds of, a
substantially concurrent offering of, shares of the Qualified
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Capital Stock of the Company (or options, warrants or other rights to
acquire such Qualified Capital Stock);
(v) distributions made by the Company on the Issue
Date that are utilized solely to consummate the Recapitalization and
distributions made subsequent to the Issue Date in order to make
payments pursuant to the Recapitalization Agreement, as in effect on
the Issue Date and as amended from time to time so long as any such
amendment or modification is, in the good faith judgment of the Board
of Directors, not more disadvantageous to the Holders of Notes in any
material respect then the Recapitalization Agreement as in effect on
the Issue Date;
(vi) repurchases by the Company of Qualified Capital
Stock (or options therefor) of the Company from directors, officers or
employees of the Company or any of its Restricted Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of such officers or employees, in an aggregate amount not to
exceed, in any calendar year, $2,000,000; provided that unused amounts
in any calendar year (beginning with calendar year 1999) may be carried
forward and used to make repurchases as described above in this clause
(vi) in any succeeding calendar year; provided further that the
aggregate amount spent pursuant to this clause (vi) in any calendar
year (both pursuant to the immediately preceding proviso and the
portion of this clause (vi) which precedes said proviso) does not
exceed $4,000,000 in any calendar year;
(vii) the declaration and payment of regularly
accruing dividends to holders of any class or series of Disqualified
Capital Stock of the Company or its Restricted Subsidiaries or the
declaration and payment of regularly accruing dividends to holders of
Preferred Stock of Restricted Subsidiaries, in each case, issued after
the Issue Date in accordance with Section 4.03;
(viii) the declaration and payment of regularly
accruing dividends to holders of any class or series of Designated
Preferred Stock of the Company issued after the Issue Date; provided
that at the time of such issuance, and after giving effect to such
issuance on a pro forma basis (for purposes of making determinations on
a pro forma basis pursuant to this clause (viii), treating all
dividends which will accrue on such Designated Preferred Stock, as well
as all other Designated Preferred Stock then outstanding, as if same
will in fact be, or have in fact been, paid in cash), the Company would
have been able to incur at least $1.00 of additional Indebtedness
pursuant to Section 4.03(a); and
(ix) Restricted Payments in aggregate amount not to
exceed $15,000,000; provided that, except in the case of clauses (i),
(iii) and (v) of this Section 4.06(b), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the
actions or payments set forth therein.
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(c) Except as set forth in the next sentence, each Restricted
Payment and issuance of Capital Stock described in Section 4.06(b) shall be
included in calculating whether the conditions of clause (C) of Section 4.06(a)
have been met with respect to any subsequent Restricted Payments. The following
Restricted Payments described in the preceding paragraph shall not be included
in such calculation:
(i) Restricted Payments described in clauses (ii), (v), (viii)
and (ix) of Section 4.06(b) and
(ii) an exchange of Capital Stock for Capital Stock or
Indebtedness described in clause (iii) or (iv) of Section 4.06(b).
(d) In the event the proceeds of an issuance of Capital Stock
of the Company are used for the redemption, repurchase or other acquisition of
the Notes, or Indebtedness that is pari passu with the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of Section 4.06(a)
only to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of Indebtedness. For purposes of determining compliance with
this Section 4.06, in the event that a Restricted Payment meets the criteria of
more than one of the types of Restricted Payments described in the above
clauses, the Company, in its sole discretion, may order and classify, and from
time to time may reclassify, such Restricted Payment if it would have been
permitted at the time such Restricted Payment was made and at the time of such
reclassification.
SECTION 4.07 Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. (a) The Company will not, and
will not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions
permitted by applicable law on any Capital Stock of such Restricted
Subsidiary owned by the Company or any other Restricted Subsidiary;
(ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary;
(iii) make loans or advances to the Company or any
other Restricted Subsidiary; or
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(iv) transfer any of its property or assets to the
Company or any other Restricted Subsidiary.
(b) The provisions of Section 4.07(a) shall not
restrict any encumbrances or restrictions:
(i) existing on the Issue Date in the New Credit
Facility, this Indenture or any other agreements in effect on the Issue
Date, and any extensions, refinancings, renewals or replacements of
such agreements; provided that the encumbrances and restrictions in any
such extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the
property or assets of such Person acquired by the Company or any
Restricted Subsidiary, existing at the time of such acquisition and not
incurred in contemplation thereof, which encumbrances or restrictions
are not applicable to any Person or the property or assets of any
Person other than such Person or the property or assets of such Person
so acquired;
(iv) in the case of clause (iv) of Section 4.07(a),
(A) that restrict in a customary manner the subletting, assignment or
transfer of any property or asset that is a lease, license, conveyance
or contract or similar property or asset, (B) existing by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by this Indenture or (C) arising or
agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate,
detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any
Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and
imposed pursuant to an agreement that has been entered into for the
sale or disposition of all or substantially all of the Capital Stock
of, or property and assets of, such Restricted Subsidiary, pending such
sale or disposition;
(vi) existing under purchase money obligations for
property acquired in the ordinary course of business that impose
restrictions of the nature discussed in clause (iv) above on the
property so acquired;
(vii) existing under applicable law or any applicable
rule, regulation or order;
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(viii) contracts for the sale of assets, including, without
limitation, customary restrictions with respect to a Subsidiary
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets
of such Subsidiary;
(ix) existing under Secured Indebtedness otherwise permitted
to be incurred pursuant to Sections 4.03 and 4.05 that limit the right
of the debtor to dispose of the assets securing such Indebtedness;
(x) restrictions on cash or other deposits or net worth
imposed by customers under contracts (not evidencing or relating to
Indebtedness) entered into the ordinary course of business; and
(xi) existing under customary provisions in joint venture
agreements and other similar agreements (in each case relating solely
to the respective joint venture or similar entity or the equity
interests therein) entered into in the ordinary course of business.
(c) Nothing contained in this Section 4.07 shall prevent the
Company or any Restricted Subsidiary from (i) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted under Section 4.05 or (ii)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries.
SECTION 4.08 Limitation of Guarantees by Restricted
Subsidiaries. (a) The Company will not permit any of its Restricted Subsidiaries
directly or indirectly to Guarantee any Indebtedness of the Company or any other
Restricted Subsidiary (excluding any Guarantee of a Restricted Subsidiary which
constitutes Acquired Indebtedness of such Subsidiary, so long as such Guarantee
does not apply to Indebtedness pursuant to the New Credit Facility or any other
Indebtedness of the Company and its Restricted Subsidiaries not acquired
pursuant to the respective acquisition or merger) unless, in any such case, (i)
such Restricted Subsidiary becomes a Guarantor in accordance with the
requirements of Section 11.07 and (ii) if any such guarantee of such Restricted
Subsidiary is provided in respect of Indebtedness that is expressly subordinated
to the Notes, such guarantee or other instrument provided by such Restricted
Subsidiary in respect of such subordinated Indebtedness shall be subordinated to
the Subsidiary Guarantee pursuant to subordination provisions no less favorable
to the Holders of the Notes than those contained in this Indenture.
(b) Notwithstanding Section 4.08(a), any such Subsidiary
Guarantee by a Restricted Subsidiary shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon:
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(i) the release and discharge of the Guarantee which resulted
in the creation of such Subsidiary Guarantee (as well as the release or
discharge of any subsequently created Guarantees which would have
resulted in the creation of such Subsidiary Guarantee if same did not
already exist), in each case except a discharge or release by or as a
result of payment under such Guarantee;
(ii) any sale or other disposition (by merger or otherwise) to
any Person which is not a Restricted Subsidiary of the Company of all
of the Company's and its other Restricted Subsidiaries' Capital Stock
in such Restricted Subsidiary; provided that such sale or disposition
of such Capital Stock or assets is otherwise in compliance with the
terms of this Indenture;
(iii) the designation of such Subsidiary as an Unrestricted
Subsidiary in accordance with the provisions hereof; or
(iv) the sale or other disposition of shares of Capital Stock
of such Subsidiary to a Person other than the Company or a Restricted
Subsidiary such that such Subsidiary ceases to constitute a Subsidiary
of the Company, provided such disposition is otherwise in accordance
with the provisions of this Indenture.
SECTION 4.09 Limitation on Transactions with Shareholders and
Affiliates. (a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any holder
(or any Affiliate of such holder) of 5% or more of any class of Capital Stock of
the Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or, if such transaction is pursuant to a written agreement, at the time of the
execution of the agreement providing therefor, in a comparable arm's length
transaction with a Person that is not such a holder or an Affiliate.
(b) Section 4.09(a) does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the
disinterested members of the Board of Directors or (B) for which the
Company or a Restricted Subsidiary delivers to the Trustee a written
opinion of a nationally recognized accounting, valuation or investment
banking firm addressed to the Company and the Trustee, stating that the
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view;
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(ii) any transaction solely between the Company and
any of its Wholly Owned Restricted Subsidiaries or solely between
Wholly Owned Restricted Subsidiaries;
(iii) management and administrative services provided
by the Company or any Restricted Subsidiary to any Restricted
Subsidiary or any Person in which the Company or any Restricted
Subsidiary has an Investment;
(iv) the payment of reasonable and customary regular
fees to directors of the Company;
(v) any Restricted Payments not prohibited by Section
4.06;
(vi) issuances of Qualified Capital Stock of the
Company, to the extent otherwise permitted under this Indenture, to the
Principals and the Management Investor and its equity holders;
(vii) customary investment banking, underwriting,
placement agent or financial advisory fees paid in connection with
services rendered to the Company or its Subsidiaries;
(viii) management fees (A) paid to the Management
Investor in amounts not to exceed $400,000 in any calendar year and (B)
to JLL in amounts not to exceed $500,000 in any calendar year;
(ix) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, employee stock options and
employee stock ownership plans approved by the Board of Directors;
(x) loans or advances to employees in the ordinary
course of business of the Company or any of its Restricted Subsidiaries
consistent with past practices;
(xi) the existence of, or the performance by the
Company or any of its Restricted Subsidiaries of its obligations under
the terms of, any stockholders agreement (including any registration
rights agreement or purchase agreement related thereto) to which it is
a party as of the Issue Date and any similar agreements which it may
enter into thereafter, in each case subject to compliance with the
other provisions of this Indenture; provided, however, that the
existence, or the performance by the Company or any of its Restricted
Subsidiaries of obligations under any future amendment to any such
existing agreement or under any similar agreement entered into after
the Issue Date shall only be permitted by this clause (xi) to the
extent that the
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terms (taken as a whole) of any such amendment or new agreement are not
otherwise disadvantageous to the Holders in any material respect;
(xii)arrangements with Miller Milling relating to the
procurement of raw materials on behalf of the Company and its
Restricted Subsidiaries, so long as the respective arrangements are
pursuant to terms which have been approved by the majority of the
disinterested members of the Board of Directors;
(xiii)any Permitted Investment made pursuant to clause (xii)
of the definition thereof;
(xiv)the Miller Real Property Transactions;
(xv) the entering into of agreements with lenders to Miller
Milling, pursuant to which the Company and its Subsidiaries (A) consent
to such lenders' liens on Miller Milling's assets, and (B) agree to
subordinate any rights of first refusal they may have against such
assets; and
(xvi)payments made pursuant to the following conditions: if
the Company is to file consolidated federal income tax returns with New
World Pasta, LLC, or combined or unitary state income tax returns with
New World Pasta, LLC, the Company may enter into a tax sharing
agreement with New World Pasta, LLC and may pay to New World Pasta, LLC
amounts when due and payable pursuant to such tax sharing agreement in
respect of amounts of tax due with respect to such consolidated,
combined or unitary returns, as the case may be, in each case in an
amount not to exceed the amount of tax that the Company would have been
obligated to pay to the appropriate taxing authority if the Company and
its subsidiaries had filed a hypothetical separate consolidated,
combined or unitary return for the then current year and all prior
years ending after the Issue Date.
(c) Notwithstanding Sections 4.09(a) and 4.09(b), any
transaction or series of related transactions covered by Section 4.09(a) and not
covered by clauses (ii) through (xvi) of Section 4.09(b), (i) the aggregate
amount of which exceeds $5,000,000 in value, must be approved or determined to
be fair in the manner provided for in Section 4.09(b) (i) (A) or (B) and (ii)
the aggregate amount of which exceeds $10,000,000 in value, must be determined
to be fair in the manner provided for in Section 4.09(b) (i) (B) above.
SECTION 4.10 Limitation on Asset Sales. (a) The Company will
not, and will not permit any Restricted Subsidiary to, consummate any Asset
Sale, unless (i) the consideration received by the Company or such Restricted
Subsidiary is at least equal to the fair market value (as determined in good
faith by the Board of Directors) of the assets sold or disposed of, and (ii) at
least 75% of the consideration received consists of cash or Cash
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Equivalents; provided that for purposes of preceding clause (ii) each of the
following shall be deemed to constitute cash;
(A) the outstanding principal amount of Indebtedness
of the Company or any Restricted Subsidiary (other than (x) Capital
Stock which constitutes Indebtedness and (y) Indebtedness to the
Company or any Restricted Subsidiary) assumed by the transferee (which
shall not constitute the Company or a Restricted Subsidiary) pursuant
to the respective Asset Sale, so long as the Company or such Restricted
Subsidiary is irrevocably and unconditionally released from all
liability under such Indebtedness;
(B) any notes or other obligations received by the
Company or any Restricted Subsidiary from such transferee that are,
within 180 days after the date of the respective Asset Sale, converted
by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received in that conversion); and
(C) any Designated Noncash Consideration received by
the Company or any of its Restricted Subsidiaries in such Asset Sale
having an aggregate fair market value, taken together with all other
Designated Noncash Consideration received since the date of this
Indenture pursuant to this clause (C) that is at that time outstanding,
not to exceed the greater of (x) $30,000,000 and (y) 10% of Total
Assets at the time of the receipt of such Designated Noncash
Consideration (with the fair market value of each item of Designated
Noncash Consideration being measured at the time received and without
giving effect to any subsequent changes in value).
(b) Within 365 days after the receipt of any Net Cash
Proceeds from an Asset Sale, the Company shall or shall cause the
relevant Restricted Subsidiary to:
(i) (A) apply an amount equal to 100% of such Net Cash Proceeds to
permanently repay Senior Indebtedness of the Company, or Guarantor
Senior Indebtedness of any Restricted Subsidiary providing a Subsidiary
Guarantee or Indebtedness of any other Restricted Subsidiary, in each
case owing to a Person other than the Company or any of its Restricted
Subsidiaries; or
(B) invest an equal amount, or the amount not so
applied pursuant to Section 4.10(b)(i)(A) (or enter into a
definitive agreement committing to so invest within 365 days
after the date of such agreement), in property or assets
(other than current assets) of a nature or type or that are
used in a business (or in the Capital Stock of a company
(which company shall become a Restricted Subsidiary upon the
making of such investment) having property and assets of a
nature or type, or engaged in a business) similar or related
to the nature or type of the property and assets of, or the
business of, the Company and its Restricted Subsidiaries
existing on the date of such investment; and
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(ii) apply (no later than the end of the 365-day period
following the receipt of such Net Cash Proceeds) such excess Net Cash
Proceeds (to the extent not applied pursuant to Section 4.10(b)(i)) as
provided in this Section 4.10.
(c) The amount of such excess Net Cash Proceeds required to be
applied (or to be committed to be applied) during a 365-day period as set forth
in Section 4.10(b)(i) and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
(d) If, as of the first day of any calendar month, the
aggregate amount of Excess Proceeds not theretofore subject to an Offer to
Purchase pursuant to this Section 4.10 totals at least $10,000,000, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 100% of the principal amount of the Notes, plus, in
each case, accrued interest and Liquidated Damages, if any, to the Purchase
Offer Payment Date.
SECTION 4.11 Change of Control. The Company must commence,
within 30 days of the occurrence of a Change of Control, and consummate, an
Offer to Purchase for all Notes then outstanding, at a purchase price equal to
101% of the principal amount thereof, plus accrued interest and Liquidated
Damages, if any, to the Purchase Offer Payment Date.
SECTION 4.12 Compliance with Laws. The Company shall comply,
and shall cause each of its Restricted Subsidiaries to comply, with all
applicable statutes, rules, regulations, orders and restrictions of the United
States of America, all states and municipalities thereof, and of any
governmental department, commission, board, regulatory authority, bureau, agency
and instrumentality of the foregoing, in respect of the conduct of their
respective businesses and the ownership of their respective properties, except
for such noncompliances as are not in the aggregate reasonably likely to have a
material adverse effect on the financial condition or results of operations of
the Company and its Restricted Subsidiaries, taken as a whole.
SECTION 4.13 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, (1) all material taxes, assessments and governmental charges
levied or imposed upon the Company or any Restricted Subsidiary or upon the
income, profits or property of the Company or any Restricted Subsidiary and (2)
all lawful claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a material liability, or Lien upon the property, of
the Company or any Restricted Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
appropriate provision has been made.
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SECTION 4.14 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 any Default or Event of Default,
the Company shall promptly, and in no event later than 5 Business Days after the
occurrence thereof, deliver an Officers' Certificate to the Trustee specifying
the Default or Event of Default.
SECTION 4.15 Maintenance of Properties and Insurance. (a)
Subject to Article Five, the Company shall cause all material properties owned
by or leased to it or any Restricted Subsidiary and used or useful in the
conduct of its business or the business of any Restricted Subsidiary to be
maintained and kept in normal condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 4.15 shall prevent the Company
or any Restricted Subsidiary from discontinuing the use, operation or
maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal is, in the judgment of the Board of Directors of the
Company or the Restricted Subsidiary concerned, or of an Officer (or other agent
employed by the Company or of any Restricted Subsidiary) of the Company or such
Restricted Subsidiary having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any Restricted
Subsidiary as, in the judgment of the Company, may be necessary.
(b) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such risks
and in such amounts, and with such deductibles, retentions, self-insured amounts
and co-insurance provisions as, in the judgment of the Company, may be
necessary.
SECTION 4.16 Compliance Certificate. The Company shall deliver
to the Trustee within 45 days after the end of each of the first three fiscal
quarters of the Company and within 90 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 officers 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 quarter or fiscal year. If they do know
of such a Default or Event of Default, the certificate shall describe all such
Defaults or Events of Default, their status and
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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 4.16
shall be for the period commencing January 1, 1999 and ending March 31, 1999.
SECTION 4.17 Reports to Holders and Trustee. (a) Whether or
not required by the Commission, so long as any Notes are outstanding, the
Company will furnish to the Holders of Notes and the Trustee, within the time
periods specified in the Commission's rules and regulations:
(i) all quarterly and annual financial information that would
be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company were required to file such Forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report on the annual financial statements by the
Company's certified independent accountants; and
(ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file
such reports.
(b) If the Company has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual financial information
required by Section 4.17(a) shall include a reasonably detailed presentation,
either on the face of the financial statements or in the footnotes thereto, and
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company.
(c) Whether or not required by the Commission, the Company
will file a copy of all of the information and reports referred to in clauses
(i) and (ii) of Section 4.17(a) with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request.
Moreover, the Company and each Guarantor agrees that, for so long as any Notes
remain outstanding, it will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(d) Delivery of such reports, information and documents to the
Trustee is for informational purposes only, and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 4.18 Waiver of Stay, Extension or Usury Laws. Each of
the Company and the Guarantors covenants (to the extent that it may lawfully do
so) that it shall 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, which would prohibit or forgive the Company or
such Guarantor from paying all or any portion of the principal of and/or
interest and Liquidated Damages, if any, on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company and each Guarantor hereby expressly waive all
benefit or advantage of any such law, and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.19 Conduct of Business. The Company and its
Restricted Subsidiaries will not engage in any businesses which are not the
same, similar or reasonably related or complementary to the businesses in which
the Company and its Restricted Subsidiaries are engaged on the Issue Date (as
determined in good faith by the Board of Directors of the Company).
ARTICLE FIVE
MERGER, CONSOLIDATION AND SALE OF ASSETS
SECTION 5.01 Merger, Consolidation and Sale of Assets. (a) 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 of
the Company 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 (A) the Company shall be the surviving or
continuing corporation or (B) 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 Notes and
the performance of every covenant of the Notes, this Indenture and the
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Registration Rights Agreement 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)(B) 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(a);
(iii)immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(B) 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) Notwithstanding clauses (ii), (iii) and (iv) of Section
5.01(a), (i) any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its property and assets to the Company or any other
Restricted Subsidiary and (ii) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction.
(c) For purposes of Section 5.01(a), the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more 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.
(e) Each Guarantor (other than any Guarantor whose Subsidiary
Guarantee is to be released in accordance with the terms of such Subsidiary
Guarantee and this Indenture in connection with any transaction complying with
Section 4.10) 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:
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(i) the entity formed by or surviving any such consolidation
or merger (if other than the Guarantor) 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 (in form
and substance satisfactory to the Trustee) all of the obligations of
the Guarantor on the Subsidiary 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 Section 5.01(a)(ii).
(f) Notwithstanding Section 5.01(e)(iv), (i) any Guarantor may
consolidate with, merge into or transfer all or part of its property and assets
to the Company or any other Guarantor and (ii) any Guarantor formed solely for
the purpose of merging with and into any other Person, may merge with or into
such Person.
SECTION 5.02 Successor Substituted. Upon any consolidation,
combination or merger or any transfer of all or substantially all of the assets
of the Company in accordance with this Section 5.02, 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 for, and may exercise every right
and power of, the Company under this Indenture and the Notes with the same
effect as if such surviving entity had been named as such.
ARTICLE SIX
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. Each of the following is an
"Event of Default" for the purposes of this Indenture:
(1) default in the payment of principal of (or premium, if
any, on) any Note when the same becomes due and payable at maturity,
upon acceleration, redemption or otherwise (including the failure to
make a payment to purchase Notes tendered pursuant to an Offer to
Purchase), whether or not such payment is prohibited by the
subordination provisions of Article Nine;
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(2) default in the payment of interest on, or Liquidated
Damages with respect to, any Note when the same becomes due and
payable, and such default continues for a period of 30 days, whether or
not such payment is prohibited by the subordination provisions of
Article Nine;
(3) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in this Indenture or under
the Notes (other than a default specified in clause (1) or (2) above)
and such default or breach continues for a period of 30 consecutive
days after written notice by the Trustee or the Holders of 25% or more
in aggregate outstanding principal amount of the Notes;
(4) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Restricted Subsidiary having an
outstanding principal amount of $10,000,000 or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 10 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 10 days of such payment default;
(5) there shall be any period of 60 consecutive days following
entry of one or more final judgments or orders (not covered by
insurance) for the payment of money in excess of $10,000,000 in the
aggregate (treating any deductibles, self-insurance or retention as not
so covered) against the Company and/or one or more Significant
Restricted Subsidiaries, during which a stay of enforcement of such
final judgment or order, by reason of pending appeal or otherwise shall
not be in effect or such judgments or orders shall not be paid;
(6) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any
Significant Restricted Subsidiary in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or
any Significant Restricted Subsidiary or for all or substantially all
of the property and assets of the Company or any Significant Restricted
Subsidiary or (C) the winding up or liquidation of the affairs of the
Company or any Significant Restricted Subsidiary and, in each case,
such decree or order shall remain unstayed and in effect for a period
of 60 consecutive days;
(7) the Company or any Significant Restricted Subsidiary (A)
commences a voluntary case under any applicable bankruptcy, insolvency
or other
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similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Restricted Subsidiary or for
all or substantially all of the property and assets of the Company or
any Significant Restricted Subsidiary or (C) effects any general
assignment for the benefit of creditors; or
(8) any Subsidiary Guarantee of any Guarantor that is a
Significant Restricted Subsidiary ceases to be in full force and effect
or any such Subsidiary Guarantee is declared to be null, void or
unenforceable or any such Subsidiary Guarantee is found to be invalid
or any such Guarantor denies its liability under its Subsidiary
Guarantee (other than by reason of a release of a Guarantor in
accordance with the terms of Section 4.08(b)).
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
SECTION 6.02 Acceleration. If an Event of Default (other than
an Event of Default specified in clause (6) or (7) of Section 6.01 that occurs
with respect to the Company) shall occur and is continuing under this Indenture,
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the principal of, premium, if any, and accrued
interest on the Notes to be immediately due and payable ("Acceleration Notice").
Upon a declaration of acceleration, such principal of, premium, if any, and
accrued interest shall be immediately due and payable. If an Event of Default
specified in clause (6) or (7) of Section 6.01 shall occur with respect to the
Company, the principal of, premium, if any, and accrued interest on the Notes
then outstanding 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 Notes as described in the preceding paragraph, the Holders of a majority
in principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
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
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in Section 6.01(6), 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.
SECTION 6.03 Control by Majority. Subject to Section 2.09, the
Holders of at least a majority in aggregate principal amount of the outstanding
Notes 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
the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that may subject the Trustee to personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders of Notes not joining in the giving of such
direction and may take any other action it deems proper that is not inconsistent
with any such direction received from Holders of Notes.
SECTION 6.04 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 Notes or
to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes 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 6.05 Waiver of Past Default. Subject to Sections 2.09,
6.07 and 10.02, the Holders of not less than a majority in aggregate principal
amount of the outstanding Notes 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 the principal of or interest on any Notes. 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
Notes, respectively. This paragraph of this Section 6.05 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 Notes, 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 Notes, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
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SECTION 6.06 Limitation on Suits. A Holder may not pursue any
remedy with respect to this Indenture or the Notes 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 Notes make a written request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any costs,
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
aggregate principal amount of the outstanding Notes 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 and premium, if any or interest on a Note, on
or after the respective due dates expressed in the Note, 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 the Holder.
SECTION 6.08 Collection Suit by Trustee. If an Event of
Default in payment of principal or interest specified in Section 6.01(1) or (2)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other obligor on the
Notes 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 Notes and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and 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 counsel) and the Holders
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allowed in any judicial proceedings relative to the Company or any other obligor
upon the Notes, their respective creditors or their respective 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 Notes 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.
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 Notes for
principal (and premium, if any) and interest and Liquidated Damages, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal (and premium, if any) and interest and
Liquidated Damages, 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 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 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. This Section 6.11
shall not apply to a suit by the Trustee, a suit by a Holder or group of Holders
of more than 10% in aggregate principal amount of the outstanding Notes, or to
any suit instituted by any Holder for the enforcement or the payment of the
principal or interest on any Notes on or after the respective due dates
expressed in the Note.
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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 person would exercise or use under the circumstances
in the conduct of such person's own affairs.
(b) Except during the continuance of a Default:
(1) The Trustee shall not be liable except for the performance
of such duties as are specifically set forth herein and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions conforming to the requirements of this Indenture; however, 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 Section 6.03.
(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
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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.
SECTION 7.02 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may conclusively rely on any document believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel, which shall conform to the
provisions of Section 13.05. 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) The Trustee may consult with counsel of its selection and the
advice or opinion of such 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 counsel.
(f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by an Officers' Certificate 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 security or
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indemnity reasonably satisfactory to it 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 Notes and this
Indenture.
(j) The rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed by the Trustee
to act hereunder.
SECTION 7.03 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not Trustee, subject to Section 7.10 hereof. Any Agent may
do the same with like rights. However, the Trustee is subject to Sections 7.10
and 7.11.
SECTION 7.04 Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Notes, it shall not be accountable for the Company's use of the proceeds
from the Notes, and it shall not be responsible for any statement of the Company
in this Indenture or any document issued in connection with the sale of Notes or
any statement in the Notes 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 knows of such Defaults or Events of
Default, the Trustee shall mail to each Holder notice of the Default or Event of
Default within 90 days after the occurrence thereof. Except in the case of a
Default or an Event of Default in payment of principal of or interest on any
Note or a Default or Event of Default in complying with Section 6.01, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the interest
of Holders. This Section 7.05 shall be in lieu of the proviso to Section 315(b)
of the TIA and such proviso to Section 315(b) of the
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TIA is hereby expressly excluded from this Indenture and the Notes, as permitted
by the TIA.
SECTION 7.06 Reports by Trustee to Holders. Within 60 days after each
February 15 of each year beginning with 2000, the Trustee shall, to the extent
that any of the events described in TIA Section 313(a) occurred within the
previous twelve months, but not otherwise, mail to each Holder a brief report
dated as of such date that complies with TIA Section 313(a). The Trustee also
shall comply with TIA Sections 313(b), 313(c) and 313(d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each securities exchange, if
any, on which the Notes are listed.
The Company shall notify the Trustee if the Notes become listed on any
securities exchange or of any delisting thereof.
SECTION 7.07 Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation as the Company and the Trustee shall
from time to time agree in writing for its services. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including fees, disbursements and expenses
of its agents and counsel) incurred or made by it in addition to the
compensation for its services except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 7.01 hereof.
The Company shall indemnify the Trustee or any predecessor trustee
hereunder for, and hold it harmless against any and all loss, damage, claims,
liability or expense, including taxes (other than taxes based upon, measured by
or determined by the income of the Trustee), arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim (whether
asserted by the Company or any Holder or any other Person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent that such loss, damage, claim, liability or
expense is due to its own negligence or bad faith. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may seek
indemnity. However, the failure by the Trustee to so notify the Company shall
not relieve the Company of its obligations hereunder. The Company shall defend
the claim and the Trustee shall cooperate in the defense (and may employ its own
counsel) at the Company's expense; provided, however, that the Company's
reimbursement obligation with respect to counsel employed by the Trustee will be
limited to the reasonable fees and expenses of such counsel.
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The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify any loss or liability incurred by the Trustee
as a result of the Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes 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 Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or 6.01(7) occurs, the expenses (including
the reasonable fees and expenses of its agents and 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. The Company's obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Company's obligations pursuant to
Article Eight, the termination of this Indenture, and any rejection or
termination 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 Notes 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 a bankrupt or an insolvent 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 Notes may appoint a successor Trustee
to replace the successor Trustee appointed by the Company.
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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 10% in principal amount of the outstanding Notes 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 7.07, 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.
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.
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 $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 the Company shall
comply with the provisions of TIA Section 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 the Company 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 herein before specified in this Article Seven.
SECTION 7.11 Preferential Collection of Claims Against the Company. 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
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Section 311(a) to the extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01 Termination of the Company's Obligations. (a) The
Company may terminate its obligations under the Notes and this Indenture, except
those obligations referred to in this Section 8.01(a), if all Notes previously
authenticated and delivered (other than destroyed, lost or stolen Notes which
have been replaced or paid or Notes for whose payment U.S. Legal Tender or U.S.
Government Obligations, or a combination thereof, has theretofore been deposited
with the Trustee or the Paying Agent in trust or segregated and held in trust by
the Company and thereafter repaid to the Company, as provided in Section 8.05)
have been delivered to the Trustee for cancellation and the Company has paid all
sums payable by it hereunder, or if:
(i) either (A) pursuant to Article Three, the Company shall
have given notice to the Trustee and mailed a notice of redemption to
each Holder of the redemption of all of the Notes under arrangements
satisfactory to the Trustee for the giving of such notice or (B) all
Notes have otherwise become due and payable hereunder;
(ii) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee satisfactory to the Trustee,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the
benefit of the Holders for that purpose, U.S. Legal Tender or U.S.
Government Obligations, or a combination thereof, in such amount as is
sufficient without consideration of reinvestment of such interest, to
pay principal, premium (if any), interest and Liquidated Damages, if
any, on the outstanding Notes to maturity or redemption, as well as the
Trustee's fees and expenses; provided that the Trustee shall have been
irrevocably instructed to apply such U.S. Legal Tender to the payment
of said principal, premium interest and Liquidated Damages with respect
to the Notes; provided, further, that no deposits made pursuant to this
Section 8.01(a)(ii) shall cause the Trustee to have a conflicting
interest as defined in and for the purposes of the TIA; provided,
further, that from and after the time of deposit, the money deposited
shall not be subject to the rights of holders of Senior Indebtedness or
Guarantor Senior Indebtedness pursuant to the provisions of Article
Nine or Twelve and provided, further, that, as confirmed by an Opinion
of Counsel, no such deposit shall result in the Company, the Trustee or
the trust becoming or being deemed to be an "investment company" under
the Investment Company Act;
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(iii) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be continuing on the
date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other material instrument to which the Company is
a party or by which it is bound;
(iv) the Company shall have paid all other sums payable by it
hereunder; and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for or relating to the termination of
the Company's obligations under the Notes and this Indenture have been
complied with. Such Opinion of Counsel shall also state that such
satisfaction and discharge does not result in a default under any
agreement or instrument then known to such counsel that binds or
affects the Company.
(b) Notwithstanding Section 8.01(a), the Company's obligations
in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding pursuant to the last paragraph
of Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
(c) After such delivery or irrevocable deposit, the Trustee
upon request shall acknowledge in writing the discharge of the Company's
obligations under the Notes and this Indenture except for those surviving
obligations specified above.
SECTION 8.02 Legal Defeasance and Covenant Defeasance. (a) The
Company may, at its option by Board Resolution, at any time, elect to have
either paragraph (b) or (c) below be applied to all outstanding Notes upon
compliance with the conditions set forth in Section 8.03.
(b) The Company may, at its option and at any time, elect to
have its obligations and the obligations of the Guarantors (except as described
below) discharged with respect to the outstanding Notes, this Indenture and the
Subsidiary Guarantees ("Legal Defeasance"). If the Company exercises its Legal
Defeasance option, the Company and, if it so elects, each of the Guarantors,
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes and cured all then existing Defaults and Events of
Default, except for:
(i) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of (premium, if any, on) and
interest and Liquidated Damages, if any, on such Notes when such
payments are due;
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(ii) the Company's obligations with respect to such Notes
under Article Two and Section 4.02 hereof;
(iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's obligations in connection
therewith; and
(iv) this Article Eight.
Subject to compliance with this Article Nine, the Company may exercise its
option under this paragraph (b) notwithstanding the prior exercise of its option
under paragraph (c) hereof. Legal Defeasance shall become effective on the 91st
day following the deposit contemplated by Section 8.03(a).
(c) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (c), the Company (and the Guarantors, to
the extent applicable) shall, subject to the satisfaction of the conditions set
forth in Section 8.03 hereof, be released from its or their obligations under
the covenants set forth in Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 5.01(a)(ii) and 5.01(d)(iv) for all other purposes hereunder
(it being understood that such Notes shall not be deemed outstanding for
accounting purposes) and Holders of the Notes and any amounts deposited under
Section 8.03 hereof shall cease to be subject to any obligations to, or the
rights of, any holder of Senior Indebtedness or Guarantor Senior Indebtedness
under Article Nine or Twelve or otherwise ("Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event or Default under Section 6.01(3), and
Sections 6.01(4) and 6.01(5) shall not be deemed to be Events of Default;
provided, that except as specified above, the remainder of this Indenture and
such Notes shall be unaffected by a Covenant Defeasance.
SECTION 8.03 Conditions to Legal Defeasance or Covenant
Defeasance. The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders cash in U.S. Legal Tender, 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 and Liquidated Damages, if any, on the
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Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be;
(b) the Company shall have delivered to the Trustee (i) in the
case of a Legal Defeasance only, either (x) an Opinion of Counsel to
the effect that Holders will not recognize income, gain or loss for
federal income tax purposes as a result of the Company's exercise of
its option under Section 8.02(b) and will be subject to federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit, defeasance and discharge had
not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to
the same effect unless there has been a change in applicable federal
income tax law after the Issue Date such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from the
Internal Revenue Service to the same effect as the aforementioned
Opinion of Counsel and (ii) an Opinion of Counsel to the effect that
the creation of the defeasance trust does not violate the Investment
Company Act, and after the passage of 91 days following the deposit,
the trust fund will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law;
(c) 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;
(d) immediately after giving effect to such deposit on a pro
forma basis, no Event of Default, or event that after the giving of
notice or lapse of time or both would become an Event of Default, shall
have occurred and be continuing on the date of such deposit or during
the period ending on the 91st day after the date of such deposit, and
such deposit shall not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(e) the Company shall not be not prohibited from making
payments in respect of the Notes by the provisions of Article Nine
hereof;
(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;
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(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 have been complied with; and
(h) if at such time the Notes are listed on a national
securities exchange, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Notes will not be delisted as
a result of such deposit, defeasance and discharge.
SECTION 8.04 Application of Trust Money. The Trustee or Paying
Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations
deposited with it pursuant to this Article Eight, and shall apply the deposited
U.S. Legal Tender and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of and interest on the Notes.
The Trustee shall be under no obligation to invest said U.S. Legal Tender or
U.S. Government Obligations except as it may agree with the Company.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or
U.S. Government Obligations deposited pursuant to Section 8.03 hereof 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 the
outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the Company's request any U.S. Legal Tender or U.S. Government
Obligations held by it as provided in Section 8.03 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.05 Repayment to Company. Subject to this Article
Eight, the Trustee and the Paying Agent shall promptly pay to the Company upon
written request any excess U.S. Legal Tender or U.S. Government Obligations held
by them at any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall pay to the Company
upon written request any money held by them for the payment of principal or
interest that remains unclaimed for two years; provided that the Trustee or such
Paying Agent, 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 will be repaid to
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the Company. After payment to the Company, Holders entitled to such money must
look to the Company for payment as general creditors unless an applicable law
designates another Person.
SECTION 8.06 Reinstatement. If the Trustee or Paying Agent is
unable to apply any U.S. Legal Tender or U.S. Government Obligations in
accordance with this Article Eight 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 or if such U.S.
Legal Tender or U.S. Government Obligations are or become subject to turnover to
holders of Senior Indebtedness or Guarantor Senior Indebtedness pursuant to
Article Nine or Article Twelve, the Company's obligations under this Indenture
and the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Eight until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with Article Eight; provided that if the Company has made any payment
of interest on or principal of any Notes because of the reinstatement of their
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
SUBORDINATION OF NOTES
SECTION 9.01 Notes Subordinated to Senior Indebtedness. The
Company covenants and agrees, and the Trustee and each Holder of the Notes by
his acceptance thereof likewise covenant and agree, that all Notes shall be
issued subject to the provisions of this Article Nine; and each person holding
any Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that all payments on the Notes by the Company shall,
to the extent and in the manner set forth in this Article Nine, be subordinated
and junior in right of payment to the prior payment in full in cash or Cash
Equivalents of all amounts payable under Senior Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter incurred.
SECTION 9.02 No Payment on Notes in Certain Circumstances. If
any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by acceleration or otherwise, of any principal
of, interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Designated Senior Indebtedness, no
payment of any kind or character shall be made by or on behalf of the Company or
any other Person on its behalf with respect to any Obligations on the Notes or
to acquire any of the Notes for cash or property or otherwise; provided, that
Holders of the Notes may receive payments made from amounts (out of funds not
deposited with the Trustee or Paying Agent in violation of this Article Nine)
held by the Paying Agent as contemplated by the last paragraph of Section 2.08
(so long as, on the respective Redemption Date, Purchase
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Offer Payment Date or Final Maturity Date, the payments to be made with respect
to the Notes would not violate the provisions of this Article Nine or Article
Twelve) or payments from a trust described under Article Eight (so long as, on
the date or dates the respective amounts were paid into the trust, such payments
were made with respect to the Notes without violating the provisions of this
Article Nine or Article Twelve) (with the payments described in this proviso
being herein called "Permitted Payments").
In addition, if any other event of default occurs and is
continuing with respect to any Designated Senior Indebtedness, as such event of
default is defined in the instrument creating or evidencing such Designated
Senior Indebtedness, permitting the holders (without any notice or lapse of
time, except any required notice of acceleration) of such Designated Senior
Indebtedness then outstanding to accelerate the maturity thereof and if the
Representative for the respective issue of Designated Senior Indebtedness gives
written notice of the event of default to the Trustee (a "Payment Blockage
Notice"), then, unless and until all events of default specified in the Payment
Blockage Notice have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Designated
Senior Indebtedness terminating the Payment Blockage Period, during the 179 days
after the delivery of such Payment Blockage Notice (the "Payment Blockage
Period"), neither the Company nor any other Person on either of their behalf
shall (x) make any payment of any kind or character with respect to any
Obligations on the Notes or (y) acquire any of the Notes for cash or property or
otherwise (except that holders of the Notes may receive Permitted Payments).
Notwithstanding anything herein to the contrary, in no event
will a Payment Blockage Period extend beyond 179 days from the date the Payment
Blockage Notice is delivered and only one such Payment Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness shall be, or be made, the
basis for commencement of a second Payment Blockage Period by the Representative
of such Designated Senior Indebtedness whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action, or any breach of any financial covenants for a period
commencing after the date of commencement of such Payment Blockage Period that,
in either case, would give rise to an event of default pursuant to any
provisions under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose).
SECTION 9.03 Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
due or to
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become due upon all Senior Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Indebtedness whether or not such interest is an allowed claim in such
proceeding) shall first be paid in full in cash or Cash Equivalents, or such
payment duly provided for to the satisfaction of the holders of Senior
Indebtedness, before any payment or distribution of any kind or character is
made on account of any Obligations on the Notes, or for the acquisition of any
of the Notes for cash or property or otherwise (except that holders of the Notes
may receive Permitted Payments). Before any payment may be made by, or on behalf
of, the Company of the principal of, premium, if any, or interest on the Notes
upon any such dissolution or winding-up or total liquidation or reorganization,
any payment or distribution of assets or securities of the Company of any kind
or character, whether in cash, property or securities (excluding any Permitted
Payments), to which the Holders of the Notes or the Trustee on their behalf
would be entitled, but for the subordination provisions of this Indenture, shall
be made by the Company or by any receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, directly to
the holders of the Senior Indebtedness of the Company (pro rata to such holders
on the basis of the respective amounts of Senior Indebtedness held by such
holders) or their representatives or to the trustee or trustees or agent or
agents under any agreement or indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay all such Senior Indebtedness in full in cash or Cash
Equivalents after giving effect to any prior or concurrent payment, distribution
or provision therefor to or for the holders of such Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities (excluding any Permitted Payments), shall be received by the
Trustee or any Holder of Notes at a time when such payment or distribution is
prohibited by Section 9.03(a) and before all obligations in respect of Senior
Indebtedness of the Company are paid in full in cash or Cash Equivalents, such
payment or distribution shall be received and held in trust for the benefit of,
and shall be paid over or delivered to, the holders of Senior Indebtedness of
the Company (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their representatives, or to the
trustee or trustees or agent or agents under any indenture pursuant to which any
of such Senior Indebtedness may have been issued, as their respective interests
may appear, for application to the payment of such Senior Indebtedness remaining
unpaid until all such Senior Indebtedness has been paid in full in cash or Cash
Equivalents after giving effect to any prior or concurrent payment, distribution
or provision therefor to or for the holders of such Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of its property as an entirety,
or substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 9.03
if
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the Company shall comply with the conditions stated in Article Five.
SECTION 9.04 Subrogation. Upon the payment in full in cash or
Cash Equivalents of all Senior Indebtedness of the Company, or provision for
payment, the Holders of the Notes shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company made on such Senior Indebtedness
until the principal of and interest on the Notes shall be paid in full in cash
or Cash Equivalents; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of the Company of any
cash, property or securities to which the Holders of the Notes or the Trustee on
their behalf would be entitled except for the provisions of this Article Nine,
and no payment over pursuant to the provisions of this Article Nine to the
holders of Senior Indebtedness of the Company by Holders of the Notes or the
Trustee on their behalf shall, as between the Company, its creditors other than
holders of Senior Indebtedness of the Company, and the Holders of the Notes, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness of the Company. It is understood that the provisions of this
Article Nine are and are intended solely for the purpose of defining the
relative rights of the Holders of the Notes, on the one hand, and the holders of
the Senior Indebtedness of the Company, on the other hand.
If any payment or distribution to which the Holders of the
Notes would otherwise have been entitled but for the provisions of this Article
Nine shall have been applied, pursuant to the provisions of this Article Nine,
to the payment of all amounts payable under Senior Indebtedness, then and in
such case, the Holders of the Notes shall be entitled to receive from the
holders of such Senior Indebtedness any payments or distributions received by
such holders of Senior Indebtedness in excess of the amount required to make
payment in full in cash of such Senior Indebtedness.
SECTION 9.05 Obligations of the Company Unconditional. Nothing
contained in this Article Nine or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company and the Holders of the Notes,
the obligation of the Company, which is absolute and unconditional, to pay to
the Holders of the Notes the principal of and interest on the Notes as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Notes and
creditors of the Company other than the holders of the Senior Indebtedness of
the Company, nor shall anything herein or therein prevent the Holder of any Note
or the Trustee on their behalf from exercising all remedies otherwise permitted
by applicable law upon default under this Indenture, subject to the rights, if
any, under this Article Nine of the holders of the Senior Indebtedness of the
Company in respect of cash, property or securities of the Company received upon
the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article Nine shall restrict the right of the Trustee or the
Holders of Notes to take any action to declare the Notes to be due and payable
prior to their stated maturity pursuant to Section 6.02
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or to pursue any rights or remedies hereunder; provided, however, that all
Designated Senior Indebtedness of the Company then due and payable shall first
be paid in full in cash or Cash Equivalents before the Holders of the Notes or
the Trustee are entitled to receive any direct or indirect payment from the
Company of principal of or interest on the Notes.
SECTION 9.06 Notice to Trustee. The Company shall give prompt
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect of the Notes
pursuant to the provisions of this Article Nine. The Trustee shall not be
charged with knowledge of the existence of any event of default with respect to
any Senior Indebtedness of the Company or of any other facts which would
prohibit the making of any payment to or by the Trustee unless and until the
Trustee shall have received notice in writing at its Corporate Trust Office to
that effect signed by an Officer of the Company, or by a holder of Senior
Indebtedness or trustee or agent therefor; and prior to the receipt of any such
written notice, the Trustee shall, subject to Article Seven, be entitled to
assume that no such facts exist; provided, however, that if the Trustee shall
not have received the notice provided for in this Section 9.06 at least two
Business Days prior to the date upon which by the terms of this Indenture any
moneys shall become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Note), then, regardless of
anything herein to the contrary, the Trustee shall have full power and authority
to receive any moneys from the Company and to apply the same to the purpose for
which they were received, and shall not be affected by any notice to the
contrary which may be received by it on or after such prior date. Nothing
contained in this Section 9.06 shall limit the right of the holders of Senior
Indebtedness of the Company to recover payments as contemplated by Section 9.03.
The Trustee shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself or itself to be a holder of any Senior
Indebtedness of the Company (or a trustee on behalf of, or other representative
of, such holder) to establish that such notice has been given by a holder of
such Senior Indebtedness or a trustee or representative on behalf of any such
holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article Nine, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness of the Company held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Nine, and if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 9.07 Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets or securities
referred to in this Article Nine, the Trustee and the Holders of the Notes shall
be entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution,
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winding-up, liquidation or reorganization proceedings are pending, or upon a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the Holders of the Notes for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of the Senior Indebtedness of
the Company and other indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Nine.
SECTION 9.08 Trustee's Relation to Senior Indebtedness. The
Trustee and any Paying Agent shall be entitled to all the rights set forth in
this Article Nine with respect to any Senior Indebtedness of the Company which
may at any time be held by it in its individual or any other capacity to the
same extent as any other holder of Senior Indebtedness of the Company, and
nothing in this Indenture shall deprive the Trustee or any Paying Agent of any
of its rights as such holder.
With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article Nine,
and no implied covenants or obligations with respect to the holders of Senior
Indebtedness of the Company shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company (except as provided in Section
9.03(b)). The Trustee shall not be liable to any such holders if the Trustee
shall in good faith mistakenly pay over or distribute to Holders of Notes or to
the Company or to any other person cash, property or securities to which any
holders of Senior Indebtedness of the Company shall be entitled by virtue of
this Article Nine or otherwise.
SECTION 9.09 Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Indebtedness. No right of any
present or future holders of any Senior Indebtedness of the Company to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with. The
provisions of this Article Nine are intended to be for the benefit of, and shall
be enforceable directly by, the holders of Senior Indebtedness of the Company.
SECTION 9.10 Holders Authorize Trustee To Effectuate
Subordination of Notes. Each Holder of Notes by his acceptance of such Notes
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Nine, and appoints the Trustee his attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, total
liquidation or reorganization of the Company (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the
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benefit of creditors or otherwise) tending towards liquidation of the business
and assets of the Company, the filing of a claim for the unpaid balance of the
principal of and interest on its or his Notes in the form required in those
proceedings.
SECTION 9.11 This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest on the
Notes by reason of any provision of this Article Nine shall not be construed as
preventing the occurrence of an Event of Default pursuant to Section 6.01.
SECTION 9.12 Trustee's Compensation Not Prejudiced. Nothing in
this Article Nine shall apply to amounts due to the Trustee pursuant to other
sections in this Indenture.
SECTION 9.13 No Waiver of Subordination Provisions. Without in
any way limiting the generality of Section 9.09, the holders of Senior
Indebtedness of the Company may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article Nine or the obligations
hereunder of the Holders of the Notes to the holders of Senior Indebtedness of
the Company, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness or any instrument evidencing the same or any agreement under
which such Senior Indebtedness is outstanding or secured; (b) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Senior Indebtedness; (c) release any Person liable in any manner
for the collection of such Senior Indebtedness; and (d) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 9.14 Subordination Provisions Not Applicable to Money
Held in Trust for Holders. All money and U.S. Government Obligations deposited
in trust with the Trustee pursuant to and in accordance with Article Eight shall
be for the sole benefit of the Holders and shall not be subject to this Article
Nine.
SECTION 9.15 Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Holder by accepting a Note acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness. It is
further acknowledged and agreed that no amendment to the provisions of this
Article Nine or to the definition of any defined terms as they are used in this
Article Nine shall be effective with respect to any Senior Indebtedness
outstanding at the time of such amendment, unless the
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respective modification has been consented to by a majority of the then
outstanding amount of the respective issue of Senior Indebtedness.
SECTION 9.16 Reinstatement. Each Holder of a Note agrees that
these subordination provisions shall continue to be effective or be reinstated,
as the case may be, if at any time any payment (in whole or in part) of any of
the Senior Indebtedness is rescinded or must otherwise be restored by any holder
of Senior Indebtedness, upon the insolvency, bankruptcy or reorganization of the
Company or any obligor upon the Notes or otherwise, all as though such payment
had not been made.
SECTION 9.17 Filing of Claims. If any proceeding of the type
described in Section 9.03(a) is in existence with respect to the Company, and if
neither the Trustee nor the relevant Holders files a proper claim or proof of
debt in the form required in such proceeding prior to 30 days before the
expiration of the time to file such claim or claims, then any of the holders of
the Senior Indebtedness or their Representative is hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes. Nothing herein
contained shall be deemed to authorize the Trustee or the holders of Senior
Indebtedness or their Representative to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Indebtedness or
their Representative to vote in respect of the claim of any Holder in any such
proceeding.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01 Without Consent of Holders. The Company and each
Guarantor, when authorized by a resolution of their respective Boards of
Directors, and the Trustee may amend or supplement this Indenture or the Notes
without notice to or consent of any Holder:
(a) to evidence the succession of another Person to the
Company or any Guarantor and the assumption by any such successor of
the covenants of the Company or any Guarantor in this Indenture and in
the Notes;
(b) to add to the covenants of the Company or any Guarantor
for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or any Guarantor;
(c) to add additional Events of Default;
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(d) to provide for uncertificated Notes in addition to or in
place of the certificated Notes;
(e) to evidence and provide for the acceptance of appointment
under this Indenture by a successor Trustee;
(f) to secure the Notes or any Subsidiary Guarantee;
(g) to cure any ambiguity, to correct or supplement any
provision in this Indenture that may be defective or inconsistent with
any other provisions in this Indenture, or to make any other provisions
with respect to matters or questions arising under this Indenture,
provided that such actions taken pursuant to this clause (g) do not, in
the opinion of the Trustee, adversely affect the interests of the
Holders in any material respect;
(h) to comply with any requirements of the SEC in order to
effect and maintain the qualification of this Indenture under the TIA;
(i) to add any Subsidiary as a Guarantor in accordance with
the provisions of this Indenture; or
(j) to release any Guarantor from its Subsidiary Guarantee
(including in connection with a sale of all of the Capital Stock of
such Guarantor) pursuant to the requirements of Section 4.08(b);
provided, however, that the Company deliver to the Trustee an Opinion
of Counsel stating that such amendment or supplement complies with the
provisions of this Section 10.01.
In formulating its opinion on the matters in clause (g), the
Trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an Opinion of Counsel.
SECTION 10.02 With Consent of Holders. Subject to Section
6.07, the Company and each Guarantor, when authorized by a resolution of their
respective boards of directors, and the Trustee may amend or supplement this
Indenture or the Notes, or waive compliance with any provision hereof or
thereof, with the written consent of the Holders of at least a majority in
principal amount of the outstanding Notes (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes). However, without the consent of each Holder affected, an
amendment, supplement or waiver, including a waiver pursuant to Section 6.05,
may not:
(a) reduce the amount of Notes whose Holders must consent to
an amendment;
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(b) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted
interest, on any Notes;
(c) reduce the principal of or change or have the effect of
changing the fixed maturity of any Notes, or change the scheduled date
on which any Notes may be subject to redemption or repurchase, or
reduce the redemption or repurchase price therefor;
(d) make any Notes payable in money other than that stated in
the Notes;
(e) make any change in the express provisions of this
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 Notes to waive Defaults or Events of
Default;
(f) amend, change or modify in any material respect the
obligation of the Company to make and consummate an Offer to Purchase
in the event of a Change of Control or make and consummate an Offer to
Purchase with respect to any Asset Sale, or modify any of the
provisions or definitions with respect thereto;
(g) modify or change any provision of this Indenture or the
related definitions affecting the ranking or subordination of the
Notes; or
(h) release any Guarantor from any of its obligations under
its Subsidiary Guarantee or this Indenture otherwise than in accordance
with the terms of this Indenture.
It shall not be necessary for the consent of the Holders under
this Section 10.02 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
10.02 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 10.03 Compliance with Trust Indenture Act. Every
amendment to or supplement of this Indenture or the Notes shall comply with the
TIA as then in effect.
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SECTION 10.04 Revocation and Effect of Consents. Until an
amendment, supplement or waiver becomes effective, a consent to it by a Holder
is a continuing consent by the Holder and every subsequent Holder of that Note
or portion of that Note that evidences the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note. Subject to the
following paragraph, any such Holder or subsequent Holder may revoke the consent
as to such Holder's Note or portion of such Note by notice to the Trustee or the
Company received before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Notes have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders of Notes entitled to consent to
any amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders of Notes 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 Notes after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
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 (h) of Section 10.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note.
SECTION 10.05 Notation on or Exchange of Notes. If an
amendment, supplement or waiver changes the terms of a Note, the Trustee may
require the Holder of the Note to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Note 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 Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms. Failure to make the appropriate
notation or issue a new Note shall not affect the validity and effect of such
amendment, supplement or waiver.
SECTION 10.06 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 Ten is authorized or permitted by
this Indenture and that such amendment, supplement or waiver constitutes the
legal, valid and binding obligation of the Company and each Guarantor,
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
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indemnity reasonably satisfactory to it.
ARTICLE ELEVEN
SUBSIDIARY GUARANTEE
SECTION 11.01 Unconditional Guarantee. Each Guarantor hereby
unconditionally guarantees to each Holder of a Note authenticated by the Trustee
and to the Trustee and its successors and assigns that: the principal of,
premium (if any) and interest on, and Liquidated Damages and all other
obligations with respect to, the Notes and under this Indenture will be promptly
paid in full when due, subject to any applicable grace period, whether at
maturity, by acceleration or otherwise, and interest on the overdue principal
and interest on any overdue interest on the Notes and all other obligations of
the Company to the Holders or the Trustee hereunder or under the Notes will be
promptly paid in full or performed, all in accordance with the terms hereof and
thereof (with all of the foregoing being collectively called the "Guaranteed
Obligations"); subject, however, to the limitations set forth in Section 11.04.
Each Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes 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 such 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 this Guarantee will not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture. If any
Holder or the Trustee is required by any court or otherwise to return to the
Company or any Guarantor or any custodian, trustee, liquidator or other similar
official acting in relation to the Company or a Guarantor, any amount paid by
the Company or a 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 such 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 become due and payable by such Guarantor for the purpose of this
Guarantee.
SECTION 11.02 Severability. In case any provision of this
Article Eleven 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.
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SECTION 11.03 Contribution. At any time a payment in respect
of the Guaranteed Obligations is made under this Guarantor shall be determined
as provided in the immediately following sentence, with the right of
contribution of each Guarantor to be revised and restated as of each date on
which payment (a "Relevant Payment") is made on the Guaranteed Obligations under
this Guarantee. At any time that a Relevant Payment is made by a Guarantor that
results in the aggregate payments made by such Guarantor hereunder in respect of
the Guaranteed Obligations to and including the date of the Relevant Payment
exceeding such Guarantor's Contributing Percentage (as defined below) of the
aggregate payments made by all Guarantors hereunder in respect of the Guaranteed
Obligations to and including the date of the Relevant Payment (such excess, the
"Aggregate Excess Amount"), each such Guarantor shall have a right of
contribution against each other Guarantor who has made payments hereunder in
respect of the Guaranteed Obligations to and including the date of the Relevant
Payment in an aggregate amount less than such other Guarantor's Contribution
Percentage of the aggregate payments made to and including the date of the
Relevant Payment by all Guarantors hereunder in respect of the Guaranteed
Obligations (the aggregate amount of such deficit, the "Aggregate Deficit
Amount") in an amount equal to (x) a fraction the numerator of which is the
Aggregate Excess Amount of such Guarantor and the denominator of which is the
Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate
Deficit Amount of such other Guarantor. A Guarantor's right of contribution
pursuant to the preceding sentence shall arise at the time of each computation,
subject to adjustment to the time of any subsequent computation; provided, that
no Guarantor may take any action to enforce such right until the Guaranteed
Obligations have been paid in full, it being expressly recognized and agreed by
all parties hereto that any Guarantor's right of contribution arising pursuant
to this Guarantee against any other Guarantor shall be expressly junior and
subordinate to such other Guarantor's obligations and liabilities in respect of
the Guaranteed Obligations and any other obligations owing under this Guarantee.
As used in this Section 11.03: (i) each Guarantor's "Contribution Percentage"
shall mean the percentage obtained by dividing (x) the Adjusted Net Worth (as
defined below) of such Guarantor by (y) the aggregate Adjusted Net Worth of all
Guarantors; (ii) the "Adjusted Net Worth" of each Guarantor shall mean the
greater of (x) the Net Worth (as defined below) of such Guarantor and (y) zero;
and (iii) the "Net Worth" of each Guarantor shall mean the amount by which the
fair salable value of such Guarantor's assets on the date of any Relevant
Payment exceeds its existing debts and other liabilities (including contingent
liabilities, but without giving effect to any Guaranteed Obligations arising
under this Guarantee) on such date. All parties hereto recognize and agree that,
except for any right of contribution arising pursuant to this Section 11.03,
each Guarantor who makes any payment in respect of the Guaranteed Obligations
shall have no right of contribution or subrogation against any other Guarantor
in respect of such payment. Each of the Guarantors recognizes and acknowledges
that the rights to contribution arising hereunder shall constitute an asset in
favor of the party entitled to such contribution.
SECTION 11.04 Limitation of Guarantor's Liability. Each
Guarantor, and by its acceptance hereof each Holder and the Trustee, hereby
confirm that it is the intention of all such parties that this Guarantee does
not constitute a fraudulent transfer or conveyance
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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, each Holder and each Guarantor hereby irrevocably agree that the
obligations of a Guarantor under this 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 such Guarantor in respect of the obligations
of such Guarantor pursuant to Section 11.05, result in the obligations of such
Guarantor not constituting such a fraudulent transfer or conveyance.
SECTION 11.05 Execution of Subsidiary Guarantee. To further
evidence the Subsidiary Guarantees to the Holders, each Guarantor hereby agrees
to execute a Subsidiary Guarantee, substantially in the form of Exhibit C
hereto, to be endorsed on and made a part of each Note ordered to be
authenticated and delivered by the Trustee. Each Guarantor hereby agrees that
its Subsidiary Guarantee set forth in Section 11.01 shall remain in full force
and effect notwithstanding any failure to endorse on each Note a Subsidiary
Guarantee. Each such Subsidiary Guarantee shall be signed on behalf of each
Guarantor by its Chairman of the Board, its President or one of its Vice
Presidents, or, if the Guarantor is a limited liability company or limited
partnership, by any such Officer of the managing member of such limited
liability company or general partner of such limited partnership, as the case
may be, prior to the authentication of the Note on which it is endorsed, and the
delivery of such Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of such Subsidiary Guarantee on behalf
of such Guarantor. Such signature upon the Subsidiary Guarantee may be a 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
Subsidiary Guarantee shall cease to be such officer before the Note on which
such Subsidiary Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Company, such Note nevertheless
may be authenticated and delivered or disposed of as though the Person who
signed the Subsidiary Guarantee had not ceased to be such officer of such
Guarantor.
SECTION 11.06 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
the Subsidiary Guarantee or this Indenture, including, without limitation, any
right of subrogation, shall be subject and subordinate to, and no payment with
respect to any such claim of such Guarantor shall be made before, the payment in
full in cash of all outstanding Notes in accordance with the provisions provided
therefor in this Indenture.
SECTION 11.07 Additional Guarantors; Releases of Guarantors.
(a) Any Person that was not a Guarantor on the date of this Indenture may become
a Guarantor by executing and delivering to the Trustee (a) a supplemental
indenture in form and substance satisfactory to the Trustee, which subjects such
Person to the provisions of this Indenture as a
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Guarantor and (b) an Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such Person and constitutes
the legal, valid, binding and enforceable obligation of such Person (subject to
such customary exceptions concerning creditors' rights and equitable principles
as may be acceptable to the Trustee in its discretion). The Subsidiary Guarantee
of each Person described in this Section 11.07 shall apply to all Notes
theretofore executed and delivered, notwithstanding any failure of such Notes to
contain a notation of such Subsidiary Guarantee thereon.
(b) The Subsidiary Guarantee furnished by a Guarantor shall be
automatically and unconditionally released and discharged (at which time the
respective such Person shall cease to be a Guarantor), without any further
action required on the part of the Trustee or any Holder, upon the occurrence of
the circumstances with respect to the respective Guarantor as expressly provided
in clause (i) through (iv) of Section 4.08(b).
SECTION 11.08 Successors and Assigns. This Article Eleven
shall be binding upon each Guarantor and its successors and assigns and shall
inure to the benefit of the successors and assigns of the Trustee and the
Noteholders and, in the event of any transfer or assignment of rights by any
Noteholder or the Trustee, the rights and privileges conferred upon that party
in this Indenture and in the Notes shall automatically extend to and be vested
in such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 11.09 Waiver of Stay, Extension or Usury Laws. Each
Guarantor 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 each such Guarantor from performing its
Subsidiary Guarantee as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) each such
Guarantor 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.
ARTICLE TWELVE
SUBORDINATION OF SUBSIDIARY GUARANTEE
SECTION 12.01 Subsidiary Guarantee Obligations Subordinated to
Senior Indebtedness. Each Guarantor covenants and agree, and the Trustee and
each Holder of the Notes by its acceptance thereof likewise covenant and agrees,
that each Subsidiary Guarantee shall be issued subject to the provisions of this
Article Twelve; and each person holding any Note, whether upon original issue or
upon transfer, assignment or exchange thereof, accepts and agrees that all
payments on the Notes pursuant to the Subsidiary Guarantee made by or on behalf
of each Guarantor shall, to the extent and in the manner set forth in this
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Article Twelve, be subordinated and junior in right of payment to the prior
payment in full in cash or Cash Equivalents of all amounts payable under
Guarantor Senior Indebtedness of such Guarantor, whether outstanding on the
Issue Date or thereafter incurred.
SECTION 12.02 Payment Over of Proceeds Upon Dissolution, etc.;
No Payment in Certain Circumstances. (a) Upon any payment or distribution of
assets of any Guarantor of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshaling of assets
of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership
or other similar proceeding relating to such Guarantor or its property, whether
voluntary or involuntary, all Obligations due or to become due upon all
Guarantor Senior Indebtedness (including interest after the commencement of any
such proceeding at the rate specified in the applicable Guarantor Senior
Indebtedness whether or not such interest is an allowed claim in such
proceeding) of such Guarantor shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of such Guarantor Senior Indebtedness, before any payment or
distribution of any kind or character is made by or on behalf of such Guarantor
on account of any of its Obligations on the Subsidiary Guarantee or for the
acquisition of any of the Notes for cash or property or otherwise (except that
holders of the Notes may receive Permitted Payments). Before any payment may be
made by, or on behalf of, a Guarantor of the principal of, premium, if any, or
interest on the Notes upon any such dissolution or winding-up or total
liquidation or reorganization, any payment or distribution of assets or
securities of such Guarantor of any kind or character, whether in cash, property
or securities (excluding any Permitted Payments), to which the Holders of the
Notes or the Trustee on their behalf would be entitled, but for the
subordination provisions of this Indenture, shall be made by such Guarantor or
by any receiver, trustee in bankruptcy, liquidation trustee, agent or other
Person making such payment or distribution, directly to the holders of the
Guarantor Senior Indebtedness of the respective Guarantor (pro rata to such
holders on the basis of the respective amounts of such Guarantor Senior
Indebtedness held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
any of such Guarantor Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay all such
Guarantor Senior Indebtedness of the respective Guarantor in full in cash or
Cash Equivalents after giving effect to any prior or concurrent payment,
distribution or provision therefor to or for the holders of such Guarantor
Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Guarantor of any kind or character, whether in cash,
property or securities (excluding any Permitted Payments), shall be received by
the Trustee or any Holder of Notes at a time when such payment or distribution
is prohibited by Section 12.02(a) and before all obligations in respect of the
Guarantor Senior Indebtedness of the respective Guarantor are paid in full in
cash or Cash Equivalents, such payment or distribution shall be received and
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of such Guarantor Senior
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Indebtedness (pro rata to such holders on the basis of the respective amounts of
such Guarantor Senior Indebtedness held by such holders) or their respective
representatives, or to the trustee or trustees or agent or agents under any
indenture pursuant to which any of such Guarantor Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of such Guarantor Senior Indebtedness remaining unpaid until all such
Guarantor Senior Indebtedness has been paid in full in cash or Cash Equivalents
after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Guarantor Senior Indebtedness.
The consolidation of the Guarantor with, or the merger of the
Guarantor with or into, another corporation or the liquidation or dissolution of
the Guarantor following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 12.02
if such Guarantor complies with the conditions stated in Article Five.
If any default occurs and is continuing in the payment when
due, whether at maturity, upon any redemption, by acceleration or otherwise, of
any principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Designated Guarantor
Senior Indebtedness, no payment of any kind or character shall be made by or on
behalf of the Guarantor or any other Person on its behalf with respect to any
Obligations on the Subsidiary Guarantee or to acquire any of the Notes for cash
or property or otherwise (except that holders of the Notes may receive Permitted
Payments).
In addition, during any Payment Blockage Period, no Guarantor,
and no other Person on any Guarantor's behalf, shall (x) make any payment of any
kind or character with respect to any Guaranteed Obligations or (y) acquire any
of the Notes for cash or property or otherwise (except that holders of the Notes
may receive Permitted Payments).
SECTION 12.03 Subrogation. Upon the payment in full in cash or
Cash Equivalents of all Guarantor Senior Indebtedness of a Guarantor, or
provision for payment, the Holders of the Notes shall be subrogated to the
rights of the holders of such Guarantor Senior Indebtedness to receive payments
or distributions of cash, property or securities of such Guarantor made on such
Guarantor Senior Indebtedness until the principal of and interest on the Notes
shall be paid in full in cash or Cash Equivalents; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Guarantor
Senior Indebtedness of any cash, property or securities to which the Holders of
the Notes or the Trustee on their behalf would be entitled except for the
provisions of this Article Twelve, and no payment over pursuant to the
provisions of this Article Twelve to the holders of such Guarantor Senior
Indebtedness by Holders of the Notes or the Trustee on their behalf shall, as
between such Guarantor, its creditors other than holders of such Guarantor
Senior Indebtedness, and the Holders of the Notes, be deemed to be a payment by
such Guarantor to or on account of such Guarantor Senior Indebtedness. It is
understood that the provisions of this Article
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Twelve are and are intended solely for the purpose of defining the relative
rights of the Holders of the Notes, on the one hand, and the holders of
Guarantor Senior Indebtedness of any such Guarantor on the other hand.
If any payment or distribution to which the Holders of the
Notes would otherwise have been entitled but for the provisions of this Article
Twelve shall have been applied, pursuant to the provisions of this Article
Twelve, to the payment of all amounts payable under Guarantor Senior
Indebtedness of any Guarantor, then and in such case, the Holders of the Notes
shall be entitled to receive from the holders of such Guarantor Senior
Indebtedness any payments or distributions received by such holders of such
Guarantor Senior Indebtedness in excess of the amount required to make payment
in full in cash of such Guarantor Senior Indebtedness.
SECTION 12.04 Obligations of Guarantors Unconditional. Nothing
contained in this Article Twelve or elsewhere in this Indenture or in the Notes
is intended to or shall impair, as among any Guarantor and the Holders of the
Notes, the obligation of such Guarantor, which is absolute and unconditional, to
pay to the Holders of the Notes the principal of and interest on the Notes as
and when the same shall become due and payable in accordance with the terms of
the Subsidiary Guarantee, or is intended to or shall affect the relative rights
of such Guarantor of the Notes and creditors of any Guarantor other than the
holders of Guarantor Senior Indebtedness of such Guarantor, as the case may be,
nor shall anything herein or therein prevent the Holder of any Note or the
Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Twelve of the holders of Guarantor Senior Indebtedness in
respect of cash, property or securities of such Guarantor received upon the
exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article Twelve shall restrict the right of the Trustee or the
Holders of Notes to take any action to declare the Notes to be due and payable
prior to their stated maturity pursuant to Section 6.02 or to pursue any rights
or remedies hereunder; provided, however, that all Designated Guarantor Senior
Indebtedness of each Guarantor then due and payable shall first be paid in full
in cash or Cash Equivalents before the Holders of the Notes or the Trustee are
entitled to receive any direct or indirect payment from such Guarantor of
principal of or interest on the Notes pursuant to the Subsidiary Guarantee.
SECTION 12.05 Notice to Trustee. The Company shall give prompt
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect of the Notes
pursuant to the provisions of this Article Twelve. The Trustee shall not be
charged with knowledge of the existence of any event of default with respect to
any Guarantor Senior Indebtedness of a Guarantor or of any other facts which
would prohibit the making of any payment to or by the Trustee unless and until
the Trustee shall have received notice in writing at its Corporate Trust Office
to that effect
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signed by an Officer of the Company, or by a holder of Guarantor Senior
Indebtedness of a Guarantor or trustee or agent therefor; and prior to the
receipt of any such written notice, the Trustee shall, subject to Article Seven,
be entitled to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 12.05 at
least two Business Days prior to the date upon which by the moneys shall become
payable for any purpose (including, without limitation, the payment of the
principal of or interest on any Note), then, regardless of anything herein to
the respective contrary, the Trustee shall have full power and authority to
receive any moneys from the Guarantor and to apply the same to the purpose for
which they were received, and shall not be affected by any notice to the
contrary which may be received by it on or after such prior date. Nothing
contained in this Section 12.05 shall limit the right of the holders of Senior
Indebtedness of the Company to recover payments as contemplated by Section
12.02. Nothing contained in this Section 12.05 shall limit the right of the
holders of Guarantor Senior Indebtedness of a Guarantor to recover payments as
contemplated by Section 12.03. The Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a holder of any Guarantor Senior Indebtedness of a Guarantor (or a trustee on
behalf of, or other representative of, such holder) to establish that such
notice has been given by a holder of such Guarantor Senior Indebtedness or a
trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Indebtedness of a Guarantor to participate in any payment or
distribution pursuant to this Article Twelve, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Guarantor Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article
Twelve, and if such evidence is not furnished, the Trustee may defer any payment
to such Person pending judicial determination as to the right of such Person to
receive such payment.
SECTION 12.06 Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article Twelve, the Trustee and the Holders of the
Notes shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation
or reorganization proceedings are pending, or upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Notes for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of Guarantor Senior Indebtedness of such
Guarantor and other indebtedness of such Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Twelve.
SECTION 12.07 Trustee's Relation to Guarantor Senior
Indebtedness of a Guarantor. The Trustee and any Paying Agent shall be entitled
to all the rights set forth
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in this Article Twelve with respect to any Guarantor Senior Indebtedness of a
Guarantor which may at any time be held by them in their individual or any other
capacity to the same extent as any other holder of Guarantor Senior Indebtedness
of such Guarantor, and nothing in this Indenture shall deprive the Trustee or
any Paying Agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness
of any Guarantor, the Trustee undertakes to perform or to observe only such of
its covenants and obligations as are specifically set forth in this Article
Twelve, and no implied covenants or obligations with respect to the holders of
such Guarantor Senior Indebtedness shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Indebtedness of any Guarantor (except as provided in
Section 12.02(b)). The Trustee shall not be liable to any such holders if the
Trustee shall in good faith mistakenly pay over or distribute to Holders of
Notes or to the Company or to any other person cash, property or securities to
which any holders of Guarantor Senior Indebtedness of a Guarantor shall be
entitled by virtue of this Article Twelve or otherwise.
SECTION 12.08 Subordination Rights Not Impaired by Acts or
Omissions of Holders of Guarantor Senior Indebtedness. No right of any present
or future holders of any Guarantor Senior Indebtedness of a Guarantor to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of such Guarantor or by any
act or failure to act, in good faith, by any such holder, or by any
noncompliance by such Guarantor with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with. The provisions of this Article Twelve are intended to be for the benefit
of, and shall be enforceable directly by, the holders of Guarantor Senior
Indebtedness of any Guarantor.
SECTION 12.09 Holders Authorize Trustee to Effectuate
Subordination of Subsidiary Guarantee. Each Holder of Notes by his acceptance of
such Notes authorizes and expressly directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article Twelve, and appoints the Trustee his attorney-in-fact
for such purposes, including, in the event of any dissolution, winding-up, total
liquidation or reorganization of any Guarantor (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of any Guarantor, the filing of a claim
for the unpaid balance of the principal of and interest in its or his Notes in
the form required in those proceedings.
SECTION 12.10 This Article Not to Prevent Events of Default.
The failure to make a payment on account of principal of or interest on the
Notes by reason of any provision of this Article Twelve shall not be construed
as preventing the occurrence of an Event of Default.
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SECTION 12.11 Trustee's Compensation Not Prejudiced. Nothing
in this Article Twelve shall apply to amounts due to the Trustee pursuant to
other sections in this Indenture.
SECTION 12.12 No Waiver of Subsidiary Guarantee Subordination
Provisions. Without in any way limiting the generality of Section 12.08, the
holders of Guarantor Senior Indebtedness of any Guarantor, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders of
the Notes, without incurring responsibility to the Holders of the Notes and
without impairing or releasing the subordination provided in this Article Twelve
or the obligations hereunder of the Holders of the Notes to the holders of such
Guarantor Senior Indebtedness, do any one or more of the following: (a) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, such Guarantor Senior Indebtedness or any instrument evidencing the
same or any agreement under which such Guarantor Senior Indebtedness is
outstanding or secured, (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing such Guarantor Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
such Guarantor Senior Indebtedness; and (d) exercise or refrain from exercising
any rights against the Guarantor and any other Person.
SECTION 12.13 Reliance by Holders of Guarantor Senior
Indebtedness on Subordination Provisions. Each Holder by accepting a Note
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any
Guarantor Senior Indebtedness, whether such Guarantor Senior Indebtedness was
created or acquired before or after the issuance of the Notes, to acquire and
continue to hold, or to continue to hold, such Guarantor Senior Indebtedness and
such holder of Guarantor Senior Indebtedness shall be deemed conclusively to
have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Guarantor Senior Indebtedness. It is
further acknowledged and agreed that no amendment to the provisions of this
Article Thirteen shall be effective with respect to any Guarantor Senior
Indebtedness outstanding at the time of such amendment unless the respective
modification has been consented to by a majority of the then outstanding amount
of the respective issue of Guarantor Senior Indebtedness.
SECTION 12.14 Reinstatement. Each Holder of a Note agrees that
these subordination provisions shall continue to be effective or be reinstated,
as the case may be, if at any time any payment (in whole or in part) of any of
the Guarantor Senior Indebtedness is rescinded or must otherwise be restored by
any holder of Guarantor Senior Indebtedness, upon the insolvency, bankruptcy or
reorganization of the respective Guarantor or any obligor upon the Notes or
otherwise, all as though such payment had not been made.
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ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01 Trust Indenture Act Controls. This Indenture is
subject to the provisions of the TIA that are required to be a part of any
indenture subject to the TIA. 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 13.02 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:
New World Pasta Company
c/o Hershey Foods Corporation
Corporate Headquarters
100 Crystal A Drive
Hershey, PA 17033-0810
Attention: James Bohenick
Facsimile: (717) 534-7643
Telephone: (717) 534-6711
with copies to:
Joseph Littlejohn & Levy
450 Lexington Avenue, Suite 350
New York, New York 10017
Attention: David Ying
Facsimile: (212) 286-8626
Telephone: (212) 286-8600
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if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Telephone: (212) 815-5359
Each party by notice to the others 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 such Holder at the address as set forth on the list
maintained pursuant to Section 2.05 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 duty
given, whether or not the addressee receives it.
SECTION 13.03 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 Notes. The Company, the
Trustee, the Registrar and any other person shall have the protection of TIA
Section 312(c).
SECTION 13.04 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 after the date hereof,
the Company shall furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance
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
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(2) an Opinion of Counsel in form and substance satisfactory
to the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 13.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has 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 13.06 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 13.07 GOVERNING LAW. THIS INDENTURE AND THE 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.
SECTION 13.08 No Recourse Against Others. No director,
officer, employee, stockholder or member of the Company, as such, shall have any
liability for any obligations of the Company under the Notes or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
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SECTION 13.09 Successors. All agreements of a party to this
Indenture contained in this Indenture shall bind such party's successors.
SECTION 13.10 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 13.11 Severability. In case any provision in this
Indenture or in the Notes 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 13.12 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.13 Legal Holidays. If a payment date is a not a
Business Day at a place of payment, payment may be made at that place on the
next succeeding Business Day, and no interest shall accrue for the intervening
period.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties have caused this
Indenture to be duly executed as of the date first written above.
NEW WORLD PASTA COMPANY
By /s/ James A. Bohenick
Title: Vice President of Finance &
Chief Financial Officer
THE BANK OF NEW YORK, as Trustee
By /s/ Mary Jane Schmalzel
Title: Vice President
GUARANTORS:
PASTA GROUP, L.L.C.
By /s/ James A. Bohenick
Title: Vice President of Finance &
Chief Financial Officer
WINCHESTER PASTA, L.L.C.
By /s/ James A. Bohenick
Title: Vice President of Finance &
Chief Financial Officer
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EXHIBIT A
TO INDENTURE
[FORM OF FACE OF NOTE]
[UNLESS THIS NOTE IS AN EXCHANGE NOTE OR IS OTHERWISE PERMITTED BY
THE INDENTURE NOT TO BEAR THE PRIVATE PLACEMENT LEGEND, INSERT THE
PRIVATE PLACEMENT LEGEND.]
[IF THIS NOTE IS THE TEMPORARY REG. S. GLOBAL NOTE, INSERT THE REG. S
LEGEND.]
[IF THIS NOTE IS A GLOBAL NOTE, INSERT THE LEGEND SET FORTH IN EXHIBIT
B TO THE INDENTURE.]
<PAGE> 117
TO INDENTURE
PAGE 2
$______________________ No._________
_____________Cusip No._________
NEW WORLD PASTA COMPANY
9 1/4% Senior Subordinated Note Due 2009
NEW WORLD PASTA COMPANY, a Delaware corporation, promises to
pay to ________, or registered assigns, the principal sum of __________ Dollars
on February 15, 2009.
Interest Payment Dates: February 15 and August 15
Interest Record Dates: February 1 and August 1
Additional provisions of this Note are set forth on the other side of
this Note.
<PAGE> 118
EXHIBIT A
TO INDENTURE
PAGE 3
NEW WORLD PASTA COMPANY
By:
Name:
Title:
By:
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies that this is one
of the Notes referred to in the
Indenture.
By:
Authorized Signatory
<PAGE> 119
EXHIBIT A
TO INDENTURE
PAGE 4
[FORM OF REVERSE OF NOTE]
9 1/4% Senior Subordinated Note Due 2009
1. Interest
NEW WORLD PASTA COMPANY, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
unpaid principal amount of this Note at the Applicable Interest Rate.
The Company will pay interest on each Interest Payment Date,
beginning August 15, 1999. Interest shall accrue from the most recent date to
which interest has been paid, or, if no interest has been paid, from the date of
issuance of this Note.
Interest will be computed on the basis of a 360-day year
composed of twelve 30-day months. The Company shall pay interest on overdue
principal at the rate per annum that is 2% in excess of the Applicable Interest
Rate from the date of such nonpayment until the amount not so paid is paid in
full (as well after as before judgment).
"Applicable Interest Rate" means 9.25% per annum.
2. Method of Payment
The Company will pay interest on the Notes (except defaulted
interest) to the Persons who are registered Noteholders at the close of business
on the relevant Interest Record Date even if Notes are canceled after such
Interest Record Date and on or before such Interest Payment Date; provided, that
payments of interest on a Redemption Date, Purchase Offer Payment Date or the
Final Maturity Date shall be made to the Person to whom principal is paid.
Noteholders must surrender Notes to a Paying Agent to collect principal
payments. The Company will pay principal and interest in U.S. Legal Tender.
However, the Company may pay principal and interest by check payable in such
money. It may mail an interest check to a Noteholder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company
may have one or more co-
<PAGE> 120
EXHIBIT A
TO INDENTURE
PAGE 5
registrars or one or more additional Paying Agents. The Company or any Guarantor
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Notes under an Indenture dated as of
February 19, 1999 ("Indenture"), among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "TIA"). Terms defined in the Indenture and not defined herein have
the meanings ascribed thereto in the Indenture. The Notes are subject to all
such terms, and Noteholders are referred to the Indenture and the TIA for a
statement of those terms.
The Notes are general unsecured obligations of the Company.
The Indenture imposes certain limitations on the Incurrence of Indebtedness by
the Company, the Incurrence of Indebtedness and Preferred Stock by certain of
its Subsidiaries, investments, the payment of dividends and other distributions
and acquisitions or retirements of the Capital Stock of the Company and certain
of its Subsidiaries, certain repayments, purchases or redemptions of
subordinated obligations, the sale or transfer of assets and Subsidiary stock,
transactions with Affiliates, the lines of business in which the Company or
certain of its Subsidiaries may operate and the ability of the Company to merge
with or into another entity. In addition, the Indenture limits the ability of
the Company and its Subsidiaries to restrict distributions and dividends from
Subsidiaries and requires the Company, under certain circumstances, to offer to
purchase Notes. The limitations are subject to a number of important
qualifications and exceptions.
[INSERT ONLY IN INITIAL NOTES] [5. Registration Rights
The Company will be obligated to consummate a Registered Exchange Offer
pursuant to which the Holders of the Initial Notes shall have the right to
exchange their Notes for Notes which have been registered under the Securities
Act, in like principal amount and otherwise having terms identical in all
material respects to the Initial Notes.]
6. Optional Redemption
The Company may not optionally redeem this Note in whole at
any time or in part at any time prior to February 15, 2004. Beginning on
February 15, 2004, this Note shall be redeemable in whole or in part for an
amount equal to the following amounts, expressed as a percentage of the
principal amount of the Notes to be redeemed, if redeemed
<PAGE> 121
EXHIBIT A
TO INDENTURE
PAGE 6
during the 12-month period commencing on February 15 of the years set forth
below, plus accrued and unpaid interest and Liquidated Damages, if any, to the
Redemption Date:
<TABLE>
<CAPTION>
Period Redemption
Price
<S> <C>
2004........................................................... 104.6250%
2005........................................................... 103.0833%
2006........................................................... 101.5417%
2007........................................................... 100.0000%
</TABLE>
(b) At any time, or from time to time, on or prior to February
15, 2002, the Company may, at its option, redeem up to 35% of sum of (i) the
initial aggregate principal amount of Notes issued in the Offering and (ii) the
respective initial aggregate principal amount of Initial Notes originally issued
under the Indenture after the Issue Date pursuant to clause (i) of the first
sentence of the fourth paragraph of Section 2.02 of the Indenture with Net Cash
Proceeds of one or more Equity Offerings, at a redemption price equal to 109.25%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of redemption; provided, however, that at
least 65% of the sum of (i) initial aggregate principal amount of Notes issued
in the Offering and (ii) the respective initial aggregate principal amounts of
Initial Notes issued under the Indenture after the Issue Date pursuant to clause
(i) of the first sentence of the fourth paragraph of Section 2.02 of the
Indenture, remain outstanding immediately after each such redemption. In order
to effect the foregoing redemption with the proceeds of any Equity Offering, the
Company shall make such redemption not more than 120 days after the consummation
of any such Equity Offering.
7. Mandatory Offers to Purchase with Proceeds of Asset Sales
Pursuant to the requirements of the Indenture, the Company
must make certain Offers to Purchase Notes (including this Note) at par plus
accrued and unpaid interest and Liquidated Damages, if any, with the Net Cash
Proceeds from certain Asset Sales; provided that such Net Cash Proceeds need not
be applied to make Offers to Purchase the Notes to the extent that such Net Cash
Proceeds are applied to make certain repayments of Indebtedness or to make
certain investments, in each case in accordance with the requirements of Section
4.10 of the Indenture.
<PAGE> 122
EXHIBIT A
TO INDENTURE
PAGE 7
8. Change of Control Put Provisions
Upon a Change of Control, any Noteholder will have the right,
subject to certain conditions, to cause the Company to repurchase all or any
part of the Notes of such Noteholder at a price equal to 101% of the principal
amount of the Notes to be repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of repurchase as provided in, and
subject to the terms of, the Indenture.
9. Subordination
The Notes are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Notes may be paid. The Company agrees, and each
Noteholder by accepting a Note agrees, to the subordination provisions contained
in the Indenture and authorizes the Trustee to give it effect and appoints the
Trustee as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A Noteholder may
transfer or exchange Notes in accordance with the Indenture. The Registrar may
require a Noteholder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Notes selected for redemption (except, in the case of a Note to be redeemed in
part, the portion of the Note not to be redeemed) or any Notes for a period of
15 business days before a mailing of a notice of an offer to repurchase or
redeem Notes or 15 business days before an interest payment date.
11. Persons Deemed Owners
The registered Noteholder may be treated as the owner of it
for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Noteholders entitled to the money must
look only to the Company and not to the
<PAGE> 123
EXHIBIT A
TO INDENTURE
PAGE 8
Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Notes and the Indenture if
the Company deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations for the payment of principal and interest on the Notes to redemption
or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended with the written consent of the
Noteholders holding at least a majority in principal amount outstanding of the
Notes and (ii) any default or noncompliance with any provision may be waived
with the written consent of the Noteholders holding a majority in principal
amount outstanding of the Notes. Subject to certain exceptions set forth in the
Indenture, without the consent of any Noteholder, the Company and the Trustee
may amend the Indenture or the Notes to cure any ambiguity, omission, defect or
inconsistency, or to provide for uncertificated Notes in addition to or in place
of certificated Notes, or to add further guarantees with respect to the Notes or
to secure the Notes, or to add additional covenants or Events of Default or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the TIA, or
to evidence the succession of another Person to the Company or any Guarantor and
the assumption by such successor of the covenants of the Company or any
Guarantor in the Indenture or in the Notes, or to evidence and provide for the
acceptance of an appointment under the Indenture by a successor Trustee, or to
release any Guarantor from its Subsidiary Guarantee in accordance with the
provisions of the Indenture.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest or Liquidated Damages in respect of the Notes;
(ii) default in payment of principal on the Notes at maturity, upon redemption,
upon declaration or otherwise, or failure by the Company to redeem or purchase
Notes when required; (iii) failure by the Company to comply with other
agreements in the Indenture or the Notes, and continuance of such default for 30
days after written notice thereof to the Company; (iv) any Subsidiary Guarantee
of a Significant Restricted Subsidiary ceases to be in full force and effect, or
such Subsidiary Guarantee is declared to be null, void or unenforceable, or if
such Subsidiary Guarantee is found to be invalid, or the Guarantor denies its
liability under such Subsidiary Guarantee (other
<PAGE> 124
EXHIBIT A
TO INDENTURE
PAGE 9
than by reason of the release of such Guarantor from its obligations in
accordance with the terms of the Indenture); (v) certain accelerations, and
failures to pay, other Indebtedness of the Company if the amount accelerated (or
so unpaid) exceeds $10,000,000; (vi) certain events of bankruptcy or insolvency
with respect to the Company, its Significant Restricted Subsidiaries; and (vii)
certain judgments or decrees for the payment of money in excess of $10,000,000.
If an Event of Default occurs and is continuing, the Trustee or the Noteholders
holding of at least 25% in principal amount of the Notes may declare all the
Notes to be due and payable immediately. Certain events of bankruptcy or
insolvency relating to the Company are Events of Default which will result in
the Notes being due and payable immediately upon the occurrence of such Events
of Default.
Noteholders may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, including the
right of the Trustee to refuse to enforce the Indenture or the Notes unless it
receives indemnity or security satisfactory to it, Noteholders holding a
majority in principal amount of the Notes may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Noteholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is in the interest of the Noteholders.
[INSERT ONLY IN INITIAL NOTES] [16. Liquidated Damages.
If the Company has failed to file the Exchange Offer Registration
Statement or a Shelf Registration within 120 days of the Issue Date or if the
Registered Exchange Offer has not been consummated, or a Shelf Registration
Statement has not been declared effective, within 180 days of the Issue Date,
then the Company must pay liquidated damages of up to 1% of the principal amount
of this Note as set forth in the Registration Rights Agreement. The Company will
also pay Liquidated Damages in the same amounts if after having been filed, the
Shelf Registration Statement is not available for resales thereunder. Liquidated
Damages will be paid at the same time and in the same way as interest payments
on Notes, and must be paid entirely in cash.]
17. Trustee Dealings with the Company
Subject to certain limitations, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company or its Affiliates with
the same rights it would have if it were not Trustee.
<PAGE> 125
EXHIBIT A
TO INDENTURE
PAGE 10
18. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each Noteholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
19. Authentication
This Note shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
20. Abbreviations
Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
22. GOVERNING LAW
THE 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.
<PAGE> 126
EXHIBIT A
TO INDENTURE
PAGE 11
The Company will furnish to any Noteholder upon written
request and without charge to the Noteholder a copy of the Indenture which has
in it the text of this Note in larger type. Requests may be made to:
New World Pasta Company
c/o Hershey Foods Corporation
Corporate Headquarters
100 Crystal A Drive
Hershey, PA 17033-0810
Attention: James Bohenick
<PAGE> 127
EXHIBIT A
TO INDENTURE
PAGE 12
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________ agent to transfer this Note on the books of
the Company. The agent may substitute another to act for him.
____________________________________________________
Date:_________________Your Signature:_________________________________________
Sign exactly as your name appears on the other side of this Note.
<PAGE> 128
EXHIBIT B
TO INDENTURE
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note 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 NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY 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
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
<PAGE> 129
EXHIBIT C
TO INDENTURE
[FORM OF SUBSIDIARY GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor (capitalized terms used herein have the meanings given
such terms in the Indenture referred to in the Note upon which this notation is
endorsed) hereby unconditionally guarantees on a senior subordinated basis (such
guaranty being referred to herein as the "Guarantee") the due and punctual
payment of the principal of, premium, if any, and interest on (and liquidated
damages, if any, with respect to) the Notes, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, premium and interest on the Notes, 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 Eleven of the
Indenture.
The obligations of the Guarantor to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth, and
are expressly subordinated and subject in right of payment to the prior payment
in full of all Guarantor Senior Indebtedness of the Guarantor, to the extent and
in the manner provided in Article Eleven and Article Twelve of the Indenture.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes shall have been executed by the
Trustee under the Indenture by the manual signature of one of its authorized
signatories.
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.
[ ]
By:
Name:
Title:
<PAGE> 130
EXHIBIT D
TO INDENTURE
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 (Asset Sale) or 4.11 (Change of Control) of the
Indenture, check one of the following:
_____ Asset Sale _____ Change of Control
If you want to have only a part of this Note purchased by the
Company pursuant to either Section 4.10 or 4.11 of the Indenture, state the
amount:
US$ ____________
Date:_____________ Your Signature:____________________
(Sign exactly as your name appears on the other side of the Note)
Signature Guarantee:__________________________________
Signature must be guaranteed by a participant in a recognized signature guaranty
medallion program or other signature guarantor acceptable to the Trustee
<PAGE> 131
EXHIBIT E
TO INDENTURE
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: Senior Subordinated Notes due 2009
(the "Notes")
New World Pasta Company
_______________________
__ ________________This Certificate relates to $___ principal amount of Notes
held in the form of* ________ a beneficial interest in a Global Note or* ______
Physical Notes by _______ (the "Transferor").
Reference is made to the Indenture, dated as of February __, 1999 (the
Indenture"), among New World Pasta Company (the "Company"), the Guarantors named
therein, and The Bank of New York, as trustee (the "Trustee"). Capitalized terms
used but not defined in this certificate are used as defined in the Indenture.
The Transferor: *
/ / Has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Note held by the Depositary a
Physical Note or Physical Notes in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Note (or the portion thereof indicated above).
/ / Has requested by written order that the Trustee register the
transfer of its interest in the Temporary Reg. S Global Note for an interest in
the Rule 144A Global Note.
/ / Has requested by written order that the Registrar exchange or
register the transfer of a Physical Note or Physical Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture and the restrictions on transfers thereof as provided in Section 2.16
of the Indenture, and that the
<PAGE> 132
EXHIBIT E
TO INDENTURE
PAGE 2
transfer of the Notes does not require registration under the Securities Act of
1933, as amended (the "Act"), because*:
/ / Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
/ / Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Act), in reliance on Rule 144A.
/ / Such Note 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 F to the Indenture.
/ / Such Note is being transferred in reliance on Rule 144 under the
Act.
/ / Such Note is being transferred in an offshore transaction pursuant
to Rule 904 under the Act.
/ / Such Note is being transferred to the Company or a Subsidiary of
the Company.
[INSERT NAME OF TRANSFEROR]
By:
[Authorized Signatory]
Date:
*Check applicable box.
<PAGE> 133
EXHIBIT F
TO INDENTURE
Form of Transferee Letter of Representation
The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the Senior Subordinated Notes due 2009 of New World Pasta
Company (the "Company") and any guarantee thereof (the "Notes"). 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, as amended
(the "Securities Act")) purchasing for our own account or for the account of
such an institutional accredited investor, and we are not acquiring the Notes
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
<PAGE> 134
EXHIBIT F
TO INDENTURE
PAGE 2
thereto) (the "Resale Restriction Termination Date") only (a) to the Company or
one of its Subsidiaries, (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 that is purchasing for its own account or
for the account of such an institutional accredited investor, (e) in an offshore
transaction in compliance with Rule 904 under the Securities Act, or (f)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act, subject in each of the foregoing cases to any requirement of law
that the disposition of our property or the property of such investor account or
accounts be at all times within our or their control and in compliance with any
applicable state securities laws. If any resale or other transfer of the 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 and that it is acquiring such Notes for
investment purposes and not for distribution in violation of the Securities Act.
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) above to require the delivery of an opinion of counsel,
certificates and/or other information satisfactory to the Company and the
Trustee.
Reference is made to the Indenture, dated as of February __,
1999 (the Indenture"), among the Company, the Guarantors named therein, and The
Bank of New York, as trustee (the "Trustee"). Capitalized terms used but not
defined in this certificate are used as defined in the Indenture.
Dated:_________ TRANSFEREE:
By: ___________________________
<PAGE> 1
EXHIBIT 4.2
SENIOR SUBORDINATED GUARANTEE
The Guarantor (capitalized terms used herein have the
meanings given such terms in the Indenture referred to in the Note upon which
this notation is endorsed) hereby unconditionally guarantees on a senior
subordinated basis (such guaranty being referred to herein as the "Guarantee")
the due and punctual payment of the principal of, premium, if any, and interest
on (and Liquidated Damages, if any, with respect to) the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal, premium and interest on the Notes, 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
Eleven of the Indenture.
The obligations of the Guarantor to the Holders of Notes
and to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth, and are expressly subordinated and subject in right of payment to the
prior payment in full of all Guarantor Senior Indebtedness of the Guarantor, to
the extent and in the manner provided in Article Eleven and Article Twelve of
the Indenture.
This Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Notes shall have been
executed by the Trustee under the Indenture by the manual signature of one of
its authorized signatories.
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.
February 19, 1999 PASTA GROUP, L.L.C.
By: /s/ James A. Bohenick
----------------------------------------
Name: James A. Bohenick
Title: Vice President, Finance, and
Chief Financial Officer
<PAGE> 1
EXHIBIT 4.3
SENIOR SUBORDINATED GUARANTEE
The Guarantor (capitalized terms used herein have the
meanings given such terms in the Indenture referred to in the Note upon which
this notation is endorsed) hereby unconditionally guarantees on a senior
subordinated basis (such guaranty being referred to herein as the "Guarantee")
the due and punctual payment of the principal of, premium, if any, and interest
on (and Liquidated Damages, if any, with respect to) the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal, premium and interest on the Notes, 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
Eleven of the Indenture.
The obligations of the Guarantor to the Holders of Notes
and to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth, and are expressly subordinated and subject in right of payment to the
prior payment in full of all Guarantor Senior Indebtedness of the Guarantor, to
the extent and in the manner provided in Article Eleven and Article Twelve of
the Indenture.
This Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Notes shall have been
executed by the Trustee under the Indenture by the manual signature of one of
its authorized signatories.
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.
February 19, 1999 WINCHESTER PASTA, L.L.C.
By: /s/ James A. Bohenick
----------------------------------------
Name: James A. Bohenick
Title: Vice President, Finance, and
Chief Financial Officer
<PAGE> 1
EXHIBIT 4.4
EXECUTION VERSION
REGISTRATION RIGHTS AGREEMENT
Dated as of February 19, 1999
among
NEW WORLD PASTA COMPANY,
PASTA GROUP, L.L.C.,
WINCHESTER PASTA, L.L.C.
and
MORGAN STANLEY & CO. INCORPORATED
and
SCOTIA CAPITAL MARKETS (USA) INC.
<PAGE> 2
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of February 19, 1999, among NEW WORLD PASTA COMPANY, a
Delaware corporation (the "Company"), PASTA GROUP, L.L.C., a Delaware limited
liability company, WINCHESTER PASTA, L.L.C., a Delaware limited liability
company (together with Pasta Group, L.L.C., the "Guarantors"), and MORGAN
STANLEY & CO. INCORPORATED and SCOTIA CAPITAL MARKETS (USA) INC. (together, the
"Placement Agents").
This Agreement is made pursuant to the Purchase Agreement
dated February 11, 1999, among the Company, the Guarantors and the Placement
Agents (the "Placement Agreement"), which provides for the sale by the Company
to the Placement Agents of an aggregate of $110,000,000 principal amount of the
Company's 9 1/4% Senior Subordinated Notes Due 2009 (the "Securities"). The
Securities are being issued pursuant to an Indenture, dated as of the date
hereof (the "Indenture"), among the Company, the Guarantors and The Bank of New
York, as Trustee. The Securities are being guaranteed (the "Guarantees") by the
Guarantors.
In order to induce the Placement Agent to enter into the
Placement Agreement, the Company and the Guarantors have agreed to provide to
the Placement Agents and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Placement Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
Advice: See the last paragraph of Section 5 hereof.
Affiliate: An "affiliate" as such term is defined in Rule 405.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2(b) hereof.
Business Day: Any day that is not a Saturday, Sunday or a day
on which banking institutions in New York are authorized or required by law to
be closed.
Company: See the introductory paragraphs hereto.
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<PAGE> 3
Effectiveness Date: The 180th day after the Issue Date;
provided, however, that with respect to any Shelf Registration, the
Effectiveness Date shall be the 90th day after the Filing Date with respect
thereto.
Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See Section 2(a)
hereof.
Filing Date: (A) With respect to an Exchange Offer
Registration Statement, the earlier of the date of the filing thereof with the
SEC and the 120th day after the Issue Date, and (B) in each other case (which
may be applicable notwithstanding the consummation of the Exchange Offer), the
45th day after the delivery (or, if earlier, the date of required delivery) of a
Shelf Notice; provided, however, that if a Shelf Notice is given or required to
be given within 10 days after the Filing Date of an Exchange Offer Registration
Statement, then the Filing Date with respect to the Initial Shelf Registration
shall be the 30th day after the delivery (or, if earlier, the date of required
delivery) of such Shelf Notice.
Guarantees: See the introductory paragraphs hereto.
Guarantors: See the introductory paragraphs hereto.
Holder: Any holder of a Security.
Indemnified Party: See Section 7(c) hereof.
Indemnifying Parties: See Section 7(c) hereof.
Indenture: See the introductory paragraphs hereto.
Information: See Section 5(n) hereof.
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<PAGE> 4
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(n) hereof.
Issue Date: February 19, 1999, the date of original issuance
of the Notes.
Liquidated Damages: See Section 4 hereof.
NASD: See Section 5(s) hereof.
Notes: The Securities that were initially issued under the
Indenture.
Offering Memorandum: The final offering memorandum of the
Company dated February 11, 1999, in respect of the offering of the Securities.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.
Placement Agents: See the introductory paragraphs hereto.
Placement Agreement: See the introductory paragraphs hereof.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Records: See Section 5(n) hereof.
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<PAGE> 5
Registrable Notes: Each Note upon its original issuance and at
all times subsequent thereto, each Exchange Note (and the related Guarantees) as
to which Section 2(c)(iv) hereof is applicable upon original issuance and at all
times subsequent thereto and each Private Exchange Note (and the related
Guarantees) upon original issuance thereof and at all times subsequent thereto,
until the earliest to occur of (i) a Registration Statement (other than, with
respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable,
the Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note (and the related Guarantees), as the
case may be, has been disposed of in accordance with such effective Registration
Statement, (ii) such Note has been exchanged pursuant to the Exchange Offer for
an Exchange Note or Exchange Notes (and the related Guarantees) that may be
resold without restriction under state and federal securities laws, (iii) such
Note, Exchange Note or Private Exchange Note (and the related Guarantees), as
the case may be, ceases to be outstanding for purposes of the Indenture, or (iv)
such Note, Exchange Note or Private Exchange Note (and the related Guarantees),
as the case may be, in the reasonable opinion of the Company, may be resold
without restriction pursuant to Rule 144(k) under the Securities Act.
Registration Default: See Section 4(c).
Registration Statement: Any registration statement of the
Company that covers any of the Notes, the Exchange Notes or the Private Exchange
Notes (and the related Guarantees) filed with the SEC under the Securities Act,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act.
Rule 144A: Rule 144A under the Securities Act.
Rule 405: Rule 405 under the Securities Act.
Rule 415: Rule 415 under the Securities Act.
Rule 424: Rule 424 under the Securities Act.
SEC: The Securities and Exchange Commission.
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<PAGE> 6
Securities: See the introductory paragraphs hereto.
"Securities" shall include all Notes, Exchange Notes and Private Exchange Notes.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if
any) under any indenture governing the Exchange Notes and Private Exchange Notes
(and the related Guarantees).
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the Company are sold to an
underwriter for reoffering to the public.
Except as otherwise specifically provided, all references in
this Agreement to acts, laws, statutes, rules, regulations, releases. forms,
no-action letters and other regulatory requirements (collectively, "Regulatory
Requirements") shall be deemed to refer also to any amendments thereto and all
subsequent Regulatory Requirements adopted as a replacement thereto having
substantially the same effect therewith.
2. Exchange Offer
(a) The Company and the Guarantors shall file with the SEC, no
later than the Filing Date, a Registration Statement (the "Exchange Offer
Registration Statement") on an appropriate registration form with respect to a
registered offer (the "Exchange Offer") to exchange any and all of the
Registrable Notes for a like aggregate principal amount of notes of the Company,
guaranteed by the Guarantors (on substantially the same terms as the
Guarantees), that are identical in all material respects to the Securities,
except that the Exchange Notes shall contain no restrictive legend thereon (the
"Exchange Notes"), and which are entitled to the benefits of the Indenture or a
trust indenture which is identical in all material respects
6
<PAGE> 7
to the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with the TIA) and which, in either
case, has been qualified under the TIA. The Exchange Offer shall comply with all
applicable tender offer rules and regulations under the Exchange Act and other
applicable law. The Company and the Guarantors shall use their reasonable best
efforts to (x) cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act on or before the Effectiveness Date, (y) keep
the Exchange Offer open for at least 20 Business Days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) consummate the Exchange Offer on or prior to the 35th day
following the date on which the Exchange Offer Registration Statement is
declared effective by the SEC. If, after the Exchange Offer Registration
Statement is initially declared effective by the SEC, the Exchange Offer or the
issuance of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, the Exchange Offer Registration Statement shall be deemed not
to have become effective for purposes of this Agreement, unless such
interference is cured within five Business Days.
Each Holder (including, without limitation, each Participating
Broker-Dealer (as defined)) who participates in the Exchange Offer will be
required to represent to the Company, in writing (which may be contained in the
applicable letter of transmittal) that: (i) any Exchange Notes acquired in
exchange for Registrable Notes tendered is being acquired in the ordinary course
of business of the Person receiving such Exchange Notes, whether or not such
recipient is such Holder itself, (ii) at the time of the commencement of the
Exchange Offer, neither such Holder nor, to the actual knowledge of such Holder,
any other Person receiving Exchange Notes from such Holder has an arrangement or
understanding with any Person to participate in the distribution of the
Exchange Notes in violation of the provisions of the Securities Act, (iii) the
Holder is not an affiliate of the Company, (iv) if such Holder is not a
Participating Broker-Dealer, that it has not engaged in, and does not intend to
engage in, the distribution of Exchange Notes, and (v) if such Holder is a
Participating Broker-Dealer, such Holder acquired the Registrable Notes as a
result of market-making activities or other trading activities and that it will
comply with the applicable provisions of the Securities Act with respect to
resale of any Exchange Notes.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Notes that are Private
Exchange Notes, Exchange Notes as to which Section 2(c)(iv) hereof is applicable
and Exchange Notes held by Participating Broker-Dealers, and the Company shall
have no further
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<PAGE> 8
obligation to register Registrable Notes (other than Private Exchange Notes and
Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3
hereof.
(b) The Company shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Placement Agents, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"), and whether such positions or policies
have been publicly disseminated by the staff of the SEC or such positions or
policies represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also expressly permit, to the extent permitted by
applicable policies and regulations of the SEC, the use of the Prospectus by all
Persons subject to the prospectus delivery requirements of the Securities Act,
including, to the extent permitted by applicable policies and regulations of
the SEC, all Participating Broker-Dealers, and include a statement describing
the means by which Participating Broker-Dealers may resell the Exchange Notes in
compliance with the Securities Act.
In accordance with Section 5 hereof, the Company and the
Guarantors shall use their reasonable best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act during the period required by the Securities Act for use in connection with
any resale of Exchange Notes; provided that such period shall not be less than
90 nor more than 270 days after such Exchange Offer Registration Statement is
declared effective (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, any Placement
Agent 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 Exchange
Offer, the Company, upon the request of any such Holder, shall simultaneously
with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver
to any such Holder, in exchange (the "Private Exchange") for such Notes held by
any such Holder, a like principal amount of notes (the "Private Exchange Notes")
of the Company, guaranteed by the Guaran-
8
<PAGE> 9
tors (on substantially similar terms as the Guarantees), that are identical in
all material respects to the Exchange Notes except for the placement of a
restrictive legend on such Private Exchange Notes. The Private Exchange Notes
shall be issued pursuant to the same indenture as the Exchange Notes and bear
the same CUSIP number as the Exchange Notes. All of the Securities shall vote
and consent together on all matters as one class, and 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.
In connection with the Exchange Offer, the Company shall:
(i) mail, or cause to be mailed, to each Holder
of record entitled to participate in the Exchange Offer a copy of the
Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(ii) utilize the services of a depositary for
the Exchange Offer with an address in the Borough of Manhattan, The
City of New York;
(iii) permit Holders to withdraw tendered
Registrable Notes at any time prior to the close of business, New York
time, on the last Business Day on which the Exchange Offer remains
open; and
(iv) otherwise comply in all material respects
with all applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Company shall:
(i) accept for exchange all Registrable Notes
validly tendered and not validly withdrawn pursuant to the Exchange
Offer and the Private Exchange, if any;
(ii) deliver to the Trustee for cancellation all
Registrable Notes so accepted for exchange; and
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<PAGE> 10
(iii) cause the Trustee to authenticate and
deliver promptly to each Holder of Registrable Notes tendered for
exchange, Exchange Notes or Private Exchange Notes, as the case may be,
equal in principal amount to the Registrable Notes of such Holder so
accepted for exchange; provided, that in the case of any Registrable
Notes held in global form by a depositary, authentication and delivery
to such depositary of one or more Exchange Notes in global form in an
equivalent principal amount thereto for the account of such Holders in
accordance with the Indenture (or the indenture described in Section
2(a) hereof) shall satisfy such authentication and delivery
requirement.
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Company to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Company, (iii)
all governmental approvals shall have been obtained, which approvals the Company
deems necessary for the consummation of the Exchange Offer or Private Exchange,
and (iv) the conditions precedent to the Company's obligations under this
Agreement shall have been fulfilled.
(c) If (i) because of any change in law or in
currently prevailing interpretations of the staff of the SEC, the Company is not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not
consummated on or prior to the 210th day after the Issue Date, (iii) any holder
of Private Exchange Notes so requests in writing to the Company, on or prior to
the 60th day after the consummation of the Exchange Offer, or (iv) in the case
of any Holder that participates in the Exchange Offer, such Holder does not
receive Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Company) and such Holder so
requests by written notice to the Company on or prior to the 60th day after the
consummation of the Exchange Offer, then in the case of each of clauses (i) to
and including (iv) of this sentence, the Company shall promptly (and in any
event within 20 days after the occurrence of any of the events described in such
clauses (i) to and including (iv)) deliver to the Holders and the Trustee
written notice thereof (the "Shelf Notice") and the Company and the Guarantors
shall file a Shelf Registration pursuant to Section 3 hereof.
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<PAGE> 11
3. Shelf Registration
If at any time a Shelf Notice is delivered or required to be
delivered as contemplated by Section 2(c) hereof, then:
(a) Initial Shelf Registration. The Company and the
Guarantors shall file with the SEC a Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes
and Exchange Notes as to which Section 2(c)(iv) is applicable (the "Initial
Shelf Registration"). The Company and the Guarantors shall use their reasonable
best efforts to file with the SEC the Initial Shelf Registration on or before
the applicable Filing Date. The Initial Shelf Registration shall be on Form S-1
or another appropriate form permitting registration of such Registrable Notes
for resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company shall not
permit any securities other than the Registrable Notes to be included in the
Initial Shelf Registration or any Subsequent Shelf Registration (as defined
below).
In accordance with Section 5 hereof, the Company and the
Guarantors shall use their reasonable best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
later of Issue Date and the date which is two years after the date on which any
affiliate of the Company ceased to hold Registrable Notes (the "Effectiveness
Period"), or such shorter period ending on the earliest to occur of (i) all
Registrable Notes covered by the Initial Shelf Registration being sold in the
manner set forth and as contemplated in the Initial Shelf Registration, (ii) a
Subsequent Shelf Registration covering all of the Registrable Notes covered by
and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf
Registration being declared effective under the Securities Act, or (iii) the
date on which, in the written opinion of counsel to the Company, all outstanding
Registrable Notes held by Persons that are not affiliates of the Company may be
resold without registration under the Securities Act pursuant to Rule 144(k)
under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial
Shelf Registration or any Subsequent Shelf Registration ceases to be effective
for any reason at any time during the Effectiveness Period (other than because
of the sale of all of the Registrable Notes registered thereunder), the Company
and the Guarantors shall use
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<PAGE> 12
their reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend the Initial Shelf Registration in a manner
to obtain the withdrawal of the order suspending the effectiveness thereof, or
file an additional "shelf" Registration Statement pursuant to Rule 415 covering
all of the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company
and the Guarantors shall use their reasonable best efforts to cause the
Subsequent Shelf Registration to be declared effective under the Securities Act
as soon as practicable after such filing and to keep such subsequent Shelf
Registration continuously effective for a period equal to the number of days in
the Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall
promptly supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act or if reasonably requested
by the Holders of a majority in aggregate principal amount of the Registrable
Notes covered by such Registration Statement or by any underwriter of such
Registrable Notes.
(d) Provision by Holders of Certain Information in
Connection with the Shelf Registration. No Holder of Registrable Notes may
include any of its Registrable Notes in any Shelf Registration unless and until
such Holder furnishes to the Company, in writing within 30 days after receipt of
a request therefor, the information specified in Items 507 and 508 (as
applicable) of Regulation S-K under the Securities Act and any other applicable
rules, regulations or policies of the SEC for use in connection with any Shelf
Registration or Prospectus included therein, on a form to be provided by the
Company. No Holder of Registrable Notes shall be entitled to Liquidated Damages
pursuant to Section 4 hereof unless and until such Holder shall have provided
all such information. Each selling Holder agrees to furnish promptly to the
Company additional information to be disclosed so that the information
previously furnished to the Company by such Holder does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
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4. Liquidated Damages
(a) The Company, the Guarantors and the Placement
Agents agree that the Holders will suffer damages if the Company or any
Guarantor fails to fulfill its obligations under Section 2 or Section 3 hereof
and that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, the Company and the Guarantors, jointly and severally,
agree to pay, as liquidated damages and as the sole and exclusive remedy of the
Holders should the Company or any Guarantor fail to fulfill its obligations
under Section 2 or Section 3 hereof, additional interest on the Securities
("Liquidated Damages") under the circumstances and to the extent set forth below
(each of which shall be given independent effect):
(i) if (A) neither the Exchange Offer
Registration Statement nor the Initial Shelf Registration has been
filed on or prior to the 120th day after the Issue Date or (B)
notwithstanding that the Company has consummated or will consummate the
Exchange Offer, the Company is required to file a Shelf Registration
and such Shelf Registration is not filed on or prior to the Filing Date
applicable thereto, then, commencing on the day after any such Filing
Date, Liquidated Damages shall accrue on the principal amount of the
Securities at a rate of 0.50% per annum for the first 90 days
immediately following each such Filing Date, and such Liquidated
Damages rate shall increase by an additional 0.50% per annum at the
beginning of each subsequent 90-day period, or
(ii) if (A) neither the Exchange Offer
Registration Statement nor the Initial Shelf Registration is declared
effective by the SEC on or prior to the 180th day after the Issue Date
or (B) notwithstanding that the Company has consummated or will
consummate the Exchange Offer, the Company is required to file a Shelf
Registration and such Shelf Registration is not declared effective by
the SEC on or prior to the Effectiveness Date in respect of such Shelf
Registration, then, commencing on the day after such Effectiveness
Date, Liquidated Damages shall accrue on the principal amount of the
Securities at a rate of 0.50% per annum for the first 90 days
immediately following the day after such Effectiveness Date, and such
Liquidated Damages rate shall increase by an additional 0.50% per
annum at the beginning of each subsequent 90-day period, or
(iii) if (A) the Company has not exchanged
Exchange Notes for all Securities validly tendered in accordance with
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<PAGE> 14
the terms of the Exchange Offer on or prior to the 35th day after the
date on which the Exchange Offer Registration Statement relating
thereto was declared effective or (B) if applicable, a Shelf
Registration has been declared effective and such Shelf Registration
ceases to be effective at any time during the Effectiveness Period,
then Liquidated Damages shall accrue on the principal amount of the
Securities at a rate of 0.50% per annum for the first 90 days
commencing on (x) the 36th day after such effective date, in the case
of (A) above, or (y) the day such Shelf Registration ceases to be
effective in the case of (B) above, and such Liquidated Damages rate
shall increase by an additional 0.50% per annum at the beginning of
each such subsequent 90-day period;
provided, however, that the Liquidated Damages rate on the Securities may not
exceed at any one time in the aggregate 1.00% per annum; provided, further,
however, that (1) upon the filing of the applicable Exchange Offer Registration
Statement or the applicable Shelf Registration as required hereunder (in the
case of clause (i) above of this Section 4(a)), (2) upon the effectiveness of
the Exchange Offer Registration Statement or the applicable Shelf Registration
as required hereunder (in the case of clause (ii) of this Section 4(a)), or (3)
upon the exchange of the applicable Exchange Notes for all Securities validly
tendered (in the case of clause (iii)(A) of this Section 4(a)), or upon the
effectiveness of the applicable Shelf Registration which had ceased to remain
effective (in the case of clause (iii)(B) of this Section 4(a)), Liquidated
Damages on the Notes in respect of which such events relate as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease to
accrue.
(b) Notification of Trustee. The Company shall notify
the Trustee within three Business Days after each and every date on which an
event occurs in respect of which Liquidated Damages are required to be paid (an
"Event Date"). Any amounts of Liquidated Damages due pursuant to (a)(i), (a)(ii)
or (a)(iii) of this Section 4 will be payable in cash on the dates, and to the
Persons, to whom interest on the Securities is payable. The amount of Liquidated
Damages will be determined by multiplying the applicable Liquidated Damages rate
by the principal amount of the outstanding Securities, multiplied by a fraction,
the numerator of which is the number of days such Liquidated Damages rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
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<PAGE> 15
(c) Suspension of Liquidated Damages for Good Cause.
Liquidated Damages shall not accrue with respect to an event listed in Sections
4(a)(i)(B), (ii)(B) and (iii)(B) hereof (each, a "Registration Default") if: (i)
such Registration Default under Section 4(a)(iii)(B) hereof occurs because of
the filing of a post-effective amendment to such Registration Statement to
incorporate annual audited financial information with respect to the Company
where such post-effective amendment is not yet effective and needs to be
declared effective to permit Holders to use the related Prospectus, (ii) such
Registration Default occurs because of the occurrence of other material events
or developments with respect to the Company that would need to be described in
such Registration Statement or the related Prospectus, and the effectiveness of
such Registration Statement is reasonably required to be suspended while such
Registration Statement and related Prospectus are amended or supplemented to
reflect such events or developments, (iii) such Registration Default results
from the suspension of the effectiveness of such Registration Statement because
of the existence of material events or developments with respect to the Company
or any of its affiliates, the disclosure of which the Company determines in good
faith would have a material adverse effect on the business, operations or
prospects of the Company, or (iv) such Registration Default results from the
suspension of the effectiveness of such Registration Statement because the
Company does not wish to disclose publicly a pending material business
transaction that has not yet been publicly disclosed; provided, however, that if
any, such Registration Default exists and continues on more than an aggregate
of 75 days in any calendar year, Liquidated Damages shall accrue and be payable
in accordance with Sections 4(a) and 4(b) hereof from the 61st day on which any
such Registration Default exists, and they shall continue to accrue until the
date on which such Registration Default is cured.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Section 2 or 3 hereof, the Company and the Guarantors shall effect
such registrations to permit the sale of the Securities covered thereby in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Company and the Guarantors hereunder, the Company and the Guarantors shall:
(a) Prepare and file with the SEC prior to the
applicable Filing Date, a Registration Statement or Registration Statements as
required by Section 2 or 3 hereof, and use their reasonable best efforts to
cause each such Registration
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<PAGE> 16
Statement to become effective and remain effective as provided herein; provided,
however, that, if
(i) such filing is pursuant to Section 3
hereof, or
(ii) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period relating thereto and from whom the Company has received written
notice that it will be a Participating Broker-Dealer in the Exchange
Offer, before filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to and
afford the Holders of the Registrable Notes included in such
Registration Statement (with respect to a Registration Statement filed
pursuant to Section 3 hereof) or each such Participating Broker-Dealer
(with respect to any such Registration Statement), as the case may be,
their counsel and the managing underwriter or underwriters, if any, a
reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (in each case at
least five days prior to such filing, or such later date as is
reasonable under the circumstances). The Company and the Guarantors
shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority in
aggregate principal amount of the Registrable Notes included in such
Registration Statement, or any such Participating Broker-Dealer, as the
case may be, their counsel, or the managing underwriter or
underwriters, if any, shall reasonably object on a timely basis, except
for any Registration Statement or amendment thereto or related
Prospectus or supplement thereto (a copy of which has been previously
furnished as provided in the preceding sentence) which counsel to the
Company has advised the Company in writing is required to be filed in
order to comply with applicable law.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep such
Shelf Registration or Exchange Offer Registration Statement continuously
effective for the Effectiveness Period or the Applicable Period, respectively,
and in any case, except for such
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<PAGE> 17
periods as to which Liquidated Damages do not accrue pursuant to Section 4(c)
hereof, cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424; and comply with the provisions of the Securities Act and
the Exchange Act applicable to each of them with respect to the disposition of
all Securities covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any such
Prospectus. The Company and the Guarantors shall be deemed not to have used
their reasonable best efforts to keep a Registration Statement effective during
the Effectiveness Period or the Applicable Period, as the case may be, relating
thereto if the Company or any Guarantor voluntarily takes any action that would
result in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able to
sell such Registrable Notes or such Exchange Notes during that period unless
such action is required by applicable law or permitted by this Agreement.
(c) If
(i) a Shelf Registration is filed pursuant to
Section 3 hereof, or
(ii) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period relating thereto from whom the Company has received written
notice that it will be a Participating Broker-Dealer in the Exchange
Offer,
notify the selling Holders of Registrable Notes (with respect to a Shelf
Registration filed pursuant to Section 3 hereof), or each such Participating
Broker-Dealer (with respect to any such Registration Statement), as the case may
be, their counsel and the managing underwriter or underwriters, if any, promptly
(but in any event within one day), and confirm such notice in writing, (i) when
a Prospectus or any Prospectus supplement or post-effective amendment has been
filed and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon request,
obtain, at the sole expense of the Company, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules thereto, documents incorporated or
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<PAGE> 18
deemed to be incorporated therein by reference and exhibits thereto), (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
Prospectus or preliminary Prospectus or the initiation of any proceedings for
that purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable Notes
or resales of Exchange Notes by Participating Broker-Dealers the representations
and warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 5(m) hereof cease to be true and
correct in all material respects, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or
sale in any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any condition
or any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's determination that a
post-effective amendment to a Registration Statement would be necessary or
appropriate; except, in the case of clauses (iii), (iv), (v) and (vi), with
respect to any event, development or transaction permitted to be kept
confidential without the accrual of Liquidated Damages under Section 4(c)(iii)
hereof, the Company shall not be required to describe such event, development or
transaction in the written notice provided.
(d) If
(i) a Shelf Registration is filed pursuant to
Section 3 hereof, or
(ii) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-
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<PAGE> 19
Dealer who seeks to sell Exchange Notes during the Applicable Period,
use their reasonable best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use their reasonable best
efforts to obtain the withdrawal of any such order at the earliest practicable
moment.
(e) If a Shelf Registration is filed pursuant to
Section 3 and if requested during the Effectiveness Period by the managing
underwriter or underwriters (if any), the Holders of a majority in aggregate
principal amount of the Registrable Notes being sold in connection with an
underwritten offering or any Participating Broker-Dealer, (i) as promptly as
practicable incorporate in a Prospectus supplement or post-effective amendment
such information as the managing underwriter or underwriters (if any), such
Holders, any Participating Broker-Dealer or counsel for any of them reasonably
request to be included therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such prospectus supplement or post-effective amendment.
(f) If
(i) a Shelf Registration is filed pursuant to
Section 3 hereof, or
(ii) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period,
furnish to each selling Holder of Registrable Notes (with respect to a Shelf
Registration filed pursuant to Section 3 hereof) and to each such Participating
Broker-Dealer who so requests (with respect to any such Registration Statement)
and to their respective counsel and each managing underwriter (if any) at the
sole expense of the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial state-
19
<PAGE> 20
ments and schedules thereto, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits thereto.
(g) If
(i) a Shelf Registration is filed pursuant to
Section 3 hereof, or
(ii) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period,
deliver to each selling Holder of Registrable Notes (with respect to a Shelf
Registration filed pursuant to Section 3 hereof), or each such Participating
Broker-Dealer (with respect to any such Registration Statement), as the case may
be, their respective counsel, and the underwriters, if any, at the sole expense
of the Company, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated therein by reference as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company and
the Guarantors hereby consent to the use of such Prospectus and each amendment
or supplement thereto by each of the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, and the underwriters
or agents, if any, and dealers (if any), in connection with the offering and
sale of the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes
or any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Securities during
the Applicable Period, use their reasonable best efforts to register or qualify,
and to cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters (if any) and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer or the managing underwriter or under writers
(if any) reasonably request in writing; provided, however, that where Securi-
20
<PAGE> 21
ties held by Participating Broker-Dealers or Registrable Notes are offered other
than through an underwritten offering, the Company agrees to cause its counsel
to perform Blue Sky investigations, and the Company and the Guarantors agree to
file registrations and qualifications required to be filed pursuant to this
Section 5(h), keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Securities held by Participating Broker-Dealers or the Registrable Notes covered
by the applicable Registration Statement; provided, further, that none of the
Company or any Guarantor shall be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified, (B) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject, or (C) subject itself to taxation
in excess of a nominal dollar amount in any such jurisdiction where it is not
then so subject.
(i) If a Shelf Registration is filed pursuant to
Section 3 hereof, cooperate with the selling Holders of Registrable Notes and
the managing under writer or underwriters (if any) to facilitate the timely
preparation and delivery of certificates representing Registrable Notes to be
sold, which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations (subject to applicable
requirements contained in the Indenture or the indenture under which the
Registrable Notes were issued) and registered in such names as the managing
underwriter or underwriters (if any) or Holders may request.
(j) Subject to the last proviso in (h) above, use their
reasonable best efforts to cause the Registrable Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case the Company will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals.
21
<PAGE> 22
(k) If
(i) a Shelf Registration is filed pursuant to
Section 3 hereof, or
(ii) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period,
upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi)
hereof (except with respect to any event, development or transaction permitted
to be kept confidential without the accrual of Liquidated Damages under Section
4(c)(iii) hereof for the period during which such Liquidated Damages do not
accrue), as promptly as practicable prepare and (subject to Section 5(a) hereof)
file with the SEC at the sole expense of the Company, a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold thereunder (with
respect to a Shelf Registration filed pursuant to Section 3 hereof) or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer (with respect to any such Registration Statement),
any such Prospectus will 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, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, the Company shall not be
required to amend or supplement a Registration Statement, any related Prospectus
or any document incorporated or deemed to be incorporated therein by reference
in the event that, and for a period not to exceed an aggregate of 60 days in any
calendar year if (i) an event occurs and is continuing as a result of which the
Shelf Registration, any related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, would, in the Company's good
faith judgment, contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein not misleading
(with respect to such a Prospectus only, in the light of the circumstances under
which they were made), and (ii) (a) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a material
adverse effect on the business, operations or prospects of the Company, or (b)
the disclosure otherwise
22
<PAGE> 23
relates to a pending material business transaction that has not yet been
publicly disclosed.
(l) Prior to the effective date of the first
Registration Statement relating to the Securities, (i) provide the Trustee with
certificates for the Exchange Notes and the Private Exchange Notes in a form
eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Exchange Notes and the Private Exchange Notes.
(m) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities similar
to the Securities in form and substance reasonably satisfactory to the Company,
and take all such other actions as are reasonably requested by the managing
underwriter or underwriters (if any) in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection (i) make such representations and warranties to, and covenants with,
the underwriters with respect to the business of the Company and the
subsidiaries of the Company (including any acquired business, properties or
entity, if applicable), and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated therein by
reference, in each case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Securities, and confirm
the same in writing if and when requested in form and substance reasonably
satisfactory to the underwriters; (ii) obtain the written opinions of counsel
to the Company and written updates thereof in form, scope and substance
reasonably satisfactory to the underwriters, addressed to the underwriters
covering the matters customarily covered in opinions reasonably requested in
underwritten offerings and such other matters as may be reasonably requested by
the managing underwriter or underwriters; (iii) obtain "cold comfort" letters
and updates thereof in form, scope and substance reasonably satisfactory to the
underwriters from the independent public accountants of the Company (and, if
necessary, any other independent public accountants of the Company, any
subsidiary of the Company or of any business acquired by the Company, for which
financial statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with under
written offerings of debt securities similar to the Securities and such other
matters as reasonably requested by the underwriters as permitted by the
Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is
entered into, include in such underwriting agreement indemnification provisions
and procedures no less
23
<PAGE> 24
favorable to the sellers and underwriters, if any, than those set forth in
Section 7 hereof (or such other provisions and procedures acceptable to Holders
of a majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the underwriters (if any). The above shall be done at
each closing under such underwriting agreement, or as and to the extent required
thereunder.
(n) If
(i) a Shelf Registration is filed pursuant to
Section 3 hereof, or
(ii) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period,
make available for inspection by any selling Holder of such Registrable Notes
being sold (with respect to a Shelf Registration filed pursuant to Section 3
hereof), or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Registrable Notes, if any,
and any attorney, accountant or other agent retained by any such selling Holder
or each such Participating Broker-Dealer (with respect to any such Registration
Statement), as the case may be, or underwriter (collectively, the "Inspectors"),
upon written request, at the offices where normally kept, during reasonable
business hours, all pertinent financial and other records, pertinent corporate
documents and pertinent instruments of the Company and subsidiaries of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Company and any of its subsidiaries
to supply all information ("Information") reasonably requested by any such
Inspector in connection with such due diligence responsibilities. Each Inspector
shall agree in writing that it will keep the Records and Information
confidential and that it will not disclose any of the Records that the Company
determines, in good faith, to be confidential and notifies the Inspectors in
writing are confidential unless (i) the disclosure of such Records or
Information is necessary to avoid or correct a material misstatement or material
omission in such Registration Statement or Prospectus, (ii) the release of such
Records or Information is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction, or (iii) the information in such Records or
Information has been made generally available to the public other than by an
Inspector or an affiliate of an Inspector; provided, however, that
24
<PAGE> 25
prior notice shall be provided as soon as practicable to the Company of the
potential disclosure of any information by such Inspector pursuant to clauses
(i) or (ii) of this sentence in order to permit the Company to obtain a
protective order (or waive the provisions of this paragraph (n)).
(o) Provide a Trustee for the Exchange Notes and the
Private Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Exchange Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Securities, to effect such changes (if any) to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use their reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of
the SEC and make generally available to its securityholders with regard to any
applicable Registration Statement, a consolidated earnings statement satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any fiscal quarter (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company, after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(q) Upon consummation of the Exchange Offer or a
Private Exchange, obtain an opinion or opinions of counsel to the Company and
the Guarantors, in a form customary for underwritten transactions, addressed to
the Trustee for the benefit of all Holders of Securities participating in the
Exchange Offer or the Private Exchange, as the case may be, that the Exchange
Notes or Private Exchange Notes, as the case may be, the related Guarantees and
the relevant indenture constitute legal, valid and binding obligations of the
Company and/or the Guarantors, as applicable, enforceable against each of them
in accordance with their respective terms, subject to customary exceptions and
qualifications.
(r) If the Exchange Offer or a Private Exchange is to
be consummated, upon delivery of the Registrable Notes by Holders to the Company
25
<PAGE> 26
(or to such other Person as directed by the Company), in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Company
shall mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being canceled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be; in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(t) Use their reasonable best efforts to take all other
steps reasonably necessary to effect the registration of the Exchange Notes
and/or Registrable Notes covered by a Registration Statement contemplated
hereby.
The covenants of the Company under Sections 5(c), (d), (f),
(g), (j), (k) and (n) with respect to an Exchange Offer Registration Statement
shall terminate as of the end of the Applicable Period. The covenants of the
Company under Sections 5(c), (d), (e), (f), (g), (j), (k) and (n) with respect
to the Shelf Registration shall terminate as of the end of the Effectiveness
Period.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller so long as
such seller fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such seller not materially misleading.
If any such Registration Statement refers to any holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such Holder by name or other-
26
<PAGE> 27
wise is not required by the Securities Act or any similar federal statute then
in force, the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder of Registrable Notes agrees by its acquisition of
such Registrable Notes, and each Participating Broker-Dealer agrees by its
acquisition of Registrable Notes or Exchange Notes to be sold by such
Participating Broker-Dealer that, upon actual receipt of any notice from the
Company of the happening of any event of the kind described in Section 5(c)(ii),
5(c)(iv), 5(c)(v) or 5(c)(vi) hereof, such Holder or Participating Broker-Dealer
will forthwith discontinue disposition of the Securities covered by such
Registration Statement or Prospectus until such Holder or Participating
Broker-Dealer receives copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto. In
the event that the Company shall give any such notice, the Applicable Period
shall be extended by the number of days during such periods from and including
the date of the giving of such notice to and including the date when each seller
of Registrable Notes covered by such Registration Statement or Exchange Notes to
be sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance
of or compliance with this Agreement by the Company and the Guarantors (other
than any underwriting discounts or commissions) shall be borne by the Company,
whether or not the Exchange Offer Registration Statement or any Shelf
Registration is filed or becomes effective or the Exchange Offer is consummated,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) reasonable fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, fees and disbursements of counsel in connection with Blue
Sky qualifications of the Securities and determination of the eligibility of
the Securities for investment under the laws of such jurisdictions within the
United States (x) where the Holders are located, in the case of the Exchange
Notes, or (y) as provided in Section 5(h) hereof, in the case of Securities to
be sold by a Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses, including without limitation, expenses of printing
certificates for Securities
27
<PAGE> 28
in a form eligible for deposit with The Depository Trust Company and of printing
Prospectuses if the printing of Prospectuses is requested by the managing
underwriter or underwriters (if any), or is reasonably requested by the Holders
of a majority in aggregate principal amount of the Registrable Notes included in
any Registration Statement or by any Participating Broker-Dealer in respect of
Securities to be sold during the Applicable Period, as the case may be, (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and, in case of a Shelf Registration, reasonable fees
and disbursements of one special counsel for all of the sellers of Registrable
Notes (exclusive of any counsel retained pursuant to Section 7 hereof), subject
to Section 6(b) hereof, (v) fees and disbursements of all independent certified
public accountants referred to in Section 5(m)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company desires such insurance, (vii) fees and expenses of all
other Persons retained by the Company, including, without limitation, the
Trustee, (viii) internal expenses of the Company (including, without limitation,
all salaries and expenses of officers and employees of the Company performing
legal or accounting duties), (ix) the expense of any annual audit, (x) any fees
and expenses incurred in connection with the listing of the Securities to be
registered on any securities exchange, and the obtaining of a rating of the
Securities, in each case, if applicable, and (xi) the expenses relating to
printing, word processing and distributing all Registration Statements. The
Holders shall be responsible for all of their other out-of-pocket expenses
incurred in connection with the registration of the Registrable Notes. The
Company and the Guarantors shall have no obligation to pay any underwriting
fees, discounts or commissions attributable to the sale of any Registrable
Notes.
(b) In connection with any Shelf Registration
hereunder, the Company shall reimburse the Holders of the Registrable Notes
being registered in such registration for the reasonable fees and disbursements
of not more than one counsel (in addition to appropriate local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Registrable
Notes to be included in such Registration Statement. The Holders shall be
responsible for all of their other out-of-pocket expenses incurred in connection
with their registration of the Registrable Notes. The Company and the Guarantors
shall have no obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of any Registrable Notes.
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<PAGE> 29
7. Indemnification
(a) The Company agrees to indemnify and hold harmless
each Holder participating in a registration hereunder and each Participating
Broker-Dealer selling Exchange Notes during the Applicable Period, and each
Person, if any, who controls any such Holder or Participating Broker-Dealer
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, or is under common control with, or is controlled by, any such
Holder or Participating Broker-Dealer, from and against all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred by any such Holder or Participating Broker-Dealer
or any such controlling or affiliated Person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto), including all documents incorporated
therein by reference, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or caused by any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company will not be so liable (i) insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Holder furnished to the Company in writing by or on behalf of any selling Holder
expressly for use therein or (ii) insofar as such losses, claims, damages or
liabilities were caused by an untrue statement or omission that was contained or
made in any preliminary prospectus and corrected in the Prospectus or any
amendment or supplement thereto if (x) the Prospectus does not contain any other
untrue statement or omission of a material fact that was the subject matter of
the related proceeding, (y) any such losses, claims, damages or liabilities
resulted from an action, claim or suit by any Person who purchased Registrable
Notes or Exchange Notes which are the subject thereof from the indemnified party
(as defined) and (z) it is established in the related proceeding that such
indemnified party failed to deliver or provide a copy of the Prospectus (as so
amended or supplemented, if applicable) to such Person with or prior to the
confirmation of the sale of such Registrable Notes or Exchange Notes to such
person if required by applicable law, unless such failure to deliver or provide
a copy of such Prospectus (as so amended or supplemented, if applicable) was a
result of non-compliance by the Company with Section 5 hereof. In connection
with any underwritten offering, the Company will also indemnify the
underwriters, if any, selling brokers, dealers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of
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<PAGE> 30
either Section 15 of the Securities Act or Section 20 of the Exchange Act) to
the same extent as provided above with respect to the indemnification of the
Holders and the Participating Broker-Dealers, if requested in connection with
any Registration Statement.
(b) Each Holder participating in a registration
hereunder and each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, agrees, severally and not jointly, to indemnify and hold
harmless the Company and the other Holders and Participating Broker-Dealers,
and each of their respective directors, officers who sign the Registration
Statement and each Person, if any, who controls the Company and any other Holder
or Participating Broker-Dealer within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to the Holders and the Participating
Broker-Dealers, but only with reference to information relating to such Holder
furnished to the Company in writing by or on behalf of such Holder expressly for
use in any Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel
and the indemnifying party has agreed to pay the fees and expenses of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for (a) the fees and
expenses of more than one separate firm engaged in accordance with clause (ii)
of the preceding sentence (in addition to any local counsel) for all
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred upon written request and presentation of invoices. In any case
involving the Placement Agents and
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<PAGE> 31
Persons who control the Placement Agents, such firm shall be designated in
writing by Morgan Stanley & Co. Incorporated. In any other case involving the
Holders and such Persons who control Holders, such firm shall be designated in
writing by a majority of affected Holders (measured in terms of the principal
amount of outstanding Securities). In all other cases, such firm shall be
designated by the Company. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but, if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement. Notwithstanding the immediately
preceding sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party shall not be liable for any settlement of the
nature contemplated by the immediately preceding sentence effected without its
consent if such indemnifying party (i) reimburses such indemnified party in
accordance with such request to the extent that it in good faith considers such
request to be reasonable and (ii) provides written notice to the indemnified
party substantiating the unpaid amount as unreasonable, in each case prior to
the date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which such 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.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements
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<PAGE> 32
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
Company and the Holders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective
principal amount of Registrable Notes of such Holder that were registered
pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be
just or equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Notes were sold by such Holder exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 7 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 7 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Participating Broker-Dealer, any Holder or any Person controlling any
Participating Broker-Dealer or any Holder, or by or on behalf of the Company,
its officers or directors or any Person controlling the Company, (iii)
acceptance of any of the Exchange Notes and (iv) any sale of Registrable Notes
pursuant to a Shelf Registration.
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<PAGE> 33
8. Rules 144 and 144A
Each of the Company and the Guarantors covenants and agrees
that it will file the reports required to be filed by it under the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Exchange Act and, if at any time the
Company or any Guarantor is not required to file such reports, the Company or
such Guarantor will, upon the request of any Holder or beneficial owner of
Registrable Notes, make available such information necessary to permit sales
pursuant to Rule 144A. Each of the Company and the Guarantors further covenants
and agrees for so long as any Registrable Notes remain outstanding that it will
take such further action as any Holder of Registrable Notes may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Notes without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144(k) under the Securities Act
and Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. None of the Company or
any Guarantor has, as of the date hereof, and none of the Company or any
Guarantor shall, after the date of this Agreement, enter into any agreement with
respect to any of its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's or
any Guarantor's other issued and outstanding securities under any such
agreements. None of the Company or any Guarantor will enter into any agreement
with respect to any of its securities which
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<PAGE> 34
will grant to any Person piggyback registration rights with respect to any
Registration Statement.
(b) Adjustments Affecting Registrable Notes. None of
the Company or any Guarantor shall, directly or indirectly, take any action with
respect to the Registrable Notes as a class that would adversely affect the
ability of the Holders of Registrable Notes to include such Registrable Notes in
a registration undertaken pursuant to this Agreement.
(c) 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, otherwise than with
the prior written consent of (I) the Company, and (II)(A) the Holders of not
less than a majority in aggregate principal amount of the then outstanding
Registrable Notes and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; provided, however, that Section 7 and this Section
10(c) may not be amended, modified or supplemented without the prior written
consent of each Holder, each Placement Agent, and each Participating
Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be,
disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. 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 of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) Notices. All notices and other communications
(including, without limitation, any notices or other communications to the
Trustee) provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or facsimile:
(i) if to a Holder or any Participating Broker-
Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture;
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<PAGE> 35
(ii) if to the Company, at the following address:
100 Crystal A Drive
Hershey, PA 17033-0810
Telephone No.: (717) 534-6711
Facsimile No.: (717) 534-7643
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New, York 10022
Attention: J. Gregory Milmoe, Esq.
Telephone No.: (212) 735-3000
Facsimile No.: (212) 735-2000
and
Joseph Littlejohn & Levy
450 Lexington Avenue, Suite 350
New York, NY 10017
Attention: David Ying
Telephone No.: (212) 286-8600
Facsimile No.: (212) 286-8626
(iii) If to a Placement Agent, at the following
address:
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Attention: Andrew Earls
Telephone No.: (212) 761-1278
Facsimile No.: (212) 761-0587
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attention: Eric Berg
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<PAGE> 36
Telephone No.: (212) 819-8200
Facsimile No.: (212) 354-8113
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; one Business
Day after being timely delivered to a next-day air courier, and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in the Indenture.
(e) Successor and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto, the Holders and the Participating Broker-Dealers.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. 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
36
<PAGE> 37
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.
(j) Securities Held by the Company or Its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company
or its affiliates shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(k) Third-Party Beneficiaries. Holders of Registrable
Notes and Participating Broker-Dealers are intended third-party beneficiaries of
this Agreement, and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the
Placement Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Holders
on the one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby. IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first written above.
NEW WORLD PASTA COMPANY
By /s/ James A. Bohenick
Name: James A. Bohenick
Title: Vice President, Finance, and Chief
Financial Officer
PASTA GROUP, L.L.C.
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<PAGE> 38
By /s/ James A. Bohenick
Name: James A. Bohenick
Title: Vice President, Finance, and Chief
Financial Officer
WINCHESTER PASTA, L.L.C.
By /s/ James A. Bohenick
Name: James A. Bohenick
Title: Vice President, Finance, and Chief
Financial Officer
Confirmed and accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
SCOTIA CAPITAL MARKETS (USA) INC.
By: MORGAN STANLEY & CO. INCORPORATED
By /s/David J. Frey
Name: David J. Frey
Title: Vice President
38
<PAGE> 1
EXHIBIT 4.6
[FORM OF FACE OF EXCHANGE NOTE]
[IF THIS NOTE IS A GLOBAL NOTE, INSERT THE FOLLOWING LEGEND.]
THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY 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 DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
$ No._________
Cusip No._______
NEW WORLD PASTA COMPANY
9 1/4% Senior Subordinated Exchange Note Due 2009
NEW WORLD PASTA COMPANY, a Delaware corporation, promises to
pay to ________, or registered assigns, the principal sum of __________ Dollars
on February 15, 2009.
Interest Payment Dates: February 15 and August 15
Interest Record Dates: February 1 and August 1
Additional provisions of this Note are set forth on the other
side of this Note.
NEW WORLD PASTA COMPANY
By:
Name:
Title:
By:
Name:
Dated: Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Notes
referred to in the Indenture.
By:
Authorized Signatory
<PAGE> 2
[FORM OF REVERSE OF EXCHANGE NOTE]
9 1/4% Senior Subordinated Exchange Note Due 2009
1. Interest
NEW WORLD PASTA COMPANY, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
unpaid principal amount of this Note at the Applicable Interest Rate.
The Company will pay interest on each Interest Payment Date,
beginning August 15, 1999. Interest shall accrue from the most recent date to
which interest has been paid, or, if no interest has been paid, from the date of
issuance of this Note.
Interest will be computed on the basis of a 360-day year
composed of twelve 30-day months. The Company shall pay interest on overdue
principal at the rate per annum that is 2% in excess of the Applicable Interest
Rate from the date of such nonpayment until the amount not so paid is paid in
full (as well after as before judgment).
"Applicable Interest Rate" means 9.25% per annum.
2. Method of Payment
The Company will pay interest on the Notes (except defaulted
interest) to the Persons who are registered Noteholders at the close of business
on the relevant Interest Record Date even if Notes are canceled after such
Interest Record Date and on or before such Interest Payment Date; provided, that
payments of interest on a Redemption Date, Purchase Offer Payment Date or the
Final Maturity Date shall be made to the Person to whom principal is paid.
Noteholders must surrender Notes to a Paying Agent to collect principal
payments. The Company will pay principal and interest in U.S. Legal Tender.
However, the Company may pay principal and interest by check payable in such
money. It may mail an interest check to a Noteholder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company
may have one or more co-registrars or one or more additional Paying Agents. The
Company or any Guarantor may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Notes under an Indenture dated as of
February 19, 1999 ("Indenture"), among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "TIA"). Terms defined in the Indenture and not defined herein have
the meanings ascribed thereto in the Indenture. The Notes are subject to all
such terms, and Noteholders are referred to the Indenture and the TIA for a
statement of those terms.
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<PAGE> 3
The Notes are general unsecured obligations of the Company.
The Indenture imposes certain limitations on the Incurrence of Indebtedness by
the Company, the Incurrence of Indebtedness and Preferred Stock by certain of
its Subsidiaries, investments, the payment of dividends and other distributions
and acquisitions or retirements of the Capital Stock of the Company and certain
of its Subsidiaries, certain repayments, purchases or redemptions of
subordinated obligations, the sale or transfer of assets and Subsidiary stock,
transactions with Affiliates, the lines of business in which the Company or
certain of its Subsidiaries may operate and the ability of the Company to merge
with or into another entity. In addition, the Indenture limits the ability of
the Company and its Subsidiaries to restrict distributions and dividends from
Subsidiaries and requires the Company, under certain circumstances, to offer to
purchase Notes. The limitations are subject to a number of important
qualifications and exceptions.
5. Optional Redemption
The Company may not optionally redeem this Note in whole at
any time or in part at any time prior to February 15, 2004. Beginning on
February 15, 2004, this Note shall be redeemable in whole or in part for an
amount equal to the following amounts, expressed as a percentage of the
principal amount of the Notes to be redeemed, if redeemed during the 12-month
period commencing on February 15 of the years set forth below, plus accrued and
unpaid interest and Liquidated Damages, if any, to the Redemption Date:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----
<S> <C>
2004.................................................................. 104.6250%
2005.................................................................. 103.0833%
2006.................................................................. 101.5417%
2007.................................................................. 100.0000%
</TABLE>
(b) At any time, or from time to time, on or prior to February
15, 2002, the Company may, at its option, redeem up to 35% of sum of (i) the
initial aggregate principal amount of Notes issued in the Offering and (ii) the
respective initial aggregate principal amount of Initial Notes originally issued
under the Indenture after the Issue Date pursuant to clause (i) of the first
sentence of the fourth paragraph of Section 2.02 of the Indenture with Net Cash
Proceeds of one or more Equity Offerings, at a redemption price equal to
109.25% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of redemption; provided,
however, that at least 65% of the sum of (i) initial aggregate principal amount
of Notes issued in the Offering and (ii) the respective initial aggregate
principal amounts of Initial Notes issued under the Indenture after the Issue
Date pursuant to clause (i) of the first sentence of the fourth paragraph of
Section 2.02 of the Indenture, remain outstanding immediately after each such
redemption. In order to effect the foregoing redemption with the proceeds of any
Equity Offering, the Company shall make such redemption not more than 120 days
after the consummation of any such Equity Offering.
6. Mandatory Offers to Purchase with Proceeds of Asset Sales
Pursuant to the requirements of the Indenture, the Company
must make certain Offers to Purchase Notes (including this Note) at par plus
accrued and unpaid interest and Liquidated Damages, if any, with the Net Cash
Proceeds from certain Asset Sales; provided that such Net Cash Proceeds need
3
<PAGE> 4
not be applied to make Offers to Purchase the Notes to the extent that such Net
Cash Proceeds are applied to make certain repayments of Indebtedness or to make
certain investments, in each case in accordance with the requirements of Section
4.10 of the Indenture.
7. Change of Control Put Provisions
Upon a Change of Control, any Noteholder will have the right,
subject to certain conditions, to cause the Company to repurchase all or any
part of the Notes of such Noteholder at a price equal to 101% of the principal
amount of the Notes to be repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of repurchase as provided in, and
subject to the terms of, the Indenture.
8. Subordination
The Notes are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Notes may be paid. The Company agrees, and each
Noteholder by accepting a Note agrees, to the subordination provisions contained
in the Indenture and authorizes the Trustee to give it effect and appoints the
Trustee as attorney-in-fact for such purpose.
9. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A Noteholder may
transfer or exchange Notes in accordance with the Indenture. The Registrar may
require a Noteholder, among other things, to furnish appropriate endorsements
or transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not register the transfer of or exchange
any Notes selected for redemption (except, in the case of a Note to be redeemed
in part, the portion of the Note not to be redeemed) or any Notes for a period
of 15 business days before a mailing of a notice of an offer to repurchase or
redeem Notes or 15 business days before an interest payment date.
10. Persons Deemed Owners
The registered Noteholder may be treated as the owner of it
for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Noteholders entitled to the money must
look only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Notes and the Indenture if
the Company deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations for the payment of principal and interest on the Notes to redemption
or maturity, as the case may be.
13. Amendment, Waiver
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<PAGE> 5
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Notes may be amended with the written consent of the
Noteholders holding at least a majority in principal amount outstanding of the
Notes and (ii) any default or noncompliance with any provision may be waived
with the written consent of the Noteholders holding a majority in principal
amount outstanding of the Notes. Subject to certain exceptions set forth in the
Indenture, without the consent of any Noteholder, the Company and the Trustee
may amend the Indenture or the Notes to cure any ambiguity, omission, defect or
inconsistency, or to provide for uncertificated Notes in addition to or in place
of certificated Notes, or to add further guarantees with respect to the Notes or
to secure the Notes, or to add additional covenants or Events of Default or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the TIA, or
to evidence the succession of another Person to the Company or any Guarantor and
the assumption by such successor of the covenants of the Company or any
Guarantor in the Indenture or in the Notes, or to evidence and provide for the
acceptance of an appointment under the Indenture by a successor Trustee, or to
release any Guarantor from its Subsidiary Guarantee in accordance with the
provisions of the Indenture.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest or Liquidated Damages in respect of the Notes;
(ii) default in payment of principal on the Notes at maturity, upon redemption,
upon declaration or otherwise, or failure by the Company to redeem or purchase
Notes when required; (iii) failure by the Company to comply with other
agreements in the Indenture or the Notes, and continuance of such default for 30
days after written notice thereof to the Company; (iv) any Subsidiary Guarantee
of a Significant Restricted Subsidiary ceases to be in full force and effect, or
such Subsidiary Guarantee is declared to be null, void or unenforceable, or if
such Subsidiary Guarantee is found to be invalid, or the Guarantor denies its
liability under such Subsidiary Guarantee (other than by reason of the release
of such Guarantor from its obligations in accordance with the terms of the
Indenture); (v) certain accelerations, and failures to pay, other Indebtedness
of the Company if the amount accelerated (or so unpaid) exceeds $10,000,000;
(vi) certain events of bankruptcy or insolvency with respect to the Company, its
Significant Restricted Subsidiaries; and (vii) certain judgments or decrees for
the payment of money in excess of $10,000,000. If an Event of Default occurs and
is continuing, the Trustee or the Noteholders holding of at least 25% in
principal amount of the Notes may declare all the Notes to be due and payable
immediately. Certain events of bankruptcy or insolvency relating to the Company
are Events of Default which will result in the Notes being due and payable
immediately upon the occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, including the
right of the Trustee to refuse to enforce the Indenture or the Notes unless it
receives indemnity or security satisfactory to it, Noteholders holding a
majority in principal amount of the Notes may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Noteholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is in the interest of the Noteholders.
15. Trustee Dealings with the Company
Subject to certain limitations, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company or its Affiliates with
the same rights it would have if it were not Trustee.
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<PAGE> 6
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each Noteholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
17. Authentication
This Note shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
18. Abbreviations
Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as TEN COM (=tenants in common), TENENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
19. 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 Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. GOVERNING LAW
THE 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 Company will furnish to any Noteholder upon written
request and without charge to the Noteholder a copy of the Indenture which has
in it the text of this Note in larger type. Requests may be made to:
New World Pasta Company
c/o Hershey Foods Corporation
Corporate Headquarters
100 Crystal A Drive
Hershey, PA 17033-0810
Attention: James Bohenick
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<PAGE> 7
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________ agent to transfer this Note on the books of
the Company. The agent may substitute another to act for him.
Date:_________________ Your
Signature:__________________________
Sign exactly as your name appears on
the other side of this Note.
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<PAGE> 1
EXHIBIT 10.1
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT ("Agreement"), dated as of January
28, 1999, is among New World Pasta Company, a Delaware corporation (the
"Company"), New World Pasta, LLC, a Delaware limited liability company ("New
World"), Miller Pasta, LLC, a Delaware limited liability company ("Miller
Pasta"), and Hershey Chocolate & Confectionery Corporation, a Delaware
corporation ("Hershey") (each of New World, Miller Pasta and Hershey being
referred to herein as a "Stockholder" and collectively being referred to herein
as the "Stockholders"), and, solely for purposes of Sections 2.02(c) and 4.01(c)
hereof, the Miller Pasta Controlling Members (as defined herein).
W I T N E S S E T H
WHEREAS, Hershey, the Company, New World and certain other
entities have entered into a Recapitalization Agreement dated as of December 15,
1998, as amended (the "Recapitalization Agreement");
WHEREAS, pursuant to the Recapitalization Agreement, prior to or
at the closing on the date of this Agreement of the transactions contemplated
thereby, Hershey has, among other things, (i) transferred, or caused to be
transferred, certain assets, subject to certain liabilities, to the Company and
(ii) caused the Company to be recapitalized (collectively, the "Transactions"),
all in accordance with the terms and conditions set forth in the
Recapitalization Agreement;
WHEREAS, as a result of the Transactions, each Stockholder owns
(i) the number of shares of common stock, par value $.01 per share, of the
Company ("Company Common Stock") set forth in column A opposite such
Stockholder's name on Exhibit B hereto and (ii) the number of shares of 12%
Cumulative, Redeemable Preferred Stock par value $.01 per share, of the Company
("Company Preferred Stock") set forth in column B opposite such Stockholder's
name on Exhibit B hereto; and
WHEREAS, in connection with the Transactions, the Company and
each Stockholder desire to enter into this Agreement, all in accordance with the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereby agree as follows:
<PAGE> 2
ARTICLE I
Certain Definitions
For purposes of this Agreement, the following capitalized terms
shall have the following meanings:
(a) "Affiliate" shall have the meaning set forth in Rule
405 promulgated under the Securities Act.
(b) "Commission" shall mean the United States Securities
and Exchange Commission or any successor agency.
(c) "Credit Agreement" shall mean the Credit Agreement
dated as of January 28, 1999 (the "Initial Credit Agreement") among the Company
as borrower, various financial institutions as lenders, certain financial
institutions as co-agents, Morgan Stanley Senior Funding, Inc. as syndication
agent and The Bank of Nova Scotia, as amended, modified, supplemented, refunded,
refinanced, restructured, renewed, repaid, restated, substituted or replaced
from time to time (whether in whole or in part), including, without limitation,
any other credit agreement providing for revolving credit loans, term loans
and/or letters of credit between the Company and one or more lenders and agents
(whether with the original lenders and agents under the Initial Credit Agreement
or otherwise).
(d) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
(e) "Initial Public Offering" shall mean (i) the first
registration statement filed under the Securities Act (other than (A) a
registration statement filed on Form S-4 or any successor form or (B) a
registration statement filed on Form S-8 or any successor form) with respect to
an underwritten offering, whether primary or secondary, of shares of Company
Common Stock is declared effective by the Commission and (ii) any such
securities so registered are issued and sold pursuant thereto.
(f) "Market Value" shall mean the average of the closing
sale prices of the Company Common Stock (as reported on the principal national
securities exchange on which the Company Common Stock is then listed, which for
these purposes includes the Nasdaq Stock Market) during each of the five (5)
consecutive trading days ending on the trading day immediately prior to the
date of any Demand.
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<PAGE> 3
(g) "Permitted Transferee" shall mean, with respect to any
Person: (i) any descendant of such Stockholder; (ii) the Company; (iii) in the
case of any such Person that is a partnership, limited liability company,
corporation or trust, the partners of a partnership that is such Person, the
members of a limited liability company that is such Person, the stockholders of
a corporation that is such Person, the beneficiaries of a trust that is such
Person, or a successor partnership all of the partners of which, or a successor
limited liability company all of the members of which, or a successor
corporation all of the stockholders of which, are the Persons who were the
partners of such partnership, members of such limited liability company, or the
stockholders of such corporation or the beneficiaries of such trust, immediately
prior to the distribution by such Person; (iv) a transferee by testamentary or
intestate disposition; (v) a transferee by inter vivos transfer to the
transferring Person's spouse, children and/or other lineal descendants or any
trusts or limited partnerships or other entities established solely for the
benefit of such Persons; (vi) a successor nominee or trustee for the beneficial
owner for which such Person acts as nominee or trustee, as the case may be;
(vii) the lenders (or any agent acting on their behalf) under the Credit
Agreement pursuant to a pledge of the Stockholder's Shares to secure the
Company's obligations in connection with the Credit Agreement and, after
foreclosure thereon by such lenders (or agent), any transferee or transferees of
such lenders (or agent); (viii) subject to New World's consent (which shall not
be unreasonably withheld or delayed), any Affiliate of such Person, which such
Person controls; or (ix) solely with respect to Hershey, Hershey Foods
Corporation, a Pennsylvania corporation ("HFC"), and any one or more controlled
subsidiaries of HFC.
(h) "Person" shall mean any individual, firm, partnership,
limited liability company, corporation or other entity, and shall include any
successor (by merger or otherwise) of any such entity.
(i) "Registrable Securities" shall mean (i) the shares of
Company Common Stock owned by each Stockholder on the date hereof, as set forth
opposite each Stockholder's name on Exhibit B hereto, and (ii) all additional
shares of Company Common Stock acquired by each such Stockholder (and, in the
case of Miller Pasta, the members of such Stockholder who are officers or
directors of the Company) after the date hereof. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (i) a registration statement registering such securities under the
Securities Act has been declared effective and such securities have been sold or
otherwise transferred by the holder thereof pursuant to such effective
registration statement, (ii) such securities are sold in accordance with Rule
144 (or any successor provision) promulgated under the Securities Act or (iii)
such securities are transferred under circumstances in which all legends borne
by the certificates for such securities relating to restrictions on
transferability thereof, whether under the Securities Act or otherwise, are
removed by the Company.
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(j) "Requisite Amount" shall mean Registrable Securities
having an aggregate Market Value as of the date of any Demand (as hereinafter
defined) of at least $2.5 million.
(k) "Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
(l) "Shares" shall mean the shares of Company Common Stock
and Company Preferred Stock owned by each Stockholder on the date hereof, as set
forth opposite each such Stockholder's name on Exhibit B hereto, and all
additional shares of Company Common Stock and Company Preferred Stock acquired
by any Stockholder (and, in the case of Miller Pasta, the members of such
Stockholder who are officers or directors of the Company) after the date hereof.
(m) "Transfer" shall mean any voluntary or involuntary
attempt, directly or indirectly through the transfer of interests in controlled
Affiliates or otherwise, to offer, transfer, sell, assign, pledge, hypothecate
or otherwise dispose of any Shares, or the consummation of any such transaction,
or the soliciting of any offer to purchase or otherwise acquire, or take a
pledge of, any of the Shares, other than hedging or other derivative
transactions that hedge or otherwise relate to investment risks in respect of
any of the Shares.
ARTICLE II
Representations and Warranties; Certain Covenants
Section 2.01 Representations and Warranties of the Company.
The Company represents and warrants to each Stockholder, as of
the date hereof, as follows:
(a) Corporate Authority. The Company has full power and
authority to execute, deliver and perform this Agreement;
(b) Due Authorization. This Agreement has been duly and
validly authorized, executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that (i) the enforceability hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting creditors' rights, (ii) the remedy of
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<PAGE> 5
specific performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the court before
which any proceedings therefor may be brought, and (iii) the rights to indemnity
hereunder may be limited by federal or state securities laws or the public
policy underlying such laws;
(c) No Conflict. The execution, delivery and performance
of this Agreement by the Company do not violate or conflict with or constitute a
default under (i) the Company's certificate of incorporation or by-laws, (ii)
any judgment, order or decree, or statute, law, ordinance, rule or regulation,
of any governmental entity applicable to the Company or (iii) any material
agreement to which it is a party or by which it or its property is bound;
(d) Registration Rights. Except as provided herein, no
other party is entitled to any registration or similar right with respect to any
securities of the Company; and
(e) Voting Agreements. Except as set forth herein, the
Company is not aware of any voting trust, voting agreement or arrangement with
respect to any of its voting securities.
Section 2.02 Representations and Warranties of the Stockholders and Members.
(a) Each Stockholder individually represents and warrants
to each other Stockholder and the Company as follows:
(i) Corporate Authority. The Stockholder has full
power, capacity and authority to execute, deliver and perform this Agreement;
(ii) Due Authorization. This Agreement has been
duly and validly authorized, executed and delivered by the Stockholder and
constitutes a valid and binding obligation of the Stockholder, enforceable
against the Stockholder in accordance with its terms, except that (A) the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect affecting creditors'
rights, (B) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to certain equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought,
and (C) the rights to indemnity and contribution hereunder may be limited by
federal or state securities laws or the public policy underlying such laws; and
(iii) No Conflict. The execution, delivery and
performance of this Agreement by the Stockholder do not violate or conflict with
or constitute a default under (A) the Stockholder's organizational documents,
(B) any judgment, order or decree or statute,
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<PAGE> 6
law, ordinance, rule or regulation of any governmental entity applicable to the
Stockholder, or (C) any material agreement to which it is a party or by which it
or its property is bound.
(b) Miller Pasta represents and warrants to each other
Stockholder and the Company that, as of the date hereof, other than those
Persons listed on Exhibit A, no other Person, whether directly or indirectly, is
a member of, or owns any equity interest in, Miller Pasta, or any right that is
exercisable for, convertible into or exchangeable for any such interest, or has
any right, whether direct or indirect, to become such a member or acquire any
such interest or right.
(c) Each Miller Pasta Controlling Member individually
represents and warrants to each Stockholder, the Company and each other such
member, as of the date hereof, as follows:
(i) Authority. Such member has full power, capacity
and authority to execute, deliver and perform this Agreement;
(ii) Due Authorization. This Agreement has been
duly and validly authorized, executed and delivered by such member and
constitutes a valid and binding obligation of, enforceable against such member
in accordance with its terms, except that (i) the enforceability hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting creditors' rights, (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the court before
which any proceedings therefor may be brought, and (iii) the rights to indemnity
and contribution hereunder may be limited by federal or state securities laws or
the public policy underlying such laws; and
(iii) No Conflict. The execution, delivery and
performance of this Agreement by such member do not violate or conflict with or
constitute a default under (A) any judgment, order or decree or statute, law,
ordinance, rule or regulation of any governmental entity applicable to such
member, or (B) any material agreement to which he or it is a party or by which
he or it or his or its property is bound.
Section 2.03 Covenants.
The Company covenants to each Stockholder that it will from and
after the Initial Public Offering, timely file all reports required to be filed
by it under the Exchange Act, and if at any time the Company is not required to
file such reports, it will take such further action as a Stockholder may
reasonably require, including, without limitation, supply and make publicly
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<PAGE> 7
available any other information in the possession of or reasonably obtainable by
the Company, with the purpose of allowing such holder to avail itself of Rule
144 of the Securities Act or any other rule or regulation of the Commission
allowing it to sell securities without registration under the Securities Act.
Upon the request of any Stockholder, the Company will deliver to such
Stockholder a written statement as to its compliance with such filing
requirements.
ARTICLE III
Board of Directors
Section 3.01 Composition.
(a) Members. Each Stockholder (other than Hershey) shall
use its best efforts to cause the Board initially to consist of seven (7)
members, of which: (i) four (4) members shall be designees of New World ("New
World Directors"); (ii) two (2) members shall be designees of Miller Pasta, who
shall initially be John C. Miller and Michael L. Snow (the "Miller Pasta
Directors"); and (iii) one (1) member shall be the Chief Executive Officer of
the Company, who shall initially be C. Mickey Skinner. During the Term of this
Agreement, the number of directors may be increased with the Board having
authority to appoint individuals to fill such new director positions; provided,
however, that such additional directors, including any successors thereof, shall
be appointed by a majority of both the New World Directors and the Miller Pasta
Directors, voting separately; and provided further that (i) notwithstanding any
provision hereof to the contrary, C. Mickey Skinner shall have the right to
serve as a director of the Company through the fifth anniversary of the date of
this Agreement and (ii) directors designated solely by New World, including the
New World Directors, shall at all times during the Term constitute a majority of
the Board. During the term of this Agreement and subject to the fiduciary duties
of the Board, the Company shall use its best efforts and shall exercise all
authority under applicable law to nominate for election and cause to be elected
or appointed, as the case may be, as directors of the Company a slate of
directors consisting of individuals meeting the requirements of the previous
sentence.
(b) Compensation Committee. The Board shall establish a
compensation committee of the Board (the "Compensation Committee") which shall
consist of no less than one Miller Pasta Director. Initially, Mr. Snow shall
serve as a member of the Compensation Committee.
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(c) Removal. No Stockholder (other than Hershey) shall
take any action to cause the removal of any director designated by any other
Stockholder hereunder other than for cause (as determined by a court of
competent jurisdiction).
(d) Vacancies. If at any time a vacancy is created on the
Board by reason of the death, removal or resignation of any director who was
nominated and elected as a director pursuant to Section 3.01(a) above or this
Section 3.01(d), the Stockholders (other than Hershey) shall, as soon as
practicable, vote their shares of Company Common Stock or act by written consent
with respect to such Shares to elect the Person designated to fill such vacancy
or vacancies by the Stockholder who designated such former director to fill such
vacancy for the unexpired term of the director whom such Person is replacing.
The majority of the directors then comprising the Board shall have the right to
designate nominees to be elected to the Board for any available directorship as
to which no Stockholder has the right to designate a nominee pursuant to Section
3.01(a) hereof.
(e) Decrease in Shares Held. Notwithstanding anything to
the contrary in this Section 3.01, in the event that any Stockholder entitled
pursuant to Section 3.01(a) to designate one or more individuals for nomination
and election to the Board shall, together with its Affiliates, cease to own at
least 25% of the Shares owned by such Stockholder on the date hereof, subject to
Section 7.13 hereof, such Stockholder shall no longer have any right pursuant to
this Agreement to designate any nominee for election to the Board.
(f) Voting Agreement. Each Stockholder (other than
Hershey) agrees that, during the Term of this Agreement, (i) it will be present,
in person or represented by proxy, at all stockholder meetings of the Company
for the election of directors, so that all shares of Company Common Stock
beneficially owned by it shall be counted for the purpose of determining the
presence of a quorum for the election of directors at such meetings and (ii) it
shall vote, or act by consent with respect to, all shares of Company Common
Stock beneficially owned by it for the election of the nominees for the Board
nominated by the Board so long as such nominees consist of individuals meeting
the requirements of this Section 3.01. Except as specifically set forth in this
Section 3.01, each Stockholder shall be entitled to vote its shares of Company
Common Stock on all other matters as it deems fit.
(g) Consultation. New World shall cause the New World
Directors to consult with, and provide an opportunity to participate in
discussions to, the Miller Pasta Directors, with respect to all material
acquisitions, dispositions, mergers, business combinations or similar
transactions involving the Company or any of its subsidiaries and amendments to
the Certificate of Incorporation or By-laws of the Company, prior to approving
any such transaction or amendment.
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ARTICLE IV
Restrictions on Transfer
Section 4.01 General Restrictions.
(a) Except as set forth in Section 4.01(b), 4.04 and 4.05
hereof, no Stockholder (other than New World) may Transfer any Shares during the
Term of this Agreement except for Transfers (i) to any of its Permitted
Transferees (provided, however, that prior to any Transfer of Shares, such
Permitted Transferee (other than a Permitted Transferee described in clause
(vii) of the definition thereof) shall agree in writing to take such Shares
subject to, and to comply with, all of the provisions of this Agreement, a copy
of which agreement shall be filed with the Secretary of the Company and shall
include the address of such transferee to which notices hereunder shall be
sent), (ii) pursuant to any offer, including a tender or exchange offer, by any
Person (including the Company) to purchase all of the outstanding shares of
Company Common Stock, which offer has been approved by the Board, (iii) pursuant
to any transaction requiring the approval of the holders of at least a majority
of the shares of outstanding Company Common Stock and as to which the requisite
approval of the Stockholders shall have been obtained, and (iv) at any time
after 180 days following the consummation of the Initial Public Offering (the
"Initial Sale Date"), (A) of shares of Company Common Stock by Miller Pasta to
members of Miller Pasta, other than to Messrs. C. Mickey Skinner, John Miller
and Michael Snow and Miller Milling Company (such members being collectively
referred to herein as the "Miller Pasta Minority Members"), (B) of shares of
Company Common Stock by the Miller Pasta Minority Members and (C) of shares of
Company Common Stock by Hershey.
(b) (i) Notwithstanding the provisions of Section 4.01(a)
hereof, following the Initial Sale Date, each of Messrs. C. Mickey Skinner, John
Miller and Michael Snow and Miller Milling Company (collectively, the "Miller
Pasta Controlling Members") shall be permitted to Transfer, pursuant to a
registration statement filed under Article V hereof or otherwise, the following
percentage of the shares of Company Common Stock indirectly owned by such Person
as of the date hereof, as a result of such Person's membership interest in
Miller Pasta or its members, during the time periods indicated below:
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<PAGE> 10
<TABLE>
<CAPTION>
Aggregate Percentage of Shares
of Company Common Stock
indirectly owned by each of the
Miller Pasta Controlling Members
on the date hereof that may be
Time Period Transferred
----------- -----------
<S> <C>
The Initial Sale Date 35%
to
the second anniversary thereof
The Initial Sale Date 50
to
the sixth anniversary thereof
thereafter 75
</TABLE>
(ii) Each Miller Pasta Controlling Member shall
provide the Company and New World with written notice of any Transfer proposed
to be made pursuant to Section 4.01(b) hereof no less than five business days
prior to such Transfer.
(iii) In addition, the Miller Pasta Controlling
Members may Transfer additional shares of Company Common Stock if approved by
New World in its sole and absolute discretion.
(c) Each Miller Pasta Controlling Member agrees not to,
and not to permit any member of Miller Pasta, as listed on Exhibit A-1, to,
Transfer any equity interest in Miller Pasta, or any successor thereof (whether
by merger or otherwise), during the Term of this Agreement, except for Transfers
(i) to Permitted Transferees who agree to acquire such interest subject to the
provisions of this Section 4.01(c), (ii) of up to $1,400,000 of membership
interests by Miller Milling Company to its employees or other representatives
and (iii) in the case of the Miller Pasta Minority Members, to such other
transferees as may be approved by New World, which approval may not be
unreasonably withheld or delayed.
(d) Notwithstanding the foregoing, the restrictions on
Transfer contained in this Section 4.01 shall terminate and cease to exist in
the event that (i) New World is no longer controlled by any of Messrs. Paul
Levy, Jeffrey Lightcap or David Ying or (ii) shares
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<PAGE> 11
of Company Common Stock are distributed to the limited partners of Joseph
Littlejohn & Levy Fund III, L.P.
Section 4.02 Compliance with Securities Laws.
Each Stockholder agrees that every Transfer of its Shares shall
comply with all federal and state securities laws applicable to such
transaction. At the request of the Company, the transferring Stockholder shall
deliver to the Company an opinion of counsel, which counsel and opinion shall be
reasonably satisfactory to the Company, to the effect that the Transfer
satisfies this Section 4.02.
Section 4.03 Transfers Not In Compliance.
In the event of any purported Transfer by a Stockholder or a
member of Miller Pasta, as the case may be, that does not comply with this
Agreement, the purported transferee or successor by operation of law shall not
be deemed to be a stockholder of the Company or a member of Miller Pasta, as the
case may be, for any purpose and shall not be entitled to any of the rights of a
stockholder or member, as the case may be, including, without limitation, the
right to vote the Shares or interests or to receive a certificate for the Shares
or interests or any dividends or other distributions on or with respect to the
Shares or interests.
Section 4.04 Tag-Along Rights.
(a) Except as provided below, if New World proposes to
directly or indirectly Transfer for value any of its Shares to a Person (other
than to Persons described in clause (iii) of the definition of Permitted
Transferee of New World), New World shall provide each other Stockholder (each,
a "Notice Recipient") and the Company with not less than twenty (20) business
days' prior written notice of such proposed sale, which notice shall include all
of the material terms and conditions of such proposed sale and which shall
identify such Shares and such purchaser (the "Sale Notice"); and each Notice
Recipient shall have the option, exercisable by written notice to New World
within ten (10) business days after receipt of the Sale Notice, to require New
World to arrange for such purchaser to purchase the same percentage (the
"Percent age") of such Shares then owned by such Notice Recipient as the ratio
of the total number of such Shares which are to be sold by New World pursuant to
the proposed sale to the total number of such Shares owned by New World
immediately prior to such Transfer, or any lesser amount of such Shares as such
Notice Recipient shall desire, together with New World's Shares at the same time
as, and upon the same terms and conditions (including all direct or indirect
consideration or compensation) at which, New World sells its Shares. If a Notice
Recipient shall so elect, New World shall either (a) arrange for the proposed
purchaser to purchase all (or such portion as such
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<PAGE> 12
Notice Recipient shall specify) of the same Percentage of such Shares then owned
by such Notice Recipient at the same time as, and upon the same terms and
conditions at which New World sells its Shares, including any related covenant
not to compete or similar restriction, provided that, if such purchaser shall
elect to purchase only such aggregate number of such Shares as originally agreed
with New World, then the number of such Shares to be sold by New World and all
Notice Recipients electing to participate in the proposed sale shall be reduced
pro rata to such aggregate number, or (b) not effect the proposed sale to such
purchaser. In the event that a Notice Recipient does not exercise its right to
participate in such sale or declines to so participate, New World shall have 120
days from the date of such Sale Notice to consummate the transaction on terms
substantially no more favorable than those set forth therein without being
required to provide an additional Sale Notice to the other Stockholders.
(b) Each of the Stockholders hereby acknowledges and
agrees that (i) New World and Miller Pasta may pledge all of the Shares owned by
it to the Permitted Transferees described in clause (vii) of the definition of
Permitted Transferees, and (ii) notwithstanding anything to the contrary
contained herein, any Transfer to the Permitted Transferees described in clause
(vii) of the definition of Permitted Transferees shall be made free and clear of
the provisions of this Agreement (including, without limitation, all
restrictions and rights in connection with Transfers).
Section 4.05 Drag-Along Rights.
If at any time New World proposes to directly or indirectly
Transfer for value all or substantially all of its Shares to a Person (other
than to Persons described in clause (iii) of the definition of Permitted
Transferee or to an Affiliate of New World), New World shall have the right,
upon not less than twenty (20) business days' prior written notice of such
proposed sale (the "Purchase Notice"), which notice shall include all of the
material terms and conditions of such proposed sale and which shall identify
such Shares and the proposed purchaser, to require each other Stockholder to
sell to such purchaser that number of such Shares ("Stockholder Call Shares")
equal to the product, rounded down to the nearest whole number, of (a) a
fraction, the numerator of which is the number of such Shares to be sold by New
World and the denominator of which is the number of such Shares then owned by
New World, multiplied by (b) the number of such Shares then owned by the
Stockholder, or any lesser number of such Shares as New World shall desire. If
New World shall so elect, New World shall arrange for such purchaser to purchase
the Stockholder Call Shares at the same time as, and upon the same terms and
conditions (including all direct or indirect consideration or compensation),
including any related covenant not to compete or similar restriction, at which
New World sells its Shares. Upon receipt of the Purchase Notice, the Stockholder
shall cooperate with New World and otherwise take, or cause to be taken, all
reasonable actions and do, or cause to be done, all things reason-
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ably necessary and appropriate to so enter into, consummate and make effective
the sale and purchase of the Stockholder Call Shares, together with New World's
Shares. Notwithstanding any provision hereof to the contrary, from and after the
date on which New World consummates a Transfer subject to this Section 4.05, (a)
the Stockholder shall have no rights of a stockholder with respect to the
Stockholder Call Shares sold and purchased in such transaction and (b) the
Stockholder shall not seek, nor shall the Company have any obligation, to
enforce any such right with respect to such Stockholder Call Shares.
Section 4.06 Effect of Notices.
Notwithstanding any provision hereof to the contrary, the giving
to any Stock holder of any Sale Notice or any Purchase Notice shall not obligate
New World to consummate or effect any transaction referred to therein.
ARTICLE V
Registration Rights
Section 5.01 Demand Registrations.
(a) Requests for Registration. At any time after the
Initial Sale Date, subject to the conditions set forth herein (including the
provisions of Article IV hereof), Stockholders (other than Hershey) holding the
Requisite Amount of Registrable Securities shall be entitled to make a written
request of the Company (a "Demand") for registration under the Securities Act of
all or part of the Registrable Securities (a "Demand Registration"). Such Demand
shall specify: (i) the aggregate number of Registrable Securities requested to
be registered, (ii) the intended method of distribution in connection with such
Demand Registration to the extent then known and (iii) the identity of each
Stockholder (a "Demanding holder") requesting such Demand. Within ten (10) days
after receipt of a Demand, the Company shall give written notice of such Demand
to all other Stockholders and shall include in such registration all
Registrable Securities with respect to which the Company has received a written
request for inclusion therein within twenty (20) days after the receipt by such
Stockholder of the Company's notice required by this paragraph.
(b) Number of Demands. Each of (i) New World and (ii)
Miller Pasta shall be entitled to three (3) Demand Registrations; provided,
however, that any of (i) New World or (ii) Miller Pasta that is identified as a
Demanding holder in any Demand Registration shall be deemed to have made a
demand with respect to such Demand Registration.
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(c) Satisfaction of Obligations. A registration shall not
be treated as a permitted Demand for a Demand Registration until (i) the
applicable registration statement under the Securities Act has been filed with
the Commission with respect to such Demand Registration (which shall include any
registration statement that is not withdrawn by holders of Registrable
Securities in the circumstances contemplated by Section 5.03), and (ii) such
registration statement shall have been maintained continuously effective for a
period of at least one hundred and twenty (120) days or such shorter period
during which all Registrable Securities included therein have been disposed of
thereunder in accordance with the method of distribution set forth in such
registration statement.
(d) Availability of Short Form Registrations. The Company
shall use its best efforts to comply with the requirements for use of short form
registration for the sale of Registrable Securities under the Securities Act.
(e) Restrictions on Demand Registrations. The Company
shall not be obligated (i) in the case of a Demand Registration, to maintain the
effectiveness of a registration statement under the Securities Act, for a period
longer than one hundred and twenty (120) days or (ii) to effect any Demand
Registration within one hundred eighty (180) days after the effective date of
(A) a "firm commitment" underwritten registration in which all Stockholders were
given "piggyback" rights pursuant to Section 5.02 hereof (provided that, with
respect to such a registration in which such piggyback rights were exercised,
each such Stockholder exercising such piggyback rights was permitted to include
in such registration all of the Registrable Securities that such Stockholder
sought to include therein) or (B) any other Demand Registration. In addition,
the Company shall be entitled to postpone (upon written notice to all Stock
holders) for up to ninety (90) days the filing or the effectiveness of a
registration statement in respect of a Demand (but no more than once in any
period of twelve (12) consecutive months) if the Board determines in good faith
and in its reasonable judgment that effecting the Demand Registration in respect
of such Demand would have a material adverse affect on any proposal or plan by
the Company to engage in any material debt or equity offering, material
acquisition or disposition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or other similar material
transaction. In the event of a postponement by the Company of the filing or
effectiveness of a registration statement in respect of a Demand, the Demanding
holders shall have the right to withdraw such Demand in accordance with Section
5.03 hereof.
(f) Participation in Demand Registrations. The Company
shall not include any securities other than Registrable Securities in a Demand
Registration, except with the written consent of the holders of ninety percent
of the Registrable Securities sought to be registered pursuant to such Demand
Registration held by all the Demanding holders. If, in
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connection with a Demand Registration, any managing underwriter (or, if such
Demand Registration is not an underwritten offering, a nationally recognized
independent underwriter selected by the Demanding holders of a majority of the
Registrable Securities held by all the Demanding holders (which such underwriter
shall be reasonably acceptable to the Company and whose fees and expenses shall
be borne solely by the Company)) advises the Company and the Demanding holders
of a majority of the Registrable Securities held by all the Demanding holders
that, in its opinion, the inclusion of all the Registrable Securities and, if
authorized pursuant to this Article V, other securities of the Company, in each
case, sought to be registered in connection with such Demand Registration would
adversely affect the marketability of the Registrable Securities sought to be
sold pursuant thereto, then the Company shall include in the registration
statement applicable to such Demand Registration only such securities as the
Company and the holders of Registrable Securities sought to be registered
therein ("Demanding Sellers") are advised by such underwriter can be sold
without such an effect (the "Maximum Demand Number"), as follows and in the
following order of priority:
(i) first, the number of Registrable Securities
sought to be registered by each Demanding Seller and Hershey, pro rata in
proportion to the number of Registrable Securities sought to be registered by
all such sellers; and
(ii) second, if the number of Registrable
Securities to be included under clause (i) above is less than the Maximum Demand
Number, the number of securities sought to be included by each other seller, pro
rata in proportion to the number of securities sought to be sold by all such
other sellers, which in the aggregate, when added to the number of securities to
be included pursuant to clause (i) above, equals the Maximum Demand Number.
(g) Selection of Underwriters. If the Demanding holders of
a majority of the Registrable Securities held by all the Demanding holders
request that such Demand Registration be an underwritten offering, then the
Company shall select a nationally recognized underwriter or underwriters to
manage and administer such offering, such underwriter or underwriters, as the
case may be, to be subject to the approval of the Demanding holders of a
majority of the Registrable Securities held by all the Demanding holders, which
approval shall not be unreasonably withheld or delayed.
(h) Other Registrations. If the Company has received a
Demand and if the applicable registration statement in respect of such Demand
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (other than a registration relating to the Company employee
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benefit plans, exchange offers by the Company or a merger or acquisition of a
business or assets by the Company, including, without limitation, a registration
on Form S-4 or S-8 or any successor form), whether on its own behalf or at the
request of any holder or holders of such securities, until a period of at least
ninety (90) days has elapsed from the effective date of any Demand Registration,
unless a shorter period of time is approved by the Demanding holders of a
majority of the Registrable Securities held by all the Demanding holders.
Notwithstanding the foregoing, the Company shall be entitled to postpone any
such Demand Registration and may file or cause to be effected such other
registration in accordance with the terms of Section 5.01(e) hereof.
Section 5.02 Piggyback Registrations.
(a) Right to Piggyback. At any time after the Initial Sale
Date, whenever the Company proposes to register any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (other than a registration relating to the
Company employee benefit plans, exchange offers by the Company or a merger or
acquisition of a business or assets by the Company including, without
limitation, a registration on Form S-4 or Form S-8 or any successor form) (a
"Piggyback Registration"), subject to the conditions set forth herein (including
the provisions of Article IV hereof), the Company shall give all Stockholders
prompt written notice thereof (but not less than ten (10) business days prior to
the filing by the Company with the Commission of any registration statement with
respect thereto). Such notice (a "Piggyback Notice") shall specify, at a
minimum, the number of securities proposed to be registered, the proposed date
of filing of such registration statement with the Commission, the proposed
method of distribution, the proposed managing underwriter or underwriters (if
any and if known), and a good faith estimate by the Company of the proposed
minimum offering price of such securities. Upon the written request of a Stock
holder given within ten (10) business days of such Stockholder's receipt of the
Piggyback Notice (which written request shall specify the number of Registrable
Securities intended to be disposed of by such Stockholder and the intended
method of distribution thereof), the Company shall include in such registration
all Registrable Securities with respect to which the Company has received such
written requests for inclusion.
(b) Priority on Piggyback Registrations. If, in connection
with a Piggyback Registration, any managing underwriter (or, if such Piggyback
Registration is not an underwritten offering, a nationally recognized
independent underwriter selected by the Company (reasonably acceptable to the
holders of a majority of the Registrable Securities sought to be included in
such Piggyback Registration and whose fees and expenses shall be borne solely by
the Company)) advises the Company and the holders of the Registrable Securities
sought to be included in such Piggyback Registration, that, in its opinion, the
inclusion of all the securities
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sought to be included in such Piggyback Registration by the Company, any Persons
who have sought to have shares registered thereunder pursuant to rights to
demand (other than pursuant to Section 5.01, "piggyback" or other incidental or
participation registration rights) such registration (such demand rights being
"Other Demand Rights" and such Persons being "Other Demanding Sellers"), any
holders of Registrable Securities seeking to sell such securities in such
Piggyback Registration ("Piggyback Sellers") and any other proposed sellers, in
each case, if any, would adversely affect the marketability of the securities
sought to be sold pursuant thereto, then the Company shall include in the
registration statement applicable to such Piggyback Registration only such
securities as the Company, the Other Demanding Sellers, and the Piggyback
Sellers are so advised by such underwriter can be sold without such an effect
(the "Maximum Piggyback Number"), as follows and in the following order of
priority:
(i) if the Piggyback Registration is an offering on
behalf of the Company and not any Person exercising Other Demand Rights (whether
or not other Persons seek to include securities therein pursuant to "piggyback"
or other incidental or participatory registration rights) (a "Primary
Offering"), then (A) first, such number of securities to be sold by the Company
as the Company, in its reasonable judgment and acting in good faith and in
accordance with sound financial practice, shall have determined, and (B) second,
if the number of securities to be included under clause (A) above is less than
the Maximum Piggyback Number, the number of Registrable Securities sought to be
registered by each Piggyback Seller, pro rata in proportion to the number of
Registrable Securities sought to be registered by all the Piggyback Sellers pro
rata in proportion to the Registrable Securities sought to be registered by all
the Piggyback Sellers and all other proposed sellers, which in the aggregate,
when added to the number of securities to be registered under clause (A) above,
equals the Maximum Piggyback Number; and
(ii) if the Piggyback Registration is an offering
other than pursuant to a Primary Offering, then (A) first, such number of
securities sought to be registered by each Other Demanding Seller, pro rata in
proportion to the number of securities sought to be registered by all such Other
Demanding Sellers and (B) second, if the number of securities to be included
under clause (A) above is less than the Maximum Piggyback Number, the number of
Registrable Securities sought to be registered by each Piggyback Seller, pro
rata in proportion to the number of Registrable Securities sought to be
registered by all the Piggyback Sellers and all other proposed sellers, which in
the aggregate, when added to the number of securities to be registered under
clause (A) above, equals the Maximum Piggyback Number.
(c) Withdrawal by the Company. If, at any time after
giving written notice of its intention to register any of its securities as set
forth in Section 5.02 and prior to time the registration statement filed in
connection with such registration is declared effective, the
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Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to each
Stockholder and thereupon shall be relieved of its obligation to register any
Registrable Securities in connection with such particular withdrawn or abandoned
registration (but not from its obligation to pay the Registration Expenses (as
defined below) in connection therewith as provided herein). In the event that
the Piggyback Sellers of such a registration hold the Requisite Amount of
Registrable Securities, such holders may continue the registration as a Demand
Registration. The continuation of such registration shall be counted as a Demand
for all Stockholders who continue as participants in such registration.
Section 5.03 Withdrawal Rights.
Any Stockholder having notified or directed the Company to
include any or all of its Registrable Securities in a registration statement
under the Securities Act shall have the right to withdraw any such notice or
direction with respect to any or all of the Registrable Securities designated
for registration thereby by giving written notice to such effect to the Company
at least five (5) business days prior to the effective date of such registration
statement. In the event of any such withdrawal, the Company shall not include
such Registrable Securities in the applicable registration and such Registrable
Securities shall continue to be Registrable Securities hereunder. No such
withdrawal shall affect the obligations of the Company with respect to the
Registrable Securities not so withdrawn; provided that in the case of a Demand
Registration, if such withdrawal shall reduce the number of Registrable
Securities sought to be included in such registration below the Requisite
Amount, then the Company shall as promptly as practicable give each holder of
Registrable Securities sought to be registered notice to such effect, referring
to this Agreement and summarizing this Section 5.03, and within five (5)
business days following the effectiveness of such notice, either the Company or
the holders of a majority of the Registrable Securities sought to be registered
may, by written notices made to each holder of Registrable Securities sought to
be registered and the Company, respectively, elect that such registration
statement not be filed or, if theretofore filed, be withdrawn. During such five
(5) business day period, the Company shall not file such registration statement
if not theretofore filed or, if such registration statement has been theretofore
filed, the Company shall not seek, and shall use its best efforts to prevent,
the effectiveness thereof. Any registration statement withdrawn or not filed (i)
in accordance with an election by the Company, (ii) in accordance with an
election by the holders of the majority of the Registrable Securities sought to
be registered pursuant to such Demand Registration held by all the Demanding
holders pursuant to Section 5.01(e) hereof, (iii) in accordance with an election
by the holders of the majority of the Registrable Securities sought to be
registered pursuant to such Demand Registration held by all the Demanding
holders prior to the effectiveness of the applicable Demand Registration
Statement or (iv) in accordance with an election by the holders of the majority
of the Registrable
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Securities sought to be registered pursuant to such Demand Registration held by
all the Demanding holders subsequent to the effectiveness of the applicable
Demand Registration Statement, if any post-effective amendment or supplement to
the applicable Demand Registration Statement contains adverse information
regarding the Company shall not be counted as a Demand. Except as set forth in
clause (iv) of the previous sentence, any Demand withdrawn in accordance with an
election by the Demanding holders subsequent to the effectiveness of the
applicable Demand Registration Statement shall be counted as a Demand unless
such Demanding holders reimburse the Company for its reasonable out-of-pocket
expenses (but not including any Internal Expenses, as defined below) related to
the preparation and filing of such registration statement (in which event such
registration statement shall not be counted as a Demand hereunder). Upon the
written request of a majority of such Demanding holders, the Company shall
promptly prepare a definitive statement of such out-of-pocket expenses in
connection with such registration statement in order to assist such holders with
a determination in accordance with the next preceding sentence.
Section 5.04 Holdback Agreements.
Each Stockholder agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144) of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the ten (10) day period prior to the date which the
Company has, or in the case of a Demand Registration, the Demanding holders
have, notified the Stockholders that it or they intend to commence a public
offering through the sixty (60) day period immediately following the effective
date of any Demand Registration or any Piggyback Registration (in each case,
except as part of such registration), or, in each case, if later, the date of
any underwriting agreement with respect thereto; provided, however, that the
Stockholders shall not be obligated to comply with this Section 5.04 on more
than one (1) occasion in any nine (9) month period.
Section 5.05 Registration Procedures.
(a) Whenever the Stockholders have requested that any
Registrable Securities be registered pursuant to this Agreement (whether
pursuant to Demand Registration or Piggyback Registration), the Company (subject
to its right to withdraw such registration as contemplated by Section 5.02(c))
shall use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of distribution
thereof and, in connection therewith, the Company shall as expeditiously as
possible:
(i) prepare and file with the Commission a
registration statement with respect to such Registrable Securities on any form
for which the Company then
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qualifies and is available for the sale of Registrable Securities to be
registered thereunder in accordance with the intended method of distribution and
use its best efforts to cause such registration statement to become effective
within ninety (90) days of the date thereof;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a continuous period of not less than one hundred and
twenty (120) days (or, if earlier, until all Registrable Securities included in
such registration statement have been sold thereunder in accordance with the
method of distribution set forth therein) and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof as set forth in such registration
statement (including, without limitation, by incorporating in a prospectus
supplement or post-effective amendment, at the request of a seller of
Registrable Securities, the terms of the sale of such Registrable Securities);
(iii) before filing with the Commission any such
registration statement or prospectus or any amendments or supplements thereto,
the Company shall furnish to counsel selected by the Demanding holders of a
majority of the Registrable Securities held by the Demanding holders, counsel
for the underwriter or sales or placement agent, if any, and any other counsel
for holders of Registrable Securities, if any, in connection therewith, drafts
of all such documents proposed to be filed and provide such counsel with a
reasonable opportunity for review thereof and comment thereon, such review to be
conducted and such comments to be delivered with reasonable promptness;
(iv) promptly (i) notify and provide copies to each
seller of Registrable Securities of each of (x) the filing and effectiveness of
the registration statement and prospectus and any amendment or supplements
thereto, (y) the receipt of any comments from the Commission or any state
securities law authorities or any other governmental authorities with respect to
any such registration statement or prospectus or any amendments or supplements
thereto, and (z) any oral or written stop order with respect to such
registration, any suspension of the registration or qualification of the sale of
such Registrable Securities in any jurisdiction or any initiation or threat of
any proceedings with respect to any of the foregoing and (ii) use its reasonable
best efforts to obtain the withdrawal of any order suspending the registration
or qualification (or the effectiveness thereof) or suspending or preventing the
use of any related prospectus in any jurisdiction with respect thereto;
(v) furnish to each seller of Registrable
Securities, the underwriters and the sales or placement agent, if any, and
counsel for each of the foregoing, a
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conformed copy of such registration statement and each amendment and supplement
thereto (in each case, including all exhibits thereto and documents incorporated
by reference therein) and such additional number of copies of such registration
statement, each amendment and supplement thereto (in such case without such
exhibits and documents), the prospectus (including each preliminary prospectus)
included in such registration statement and prospectus supplements and all
exhibits thereto and documents incorporated by reference therein and such other
documents as such seller, underwriter, agent or counsel may reasonably request
in order to facilitate the disposition of the Registrable Securities owned by
each such seller;
(vi) if requested by the managing underwriter or
underwriters of any registration or by the Demanding holders of a majority of
the Registrable Securities held by the Demanding holders, subject to approval of
counsel to the Company in its reasonable judgment, promptly incorporate in a
prospectus, supplement or post-effective amendment to the registration statement
such information concerning underwriters and the plan of distribution of the
Registrable Securities as such managing underwriter or underwriters or such
holders shall reasonably furnish to the Company in writing and request be
included therein, including, without limitation, with respect to the number of
Registrable Securities being sold by such holders to such underwriter or
underwriters, the purchase price being paid therefor by such underwriter or
underwriters and with respect to any other terms of the underwritten offering of
the Registrable Securities to be sold in such offering; and make all required
filings of such prospectus, supplement or post-effective amendment as soon as
possible after being notified of the matters to be incorporated in such
prospectus, supplement or post-effective amendment;
(vii) use its best efforts to register or qualify
such Registrable Securities under such securities or "blue sky" laws of such
jurisdictions as the holders of Registrable Securities sought to be registered
reasonably request and do any and all other acts and things which may be
reasonably necessary or advisable to enable the holders of Registrable
Securities sought to be registered to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such holders and keep such
registration or qualification in effect for so long as the registration
statement remains effective under the Securities Act (provided that the Company
shall not be required to (x) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph, (y) subject itself to taxation in any such jurisdiction where it
would not otherwise be subject to taxation but for this paragraph or (z) consent
to the general service of process in any jurisdiction where it would not
otherwise be subject to general service of process but for this paragraph);
(viii) notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon the discovery that, or of the happening
of any event as a result of which, the registration statement
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covering such Registrable Securities, as then in effect, contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or any fact necessary to make the statements therein not
misleading, and promptly prepare and furnish to each such seller a supplement or
amendment to the prospectus contained in such registration statement so that
such registration statement shall not, and such prospectus as thereafter
delivered to the purchasers of such Registrable Securities shall not, contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or any fact necessary to make the statements therein not
misleading;
(ix) cause all such Registrable Securities to be
listed on the New York Stock Exchange and/or any other securities exchange and
included in each established over-the-counter market on which or through which
similar securities of the Company are listed or traded and, if not so listed or
traded, to be listed on the NASD automated quotation system ("Nasdaq") and if
listed on Nasdaq, use its reasonable efforts to secure designation of all such
Registrable Securities covered by such registration statement as a Nasdaq
"national market system security" within the meaning of Rule 11Aa2-1 under the
Securities Exchange Act of 1934, as amended, or, failing that, to secure Nasdaq
authorization for such Registrable Securities;
(x) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees, attorneys and independent
accountants to supply all information reasonably requested by any such sellers,
underwriters, attorneys, accountants or agents in connection with such
registration statement. Information which the Company determines, in good faith,
to be confidential shall not be disclosed by such persons unless (x) the
disclosure of such information is necessary to avoid or correct a misstatement
or omission in such registration statement, or (y) the release of such
information is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or governmental agency. Each seller of Registrable
Securities agrees, on its own behalf and on behalf of all its underwriters,
accountants, attorneys and agents, that any material information obtained by it
as a result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of the
Company unless and until such is made generally available to the public. Each
seller of Registrable Securities further agrees, on its own behalf and on behalf
of all its underwriters, accountants, attorneys and agents, that it will, upon
learning that disclosure of such information is sought in a court of competent
jurisdiction or governmental agency, give notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent disclosure
of the information deemed confidential;
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(xi) use its best efforts to comply with all
applicable laws related to such registration statement and offering and sale of
securities and all applicable rules and regulations of governmental authorities
in connection therewith (including, without limitation, the Securities Act and
the Exchange Act) and make generally available to its security holders as soon
as practicable (but in any event not later than fifteen (15) months after the
effectiveness of such registration statement) an earnings statement of the
Company and its subsidiaries complying with Section 11(a) of the Securities Act;
(xii) use reasonable best efforts to furnish to
each seller of Registrable Securities a signed counterpart of (x) an opinion of
counsel for the Company and (y) a comfort letter signed by the independent
public accountants who have certified the Company's financial statements
included or incorporated by reference in such registration statement, covering
such matters with respect to such registration statement and, in the case of the
accountants' comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' comfort letters delivered to the underwriters in
underwritten Initial Public Offerings of securities for the account of, or on
behalf of, an issuer of common stock, such opinion and comfort letters to be
dated the date such opinions and comfort letters are customarily dated in such
transactions, and covering in the case of such legal opinion, such other legal
matters and, in the case of such comfort letter, such other financial matters,
as the holders of a majority of the Registrable Securities being sold may
reasonably request; and
(xiii) take all such other actions as the holders
of a majority of the Registrable Securities being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities.
(b) Underwriting. Without limiting any of the foregoing,
in the event that any offering of Registrable Securities is to be made by or
through an underwriter, the Company shall enter into an underwriting agreement
with a managing underwriter or underwriters containing representations,
warranties, indemnities and agreements customarily included (but not
inconsistent with the agreements contained herein) by an issuer of common stock
in underwriting agreements with respect to offerings of common stock for the
account of, or on behalf of, such issuers. In connection with the sale of
Registrable Securities hereunder, any seller of such Registrable Securities may,
at its option, require that any and all representations and warranties by, and
indemnities and agreements of, the Company to or for the benefit of such
underwriter or underwriters (or which would be made to or for the benefit of
such an underwriter or underwriter if such sale of Registrable Securities were
pursuant to a customary underwritten offering) be made to and for the benefit of
such seller and that any or all of the conditions precedent to the obligations
of such underwriter or underwriters (or which would be so for the
23
<PAGE> 24
benefit of such underwriter or underwriters under a customary underwriting
agreement) be conditions precedent to the obligations of such seller in
connection with the disposition of its securities pursuant to the terms hereof
(it being agreed that in connection with any Demand Registration, without
limiting any rights or remedies of the Stockholders, in the event any such
condition precedent shall not be satisfied and, if not so satisfied, shall not
be waived by the holders of a majority of the Registrable Securities to be
included in such Demand Registration, such Demand Registration shall not be
counted as a permitted Demand hereunder). In connection with any offering of
Registrable Securities registered pursuant to this Agreement, the Company shall
(x) furnish to the underwriter, if any (or, if no underwriter, the sellers of
such Registrable Securities), unlegended certificates representing ownership of
the Registrable Securities being sold, in such denominations as requested and
(y) instruct any transfer agent and registrar of the Registrable Securities to
release any stop transfer order with respect thereto.
(c) Return of Prospectuses. Each seller of Registrable
Securities hereunder agrees that upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5.05(a)(viii), such
seller shall forthwith discontinue such seller's disposition of Registrable
Securities pursuant to the applicable registration statement and prospectus
relating thereto until such seller's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 5.05(a)(viii) and, if so directed
by the Company, deliver to the Company all copies, other than permanent file
copies, then in such seller's possession of the prospectus current at the time
of receipt of such notice relating to such Registrable Securities. In the event
the Company shall give such notice, the one hundred twenty (120)-day period
during which such registration statement must remain effective pursuant to this
Agreement shall be extended by the number of days during the period from the
date of giving of a notice regarding the happening of an event of the kind
described in Section 5.05(a)(viii) to the date when all such sellers shall
receive such a supplemented or amended prospectus and such prospectus shall have
been filed with the Commission.
Section 5.06 Registration Expenses.
All expenses incident to the Company's performance of, or
compliance with, its obligations under this Agreement, including, without
limitation, all registration and filing fees, all fees and expenses of
compliance with securities and "blue sky" laws (including, without limitation,
the fees and expenses of counsel for underwriters or placement or sales agents,
if any, in connection therewith), all printing and copying expenses, all "road
show" expenses, all messenger and delivery expenses, all fees and expenses of
underwriters and sales and placement agents, if any, in connection therewith
(excluding discounts and commissions), all fees and expenses of the Company's
independent certified public accountants and counsel (including, without
limitation, with respect to "comfort" letters and opinions) (collectively, the
"Registration
24
<PAGE> 25
Expenses") shall be borne by the Company; provided, however, that all
underwriting discounts and commissions allocable to each Stockholder selling
Registrable Securities shall be borne by such Stockholder. The Company shall be
responsible for the fees and expenses of one (1) legal counsel retained by all
of the Stockholders in the aggregate in connection with the sale of Registrable
Securities. Notwithstanding the foregoing, the Company shall not be responsible
for the fees and expenses of any additional counsel, or any of the accountants,
agents or experts retained by the Stockholders in connection with the sale of
Registrable Securities. The Company will pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties, the expense of any annual audit and the
expense of any liability insurance) (collectively, "Internal Expenses").
Section 5.07 Indemnification.
(a) By the Company. The Company agrees to indemnify, to
the fullest extent permitted by law, each holder of Registrable Securities being
sold, its officers, directors, members, employees and agents and each Person who
controls (within the meaning of the Securities Act) such holder or such an other
indemnified Person against all losses, claims, damages, liabilities and expenses
(collectively, the "Losses") caused by, resulting from or relating to any untrue
or alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or a fact necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished to the Company in writing by or on behalf of such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering and without limiting
any of the Company's other obligations under this Agreement, the Company shall
indemnify such underwriters, their officers, directors, employees and agents and
each Person who controls (within the meaning of the Securities Act) such
underwriters or such an other indemnified Person to the same extent as provided
above with respect to the indemnification of the holders of Registrable
Securities being sold.
(b) By Stockholders. In connection with any registration
statement in which a holder of Registrable Securities is participating, each
such holder will furnish, or cause to be furnished, to the Company in writing
information regarding such holder's ownership of Registrable Securities and its
intended method of distribution thereof and, to the extent permitted by law,
shall indemnify the Company, its directors, officers, employees and agents and
each Person who controls (within the meaning of the Securities Act) the Company
or such an other indemnified Person against all Losses caused by, resulting from
or relating to any untrue or
25
<PAGE> 26
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
caused by and contained in such information so furnished in writing by or on
behalf of such holder; provided, however, that each holder's obligation to
indemnify the Company hereunder shall be apportioned between each holder based
upon the net amount received by each holder from the sale of Registrable
Securities, as compared to the total net amount received by all of the holders
of Registrable Securities sold pursuant to such registration statement, with no
such holder being liable to the Company in excess of the net amount received by
such holder from the sale of Registrable Securities.
(c) Notice. Any Person entitled to indemnification
hereunder shall give prompt written notice to the indemnifying party of any
claim with respect to which its seeks indemnification; provided, however, the
failure to give such notice shall not release the indemnifying party from its
obligation, except to the extent that the indemnifying party has been materially
prejudiced by such failure to provide such notice.
(d) Defense of Actions. In any case in which any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof the indemnifying party will not (so long as it shall
continue to have the right to defend, contest, litigate and settle the matter in
question in accordance with this paragraph) be liable to such indemnified party
hereunder for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, supervision and monitoring (unless such indemnified
party reasonably objects to such assumption on the grounds that there may be
defenses available to it which are different from or in addition to the defenses
available to such indemnifying party, in which event the indemnified party shall
be reimbursed by the indemnifying party for the expenses incurred in connection
with retaining separate legal counsel). An indemnifying party shall not be
liable for any settlement of an action or claim effected without its consent.
The indemnifying party shall lose its right to defend, contest, litigate and
settle a matter if it shall fail diligently to contest such matter (except to
the extent settled in accordance with the next following sentence). No matter
shall be settled by an indemnifying party without the consent of the indemnified
party (which consent shall not be unreasonably withheld).
26
<PAGE> 27
(e) Survival. The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified Person and will survive the transfer of
the Registrable Securities and the termination of this Agreement.
(f) Contribution. If recovery is not available under the
foregoing indemnification provisions for any reason or reasons other than as
specified therein, any Person who would otherwise be entitled to indemnification
by the terms thereof shall nevertheless be entitled to contribution with respect
to any Losses with respect to which such Person would be entitled to such
indemnification but for such reason or reasons. In determining the amount of
contribution to which the respective Persons are entitled, there shall be
considered the Persons' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and other equitable
considerations appropriate under the circumstances. It is hereby agreed that it
would not necessarily be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. 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 found guilty of
such fraudulent misrepresentation. Notwithstanding the foregoing, no Stock
holder shall be required to make a contribution in excess of the net amount
received by such holder from the sale of Registrable Securities.
ARTICLE VI
Co-Investment Rights
Section 6.01 Preemptive Rights.
If, prior to the consumation of the Initial Public Offering, the
Company proposes to issue and sell shares of Company capital stock to any
Person, including, without limitation, any other Stockholder, each Stockholder
shall have the right to purchase from the Company a number of shares of Company
capital stock sufficient to maintain following such transaction the same
proportionate interest in the shares of Company Common Stock or Company
Preferred Stock, as the case may be, as immediately prior to such transaction.
Such purchase by each Stockholder shall be on the same terms and conditions as
such purchase by such Person. Each such issuance and sale to any Person shall be
subject to the rights set forth in this Article VI.
27
<PAGE> 28
Section 6.02 Purchase Rights.
Each Stockholder hereby agrees that, prior to the Initial Public
Offering, the Company may undertake one or more issuances and sales to New World
and any other Stock holders of Company Common Stock at the price of $10 per
share, subject to such Stockholder's rights under this Article VI. Each
Stockholder further hereby acknowledges and agrees that, subject to Section 7.13
hereof, the payment of $10 per share by New World and such other Stockholders
shall be conclusive and binding as evidence of the fair market value at such
time of the Company Common Stock.
Section 6.03 Notice.
If, prior to the Initial Public Offering, the Company proposes to
issue shares of Company capital stock to any Person, including, without
limitation, any other Stockholder, it shall give each Stockholder written notice
of such issuance, describing the price and terms upon which the Company intends
to issue the same, and the amount of Company capital stock eligible to be
purchased by each such Stockholder pursuant to Section 6.01 above. Any revision
of any material term of such intended issuance shall require re-notification to
each Stockholder and a restarting of the twenty (20) business day period
provided in Section 6.04 below.
Section 6.04 Exercise.
Upon receipt by any Stockholder of the written notice of the
Company pursuant to Section 6.03 above, such Stockholder shall have twenty (20)
business days during which to exercise the right pursuant to Section 6.01 above
to purchase its proportionate share of Company capital stock for the price and
upon the terms specified in such notice. If any Stockholder fails to notify the
Company of its exercise of such rights within such twenty (20) business day
period, such Stockholder shall have no further rights with regard to such
purchase by such Person at the price and upon the terms specified in the notice
to the Stockholder, subject to Section 6.05 below.
Section 6.05 Limitations.
If the Company has not sold the shares of Company capital stock
identified in the notice given pursuant to Section 6.03 within ninety (90) days
following the expiration of the twenty (20) business day period referred to in
Section 6.04 above, the Company shall not thereafter issue or sell any such
shares to such Person without also offering the same to each Stockholder in the
manner provided above.
28
<PAGE> 29
Section 6.06 Scope.
Each Share issued and sold to any Stockholder pursuant to the
rights set forth in this Article VI shall be subject to this Agreement; and each
certificate representing such Shares shall bear substantially the legend set
forth in Section 7.01 hereof.
ARTICLE VII
Miscellaneous
Section 7.01 Legend.
Each Stockholder agrees that substantially the following legend
shall be placed on the certificates representing any Shares owned by it:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED,
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH OFFER, TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
STOCKHOLDERS AGREEMENT DATED AS OF JANUARY 28, 1999, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF NEW WORLD PASTA COMPANY AND IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY
ALL OF THE PROVISIONS OF THE AFORESAID AGREEMENT. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE. IN ADDITION TO THE FOREGOING RESTRICTION, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF ("TRANSFER")
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, (B) PURSUANT TO RULE 144 UNDER THE ACT OR (C) UPON RECEIPT BY THE
ISSUER OF SUCH SECURITIES OF AN OPINION OF COUNSEL, WHICH OPINION AND
COUNSEL SHALL BE REASON ABLY SATISFACTORY TO SUCH ISSUER, THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT.
29
<PAGE> 30
From and after the date of this Agreement, any reference in any legend on any
certificate representing any Shares to the Stockholders Agreement shall be
deemed for all purposes to refer to this Agreement. The Company agrees to remove
the legend on the Shares upon the resale of such Shares in accordance with the
terms of this Agreement (other than pursuant to Section
4.01(a)(i)).
Section 7.02 Specific Performance.
Each Stockholder acknowledges and agrees that in the event of any
breach of this Agreement, the non-breaching parties would be irreparably harmed
and could not be made whole by monetary damages. Each Stockholder hereby agrees
that in addition to any other remedy to which such non-breaching parties may be
entitled at law or in equity, each such party shall be entitled to compel
specific performance of this Agreement in any action instituted in any court of
the United States or any state thereof having subject matter jurisdiction for
such action.
Section 7.03 Headings.
The headings in this Agreement are for convenience of reference
only and shall not control or affect the meaning or construction of any
provision hereof.
Section 7.04 Entire Agreement.
This Agreement constitutes the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein, and
there are no restrictions, promises, representations, warranties, covenants,
conditions or undertakings with respect to the subject matter hereof, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties hereto with respect to
the subject matter hereof, including, without limitation, the Recapitalization
Agreement.
Section 7.05 Proxy.
For so long as this Agreement is in effect, if any Stockholder
that has agreed to vote such Stockholder's Shares pursuant to and in accordance
with this Agreement fails or refuses to do so, then, without further action by
such Stockholder, each other such Stockholder shall have an irrevocable proxy
coupled with an interest to vote such Stockholder's Shares in accordance with
this Agreement, and each such Stockholder hereby grants to each other such
Stockholder such irrevocable proxy coupled with an interest.
30
<PAGE> 31
Section 7.06 Notices.
All notices and other communications hereunder shall be in
writing and shall be delivered personally or by next-day courier or telecopied
with confirmation of receipt, to the parties at the addresses specified below
(or at such other address for a party as shall be specified by like notice;
provided that notices of change of address shall be effective only upon receipt
thereof). Any such notice shall be effective upon receipt, if personally
delivered or telecopied, or one day after delivery to a courier for next-day
delivery.
If to the Company:
New World Pasta Company
100 Crystal A. Drive
Hershey, Pennsylvania 17033-0810
Attention: General Counsel
with copies to:
Joseph, Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Facsimile (212) 286-8626
Attention: David Y. Ying
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Facsimile (302) 651-3001
Attention: Robert B. Pincus, Esq.
31
<PAGE> 32
If to New World:
c/o Joseph, Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Facsimile (212) 286-8626
Attention: David Y. Ying
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Facsimile (302) 651-3001
Attention: Robert B. Pincus
If to Miller Pasta or any member thereof:
c/o Miller Milling Company
800 Grain Exchange Building
Minneapolis, Minnesota 55415
Facsimile (612) 332-0810
Attention: John Miller
with copies to:
Maslon, Edelman, Borman & Brand, LLP
3300 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Facsimile: (612) 672-8397
Attention: Larry A. Koch
32
<PAGE> 33
If to Hershey:
In care of Hershey Foods Corporation
100 Crystal A. Drive
Hershey, Pennsylvania 17033
Facsimile: (717) 534-7873
Attention: William F. Christ
Robert M. Reese, Esq.
with copies to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile: (212) 446-4900
Attention: Glen E. Hess, P.C.
Section 7.07 Applicable Law.
The substantive laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under applicable principles of
conflicts of law. THE PARTIES HERETO WAIVE THEIR RIGHT TO A JURY TRIAL WITH
RESPECT TO DISPUTES HEREUNDER; AND ALL SUCH DISPUTES SHALL BE SETTLED BY BINDING
ARBITRATION PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION IN NEW
YORK CITY, NEW YORK (INCLUDING REASONABLE DISCOVERY AS DETERMINED BY THE
ARBITRATOR) AND THE ORDER OF SUCH ARBITRATORS SHALL BE CONCLUSIVE, FINAL AND
BINDING ON ALL PARTIES HERETO AND MAY BE ENTERED AS A JUDGMENT IN ANY COURT
HAVING JURISDICTION OVER THE PARTIES.
Section 7.08 Severability.
The invalidity, illegality or unenforceability of one or more of
the clauses or provisions of this Agreement in any jurisdiction shall not affect
the validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of this Agreement,
including any such clause or provision, in any other jurisdiction, it being
intended that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
33
<PAGE> 34
Section 7.09 Successors; Assigns; Third-Party Beneficiaries.
The provisions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, successors
and permitted assigns. Neither this Agreement nor the rights or obligations of
any Stockholder hereunder may be assigned, except in connection with the
Transfer by a Stockholder of Shares to a Permitted Transferee in accordance with
Section 4.01. Any such attempted assignment in contravention of this Agreement
shall be void and of no effect. This Agreement is for the sole benefit of the
parties hereto and their respective heirs, successors and permitted assigns and
no provision hereof, whether express or implied, is intended, or shall be
construed, to give any other Person any rights or remedies, whether legal or
equitable, hereunder.
Section 7.10 Amendments.
This Agreement may not be amended, modified or supplemented other
than in a writing signed by the Company and the holders of at least a majority
of the Shares then subject to this Agreement; provided that no such amendment,
modification or supplement hereto that; adversely affects any Stockholder shall
be enforceable against or effective with respect to such Stockholder without
such Person's prior written consent.
Section 7.11 Waiver.
Any waiver (express or implied) of any default or breach of this
Agreement shall not constitute a waiver of any other or subsequent default or
breach.
Section 7.12 Counterparts.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same Agreement.
Section 7.13 Recapitalization.
In the event that any capital stock or other securities are
issued in respect of, in exchange for, or in substitution of, any shares of
Company Common Stock or Company Preferred Stock by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Company Common Stock or Company
Preferred Stock or any other change in the Company's capital structure,
appropriate adjustments shall be made to the terms hereof if necessary to fairly
and equitably preserve the original rights and obligations of the parties hereto
under this Agreement.
34
<PAGE> 35
Section 7.14 Term.
The term of this Agreement (the "Term") shall begin as of the
date first written above and terminate on the tenth anniversary of such date.
[SIGNATURE PAGES FOLLOW]
35
<PAGE> 36
IN WITNESS WHEREOF, this Stockholders Agreement has been
duly executed and delivered by or on behalf of each of the undersigned as of the
date first above written.
NEW WORLD PASTA COMPANY
By: /s/ C. Mickey Skinner
-----------------------------------------------
Name: C. Mickey Skinner
Title: Chairman, Chief Executive Officer
and Director
NEW WORLD PASTA, LLC
By: /s/ David Y. Ying
-----------------------------------------------
Name: David Y. Ying
Title: President
MILLER PASTA, LLC
By: /s/ John C. Miller
-----------------------------------------------
Name: John C. Miller
Title: President
HERSHEY CHOCOLATE & CONFECTIONERY
CORPORATION
By: /s/ Burton H. Snyder
-----------------------------------------------
Name: Burton H. Snyder
Title: Vice president
<PAGE> 37
FOR PURPOSES OF SECTIONS 2.02(c) AND 4.01(c) ONLY
/s/ C. Mickey Skinner
___________________________________________________
C. Mickey Skinner
FOR PURPOSES OF SECTIONS 2.02(c) AND 4.01(c) ONLY
/s/ John C. Miller
___________________________________________________
John C. Miller
FOR PURPOSES OF SECTIONS 2.02(c) AND 4.01(c) ONLY
/s/ Michael L. Snow
___________________________________________________
Michael L. Snow
FOR PURPOSES OF SECTIONS 2.02(c) AND 4.01(c) ONLY
Miller Milling Company
By: /s John C. Miller
___________________________________________________
Name: John C. Miller
Title: Chief Executive Officer
<PAGE> 38
EXHIBIT A
Miller Pasta LLC
Members and Interests
<TABLE>
<CAPTION>
Member's Name and Address Units
<S> <C>
1. Miller Milling Company 7,400*
#880 Grain Exchange Building
301 Fourth Avenue South
Minneapolis, MN 55415
2. C. Mickey Skinner 600
6975 Green Tree Drive
Naples, Florida 34108
3. Michael L. Snow 70
2649 Arcola Lane
Wayzata, MN 55391
4. Laurie Snow 70
2649 Arcola Lane
Wayzata, MN 55391
5. Michael L. Snow 1995 70
Irrevocable Trust F/B/O
Zachery Robert Snow
81 Tingler Lane
Marathon, FL 33050
6. Michael L. Snow 1995 70
Irrevocable Trust F/B/O
Kara Glenn Snow
81 Tingler Lane
Marathon, FL 33050
</TABLE>
- --------
* Of these Units, 2,100 are owned indirectly by Michael L. Snow and 2,160
are owned indirectly by John C. Miller
A-1
<PAGE> 39
<TABLE>
<S> <C>
7. Michael L. Snow 1995 70
Irrevocable Trust F/B/O
Britni Jean Snow
81 Tingler Lane
Marathon, FL 33050
8. Philip Heasley 1,000
601 Second Avenue South
Minneapolis, MN 55402
9. John Dennis 1,000
14 Bello Drive
Edina, MN 55439
10. Frank B. Bennett 1987 250
Revocable Trust
821 Marquette Avenue South
Minneapolis, MN 55402
11. Winwood Holdings Ltd. 334
1880 505 Burrard Street
Vancouver, BC, Canada
V7X 1M6
12. Hermitage Holdings Ltd. 166
1880 505 Burrard Street
Vancouver, BC, Canada
V7X 1M6
13. Robinson's Bay Partners 450
2800 Piper Tower
222 South 9th
Minneapolis, MN 55402
14. Donaldson Lufkin Jenrette F/B/O 50
Peter B. Sullivan
One Pershing Plaza
Jersey City, NJ 07399
15. LIT, LLC 100
471 Bighorn Drive
Chanhassen, MN 55317
</TABLE>
A-2
<PAGE> 40
<TABLE>
<S> <C>
16. Bluestem Capital Co. 2,000
(Carrier Pasta, LLC)
122 S. Phillips Avenue
Suite 300
Sioux Falls, SD 57104
17. EFO Co-Investment Partners 400
2626 Cole Avenue
Suite 700
Dallas, TX 75204
18. World Pasta Partners, LP 3,600
2626 Cole Avenue
Suite 700
Dallas, TX 75204
19. Peter Snow and Betsy Snow 100
834 Mendocino Avenue
Berkley, CA 94707
20. Gary Benson 100
2925 Dean Parkway
Minneapolis, MN 55416
21. Gregory LeMond 100
3000 Willow Drive
Medina, MN 55340
22. Greg Hoefner 20
880 Grain Exchange Building
Minneapolis, MN 55415
23. Merlyn Hoefner 50
880 Grain Exchange Building
Minneapolis, MN 55415
24. Glenn Snow 100
880 Grain Exchange Building
Minneapolis, MN 55415
</TABLE>
A-3
<PAGE> 41
EXHIBIT B
<TABLE>
<CAPTION>
Column A Column B
Shares of Shares of
Name of Company Common Company Preferred
Stockholder Stock Owned (#) Stock Owned (#)
- ----------- --------------- ---------------
<S> <C> <C>
New World 4,167,869 100,636.31
Miller Pasta 532,131 12,848.69
Hershey 300,000
</TABLE>
B-1
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
U.S. $250,000,000
CREDIT AGREEMENT,
dated as of January 28, 1999,
among
NEW WORLD PASTA COMPANY
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
CERTAIN FINANCIAL INSTITUTIONS
as the Co-Agents for the Lenders
MORGAN STANLEY SENIOR FUNDING, INC.,
as Syndication Agent,
and
THE BANK OF NOVA SCOTIA,
as the Lead Arranger and as the Administrative Agent for the Lenders.
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS........................3
SECTION 1.1. Defined Terms...........................................3
SECTION 1.2. Use of Defined Terms...................................33
SECTION 1.3. Cross-References.......................................33
SECTION 1.4. Accounting and Financial Determinations................33
ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, AND NOTES AND LETTERS OF CREDIT............34
SECTION 2.1. Commitments............................................34
SECTION 2.1.1. Term Loan Commitments..................................34
SECTION 2.1.2. Revolving Loan Commitment and Swing Line Loan
Commitment.............................................35
SECTION 2.1.3. Letter of Credit Commitment............................35
SECTION 2.1.4. Lenders Not Permitted or Required To Make the Loans....35
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters
of Credit..............................................36
SECTION 2.2. Reduction of the Commitment Amounts....................36
SECTION 2.2.1. Optional...............................................36
SECTION 2.2.2. Mandatory..............................................37
SECTION 2.3. Borrowing Procedures and Funding Maintenance...........37
SECTION 2.3.1. Term Loans and Revolving Loans.........................37
SECTION 2.3.2. Swing Line Loans.......................................38
SECTION 2.4. Continuation and Conversion Elections..................39
SECTION 2.5. Funding................................................40
SECTION 2.6. Issuance Procedures....................................40
SECTION 2.6.1. Other Lenders' Participation...........................41
SECTION 2.6.2. Disbursements; Conversion to Revolving Loans...........41
SECTION 2.6.3. Reimbursement..........................................42
SECTION 2.6.4. Deemed Disbursements...................................42
SECTION 2.6.5. Nature of Reimbursement Obligations....................43
SECTION 2.7. Register; Notes........................................44
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES.............45
SECTION 3.1. Repayments and Prepayments; Application................45
SECTION 3.1.1. Repayments and Prepayments.............................45
SECTION 3.1.2. Application............................................51
SECTION 3.2. Interest Provisions....................................51
SECTION 3.2.1. Rates..................................................52
SECTION 3.2.2. Post-Maturity Rates....................................52
SECTION 3.2.3. Payment Dates..........................................52
i
<PAGE> 3
SECTION 3.3. Fees...................................................53
SECTION 3.3.1. Commitment Fee.........................................53
SECTION 3.3.2. Administrative Agent's Fee.............................53
SECTION 3.3.3. Letter of Credit Fee...................................53
ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS.................54
SECTION 4.1. LIBO Rate Lending Unlawful.............................54
SECTION 4.2. Deposits Unavailable...................................54
SECTION 4.3. Increased LIBO Rate Loan Costs, etc....................55
SECTION 4.4. Funding Losses.........................................55
SECTION 4.5. Increased Capital Costs................................56
SECTION 4.6. Taxes..................................................56
SECTION 4.7. Payments, Computations, etc............................58
SECTION 4.8. Sharing of Payments....................................58
SECTION 4.9. Setoff.................................................59
SECTION 4.10. Mitigation.............................................59
ARTICLE V CONDITIONS TO CREDIT EXTENSIONS........................61
SECTION 5.1. Initial Credit Extension...............................61
SECTION 5.1.1. Resolutions, etc.......................................61
SECTION 5.1.2. Recapitalization Documents.............................62
SECTION 5.1.3. Transaction Certificate................................62
SECTION 5.1.4. Consummation of Transactions...........................62
SECTION 5.1.5. Closing Date Certificate...............................62
SECTION 5.1.6. Delivery of Notes......................................62
SECTION 5.1.7. Payment of Outstanding Indebtedness, etc...............62
SECTION 5.1.8. Subsidiary Guaranty....................................63
SECTION 5.1.9. Pledge Agreements......................................63
SECTION 5.1.10. Security Agreements....................................63
SECTION 5.1.11. Mortgages..............................................64
SECTION 5.1.12. Financial Information, etc.............................64
SECTION 5.1.13. Solvency, etc..........................................65
SECTION 5.1.14. Equity Purchase and Bridge Financing...................65
SECTION 5.1.15. Closing Fees, Expenses, etc............................65
SECTION 5.1.16. Trademark Security Agreements, Copyright Security
Agreement, Patent Security Agreement...................65
SECTION 5.1.17. Litigation.............................................65
SECTION 5.1.18. Material Adverse Change................................65
SECTION 5.1.19. Reliance Letters.......................................66
SECTION 5.1.20. Intentionally Omitted..................................66
SECTION 5.1.21. Opinions of Counsel....................................66
SECTION 5.2. All Credit Extensions..................................66
ii
<PAGE> 4
SECTION 5.2.1. Compliance with Warranties, No Default, etc...........66
SECTION 5.2.2. Credit Extension Request..............................67
ARTICLE VI REPRESENTATIONS AND WARRANTIES........................67
SECTION 6.1. Organization, etc.....................................67
SECTION 6.2. Due Authorization, Non-Contravention, etc.............68
SECTION 6.3. Government Approval, Regulation, etc..................68
SECTION 6.4. Validity, etc.........................................68
SECTION 6.5. Financial Information.................................69
SECTION 6.6. No Material Adverse Change............................69
SECTION 6.7. Litigation, Labor Controversies, etc..................69
SECTION 6.8. Subsidiaries..........................................69
SECTION 6.9. Ownership of Properties...............................70
SECTION 6.10. Taxes.................................................70
SECTION 6.11. Pension and Welfare Plans.............................70
SECTION 6.12. Environmental Warranties..............................70
SECTION 6.13. Regulations U and X...................................72
SECTION 6.14. Accuracy of Information...............................72
SECTION 6.15. Seniority of Obligations, etc.........................72
SECTION 6.16. Solvency..............................................73
SECTION 6.17. Year 2000.............................................73
SECTION 6.18. Recapitalization Agreement............................73
ARTICLE VII COVENANTS.............................................74
SECTION 7.1. Affirmative Covenants.................................74
SECTION 7.1.1. Financial Information, Reports, Notices, etc..........74
SECTION 7.1.2. Compliance with Laws, etc.............................76
SECTION 7.1.3. Maintenance of Properties.............................76
SECTION 7.1.4. Insurance.............................................76
SECTION 7.1.5. Books and Records.....................................77
SECTION 7.1.6. Environmental Covenant................................78
SECTION 7.1.7. Future Subsidiaries...................................78
SECTION 7.1.8. Future Leased Property and Future Acquisitions of
Real Property.........................................79
SECTION 7.1.9. Use of Proceeds, etc..................................80
SECTION 7.1.10. Hedging Obligations...................................80
SECTION 7.1.11. Shareholder Pledge Agreement..........................81
SECTION 7.2. Negative Covenants....................................81
SECTION 7.2.1. Business Activities...................................81
SECTION 7.2.2. Indebtedness..........................................81
SECTION 7.2.3. Liens.................................................83
SECTION 7.2.4. Financial Condition...................................84
SECTION 7.2.5. Investments...........................................86
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<PAGE> 5
SECTION 7.2.6. Restricted Payments, etc...............................88
SECTION 7.2.7. Capital Expenditures, etc..............................90
SECTION 7.2.8. Consolidation, Merger, etc.............................91
SECTION 7.2.9. Asset Dispositions, etc................................92
SECTION 7.2.10. Modification of Certain Agreements.....................92
SECTION 7.2.11. Transactions with Affiliates...........................93
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc..........93
SECTION 7.2.13. Stock of Subsidiaries..................................94
SECTION 7.2.14. Sale and Leaseback.....................................94
ARTICLE VIII EVENTS OF DEFAULT......................................94
SECTION 8.1. Listing of Events of Default...........................94
SECTION 8.1.1. Non-Payment of Obligations.............................94
SECTION 8.1.2. Breach of Warranty.....................................94
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations...95
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.....95
SECTION 8.1.5. Default on Other Indebtedness..........................95
SECTION 8.1.6. Judgments..............................................95
SECTION 8.1.7. Pension Plans..........................................95
SECTION 8.1.8. Change in Control......................................95
SECTION 8.1.9. Bankruptcy, Insolvency, etc............................96
SECTION 8.1.10. Impairment of Security, etc............................96
SECTION 8.1.11. Subordinated Notes and Senior Subordinated High
Yield Notes............................................97
SECTION 8.1.12. Redemption.............................................97
SECTION 8.2. Action if Bankruptcy, etc..............................97
SECTION 8.3. Action if Other Event of Default.......................97
ARTICLE IX THE AGENTS.............................................98
SECTION 9.1. Actions................................................98
SECTION 9.2. Funding Reliance, etc..................................98
SECTION 9.3. Exculpation............................................99
SECTION 9.4. Successor..............................................99
SECTION 9.5. Credit Extensions by each Agent.......................100
SECTION 9.6. Credit Decisions......................................100
SECTION 9.7. Copies, etc...........................................100
SECTION 9.8. The Co-Agents.........................................100
ARTICLE X MISCELLANEOUS PROVISIONS..............................101
SECTION 10.1. Waivers, Amendments, etc..............................101
SECTION 10.2. Notices...............................................102
SECTION 10.3. Payment of Costs and Expenses.........................102
SECTION 10.4. Indemnification.......................................103
iv
<PAGE> 6
SECTION 10.5. Survival..............................................104
SECTION 10.6. Severability..........................................104
SECTION 10.7. Headings..............................................104
SECTION 10.8. Execution in Counterparts, Effectiveness, etc.........105
SECTION 10.9. Governing Law; Entire Agreement.......................105
SECTION 10.10. Successors and Assigns................................105
SECTION 10.11. Sale and Transfer of Loans and Notes; Participations
in Loans and Notes....................................105
SECTION 10.11.1. Assignments...........................................105
SECTION 10.11.2. Participations........................................107
SECTION 10.12. Other Transactions....................................108
SECTION 10.13. Forum Selection and Consent to Jurisdiction...........108
SECTION 10.14. Waiver of Jury Trial..................................109
SECTION 10.15. Confidentiality.......................................109
v
<PAGE> 7
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentage
SCHEDULE III - Domestic Office
SCHEDULE IV - Fiscal Quarters
SCHEDULE V - Recapitalization Transactions
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Term-A Note
EXHIBIT A-3 - Form of Term-B Note
EXHIBIT A-4 Form of Swing Line Note
EXHIBIT B - Form of Borrowing Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Closing Date Certificate
EXHIBIT E - Form of Compliance Certificate
EXHIBIT F-1 - Form of Borrower Security Agreement
EXHIBIT F-2 - Form of Subsidiary Security Agreement
EXHIBIT G-1 - Form of Borrower Pledge Agreement
EXHIBIT G-2 - Form of Subsidiary Pledge Agreement
EXHIBIT G-3 - Form of Shareholder Pledge Agreement
EXHIBIT H-1 - Form of Subsidiary Guaranty
EXHIBIT I - Form of Mortgage
EXHIBIT J - Form of Lender Assignment Agreement
EXHIBIT K - Form of Intercompany Subordination Agreement
EXHIBIT L-1 - Form of Opinion of New York Counsel to the Borrower
EXHIBIT L-2 - Form of Opinion of Local Counsel to the Borrower
EXHIBIT M - Intentionally Omitted
EXHIBIT N - Form of Issuance Request
vi
<PAGE> 8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of January 28, 1999, is among New World
Pasta Company (formerly known as Hershey Pasta Manufacturing Company), a
Delaware corporation (the "Borrower"), the various financial institutions as are
or may become parties hereto (collectively, the "Lenders"), the various
financial institutions as may become parties hereto as co-Agents (collectively
referred to as the "Co-Agents") for the Lenders, MORGAN STANLEY SENIOR FUNDING,
INC., as syndication agent (the "Syndication Agent"), and THE BANK OF NOVA
SCOTIA ("Scotiabank"), as lead arranger (the "Lead Arranger") and administrative
agent (the "Administrative Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, on December 15, 1998, the Borrower entered into the
Recapitalization Agreement (such capitalized term, and other capitalized terms
used herein, to have the meanings provided in Section 1.1), pursuant to which
the Transferors, the Borrower and its Subsidiaries engaged in a recapitalization
(consisting of the transactions described on Schedule V) (the "Recapitalization
Transactions");
WHEREAS, as a result of the Recapitalization Transactions Pasta Group,
LLC, a Delaware limited liability company, and Winchester Pasta, LLC, a Delaware
limited liability company, became Subsidiaries of the Borrower, and, as of the
date hereof, are the only Subsidiaries of the Borrower;
WHEREAS, after giving effect to the Recapitalization Transactions, the
Bridge Financing, the Equity Purchase and the transactions contemplated hereby
and the Recapitalization Agreement (collectively, the "Transactions"), (a) the
Borrower and its Subsidiaries will own the Business; and (b) approximately
83.4%, 6.0% and 10.6% of the outstanding Common Stock of the Borrower will be
owned by New World Pasta LLC (an affiliate of JLL), HFC and the Management
Investor, respectively, and approximately 88.8% and 11.2% of the Preferred Stock
of the Borrower will be owned by New World Pasta LLC and the Management
Investor;
WHEREAS, as part of the Recapitalization Transactions, the Borrower
will issue a Note (the "Seller Note") to HFC in a principal amount of
$307,685,000 in payment of the redemption price of 30,768,500 shares of Common
Stock owned by HFC, which Seller Note will be repaid in full on the Closing
Date;
WHEREAS, in connection with the Transactions, the Borrower will incur
$110,000,000 of Bridge Financing and will incur transaction costs and expenses
(of which not more than $19,000,000 of such costs and expenses (exclusive of any
amounts which may be reimbursed by HFC or any other person pursuant to the
Recapitalization Agreement) may be paid from the proceeds of the Loans made
hereunder to the extent permitted hereby;
<PAGE> 9
WHEREAS, in connection with the Transaction and the ongoing working
capital and general corporate needs of the Borrower and its Subsidiaries, the
Borrower desires to obtain from the Lenders (and the Issuer, as the case may be)
(i) a Term-A Loan Commitment and a Term-B Loan
Commitment pursuant to which Borrowings of Term Loans will be
made in a maximum, original principal amount of $50,000,000
(in the case of Term-A Loans) and $150,000,000 (in the case of
Term-B Loans) to the Borrower in a single Borrowing to occur
on the Closing Date;
(ii) a Revolving Loan Commitment (to include
availability for Revolving Loans, Swing Line Loans and
Letters of Credit) pursuant to which Borrowings of Revolving
Loans, in a maximum aggregate principal amount (together with
all Swing Line Loans and Letter of Credit Outstandings) not to
exceed $50,000,000, will be made to the Borrower from time to
time on and subsequent to the Closing Date but prior to the
Revolving Loan Commitment Termination Date;
(iii) a Letter of Credit Commitment pursuant to which
the Issuer will issue Letters of Credit for the account of the
Borrower and its Subsidiaries from time to time on and
subsequent to the Closing Date but prior to the Revolving Loan
Commitment Termination Date in a maximum aggregate Stated
Amount at any one time outstanding not to exceed $10,000,000
(provided that the aggregate outstanding principal amount of
Revolving Loans, Swing Line Loans and Letter of Credit
Outstandings at any time shall not exceed the then existing
Revolving Loan Commitment Amount); and
(iv) a Swing Line Loan Commitment pursuant to which
Borrowings of Swing Line Loans in an aggregate outstanding
principal amount not to exceed $5,000,000 will be made on and
subsequent to the Closing Date but prior to the Revolving Loan
Commitment Termination Date (provided, that the aggregate
outstanding principal amount of Swing Line Loans, Revolving
Loans and Letter of Credit Outstandings at any time shall not
exceed the then existing Revolving Loan Commitment Amount);
with all the proceeds of the Credit Extensions to be used for the purposes set
forth in Section 7.1.9; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend such
Commitments and make such Loans to the Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
2
<PAGE> 10
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Acquisition Investment" means the acquisition, by an Investment or
through the purchase or other acquisition of assets comprising all or
substantially all of the assets of another Person or the assets comprising a
business or division of another Person) provided that if the acquisition is of
Capital Stock of such Person it shall result in such Person becoming (to the
extent it is not already) a Subsidiary of the Borrower.
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 15% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
Notwithstanding the foregoing, Miller Milling Corp. shall be deemed to be an
Affiliate of the Borrower.
"Agents" means, collectively, the Administrative Agent, the Syndication
Agent and the Co-Agents.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently established by the
Administrative Agent at its Domestic Office as its base rate for Dollar
loans in the United States; and
3
<PAGE> 11
(b) the Federal Funds Rate most recently determined by the
Administrative Agent plus 1/2 of 1%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Administrative Agent in connection with extensions of
credit. Changes in the rate of interest on that portion of any Loans maintained
as Base Rate Loans will take effect simultaneously with each change in the
Alternate Base Rate. The Administrative Agent will give notice promptly to the
Borrower and the Lenders of changes in the Alternate Base Rate.
"Applicable Commitment Fee Margin" means at all times during the
applicable periods set forth below, (a) until the delivery of unaudited
financial statements of the Borrower for the six months ended June 30, 1999
pursuant to clause (a) of Section 7.1.1, .50% per annum, and (b) thereafter, the
applicable percentage per annum set forth below under the column entitled
"Applicable Commitment Fee Margin":
<TABLE>
<CAPTION>
Applicable
Debt to EBITDA Ratio Commitment Fee Margin
<S> <C>
greater than 5.00:1 .500%
greater than or equal to 4.00:1 but less than or equal to 5.00:1 .375%
less than or equal to 4.00:1 .325%
- ---------------------------------------- ----------------------------------------------
</TABLE>
The Debt to EBITDA Ratio used to compute the Applicable Commitment Fee Margin
shall be the Debt to EBITDA Ratio set forth in the Compliance Certificate most
recently delivered by the Borrower to the Administrative Agent pursuant to
clause (d) of Section 7.1.1; changes in the Applicable Commitment Fee Margin
resulting from a change in the Debt to EBITDA Ratio shall become effective upon
delivery by the Borrower to the Administrative Agent of a new Compliance
Certificate pursuant to clause (d) of Section 7.1.1. If the Borrower shall fail
to deliver a Compliance Certificate within the number of days after the end of
any Fiscal Quarter as required pursuant to clause (d) of Section 7.1.1 (without
giving effect to any grace period), the Applicable Commitment Fee Margin from
and including the first day after the date on which such Compliance Certificate
was required to be delivered to but not including the date the Borrower delivers
to the Administrative Agent a Compliance Certificate shall conclusively equal
the highest Applicable Commitment Fee Margin set forth above. After such
delivery, the Applicable Commitment Fee Margin shall be determined as provided
above.
"Applicable Margin" means at all times during the applicable periods
set forth below,
(a) with respect to the unpaid principal amount of each
Revolving Loan and each Term-A Loan maintained as a Base Rate Loan, (i)
until the delivery of unaudited financial statements of the Borrower
for the six months ended June 30, 1999 pursuant to clause (a) of
Section 7.1.1, 1.75% per annum, and (ii) thereafter, the applicable
percent-
4
<PAGE> 12
age per annum set forth below under the column entitled "Applicable
Margin for Base Rate Loans";
(b) with respect to the unpaid principal amount of each
Revolving Loan and each Term-A Loan maintained as a LIBO Rate Loan, (i)
until the delivery of unaudited financial statements of the Borrower
for the six months ended June 30, 1999 pursuant to clause (a) of
Section 7.1.1, 2.75% per annum, and (ii) thereafter, the applicable
percentage per annum set forth below under the column entitled
"Applicable Margin for LIBO Rate Loans":
For Revolving Loans and Term-A Loans:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Applicable Applicable
Margin for Base Margin for LIBO
Debt to EBITDA Ratio Rate Loans Rate Loans
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
greater than 5.75:1 2.00% 3.00%
- -------------------------------------------------------------------------------------------------------------
greater than 5.00:1 but less than or equal to 5.75:1 1.75% 2.75%
- -------------------------------------------------------------------------------------------------------------
greater than 4.50:1 but less than or equal to 5.00:1 1.50% 2.50%
- -------------------------------------------------------------------------------------------------------------
greater than 4.00:1 but less than or equal to 4.50:1 1.25% 2.25%
- -------------------------------------------------------------------------------------------------------------
less than or equal to 4.00:1 1.00% 2.00%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(c) with respect to the unpaid principal amount of each Term-B
Loan maintained as a Base Rate Loan, (i) until the delivery of
unaudited financial statements of the Borrower for the six months ended
June 30, 1999 pursuant to clause (a) of Section 7.1.1, 2.25% per annum,
and (ii) thereafter, the applicable percentage per annum set forth
below under the column entitled "Applicable Margin for Base Rate
Loans"; and
(d) with respect to the unpaid principal amount of each Term-B
Loan maintained as a LIBO Rate Loan, (i) until the delivery of
unaudited financial statements of the Borrower for the six months ended
June 30, 1999 pursuant to clause (a) of Section 7.1.1, 3.25% per annum,
and (ii) thereafter, the applicable percentage per annum set forth
below under the column entitled "Applicable Margin for LIBO Rate
Loans":
5
<PAGE> 13
For Term-B Loans:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Applicable Applicable
Margin for Base Margin for LIBO
Debt to EBITDA Ratio Rate Loans Rate Loans
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
greater than 5.75:1 2.25% 3.25%
- -------------------------------------------------------------------------------------------------------------------------
greater than 5.00:1 but less than or equal to 5.75:1 2.25% 3.25%
- -------------------------------------------------------------------------------------------------------------------------
greater than 4.50:1 but less than or equal to 5.00:1 2.00% 3.00%
- -------------------------------------------------------------------------------------------------------------------------
greater than 4.00:1 but less than or equal to 4.50:1 2.00% 3.00%
- -------------------------------------------------------------------------------------------------------------------------
less than or equal to 4.00:1 2.00% 3.00%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Except as provided above, the Debt to EBITDA Ratio used to compute the
Applicable Margin for Revolving Loans and Term Loans shall be the Debt to EBITDA
Ratio set forth in the Compliance Certificate most recently delivered by the
Borrower to the Administrative Agent pursuant to clause (d) of Section 7.1.1;
changes in the Applicable Margin for Revolving Loans and Term Loans resulting
from a change in the Debt to EBITDA Ratio shall become effective upon delivery
by the Borrower to the Administrative Agent of a new Compliance Certificate
pursuant to clause (d) of Section 7.1.1. If the Borrower shall fail to deliver a
Compliance Certificate within the number of days after the end of any Fiscal
Quarter as required pursuant to clause (d) of Section 7.1.1 (without giving
effect to any grace period), the Applicable Margin for Revolving Loans and Term
Loans from and including the first day after the date on which such Compliance
Certificate was required to be delivered to but not including the date the
Borrower delivers to the Administrative Agent a Compliance Certificate shall
conclusively equal the highest Applicable Margin for Revolving Loans and Term
Loans set forth above. After such delivery, the Applicable Margins shall be
determined as provided above.
"Approved Fund" means, with respect to any Lender that is a fund or
other investment vehicle that invests (in whole or in part) in bank loans, any
other fund or investment vehicle that invests (in whole or in part) in bank
loans and is managed or advised by the same investment advisor as such Lender or
by an affiliate of such investment advisor.
"Assignee Lender" is defined in Section 10.11.1.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to Section 5.1.1.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
6
<PAGE> 14
"Borrower" means New World Pasta Company, formerly known as Hershey
Pasta Manufacturing Company, a Delaware corporation, and its permitted
successors and assigns.
"Borrower Pledge Agreement" means the Pledge Agreement executed and
delivered by the Borrower pursuant to clause (b) of Section 5.1.9, substantially
in the form of Exhibit G-1 hereto, as amended, supplemented, amended and
restated or otherwise modified from time to time pursuant to the terms thereof.
"Borrower Security Agreement," means the Security Agreement executed
and delivered by the Borrower pursuant to Section 5.1.10, substantially in the
form of Exhibit F-1 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time pursuant to the terms thereof.
"Borrowing" means the Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period made by the relevant Lenders on the
same Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit B
hereto.
"Bridge Financing" means the issuance of $110,000,000 aggregate
principal amount of Subordinated Notes pursuant to the Senior Subordinated
Increasing Rate Note Purchase Agreement.
"Business" shall mean the business as conducted by the (i) Transferors,
(ii) Hershey Pasta Group Winchester, Inc., a Delaware corporation, and (iii) the
Borrower (and their predecessors in interest) relating to the manufacture,
marketing, sale and distribution at any time prior to the Closing Date of the
products listed on Schedule 1.2 to the Recapitalization Agreement and pasta and
noodle products similar to those listed on such Schedule.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New
York City; and
(b) relative to the making, continuing, prepaying or repaying
of any LIBO Rate Loans, any day on which dealings in Dollars are
carried on in the London interbank market.
"Capital Expenditures" means for any period, the sum, without
duplication, of
(a) the aggregate amount of all expenditures of the Borrower
and its Subsidiaries for fixed or capital assets made during such
period which, in accordance with GAAP, would be classified as capital
expenditures; and
7
<PAGE> 15
(b) the aggregate amount of all Capitalized Lease Liabilities
incurred during such period.
"Capital Stock" means, (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
"Capitalized Lease Liabilities" means, without duplication, all
monetary obligations of the Borrower or any of its Subsidiaries under any
leasing or similar arrangement which, in accordance with GAAP, would be
classified as capitalized leases, and, for purposes of this Agreement and each
other Loan Document, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP, and the stated maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by the United States
Government;
(b) commercial paper, maturing not more than nine months from
the date of issue, which is issued by
(i) a corporation (other than an Affiliate of any
Obligor) organized under the laws of any state of the United
States or of the District of Columbia and rated at least A-2
by S&P or P-2 by Moody's, or
(ii) any Lender (or its holding company);
(c) any certificate of deposit or bankers acceptance, maturing
not more than one year after such time, which is issued by either
(i) a commercial banking institution that is a member
of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $500,000,000,
or
(ii) any Lender;
(d) short-term tax-exempt securities rated not lower than
MIG-1/1+ by either Moody's or S&P with provisions for liquidity or
maturity accommodations of 183 days or less; or
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(e) any money market or similar fund the assets of which are
comprised exclusively of any of the items specified in clauses (a)
through (d) above and as to which withdrawals are permitted at least
every 90 days.
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of property of the Borrower or any of its Subsidiaries.
"Casualty Proceeds" means, with respect to any Casualty Event, the
amount of any insurance proceeds or condemnation awards received by the Borrower
or any of its Subsidiaries in connection with such Casualty Event, but excluding
any proceeds or awards required to be paid to a creditor (other than the
Lenders) which holds a first-priority Lien permitted by Section 7.2.3 on the
property which is the subject of such Casualty Event.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Change in Control" means:
(i) prior to an IPO, (a) the acquisition, directly or
indirectly, by any person or group (as defined in Section
13(d)(3) under the Securities Exchange Act of 1934, as
amended) of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of a percentage of the
outstanding voting shares of Capital Stock of the Borrower
that exceeds in the aggregate the percentage of voting shares
of Capital Stock then beneficially owned and controlled,
directly or indirectly, by JLL and John C. Miller, C. Mickey
Skinner and Michael L. Snow (the "Specified Individuals" and
together with JLL, the "Initial Investors") or (b) the failure
of the Initial Investors to own in the aggregate free and
clear of all Liens, at least a majority of the outstanding
voting shares of Capital Stock of the Borrower on a fully
diluted basis;
(ii) after an IPO, (A)(I) the failure of the Initial
Investors to own in the aggregate free and clear of all Liens,
at least 30% of the outstanding voting shares of Capital Stock
of the Borrower on a fully diluted basis, and (II) the
acquisition, directly or indirectly, by any person or group
(as defined in Section 13(d)(3) under the Securities Exchange
Act of 1934, as amended) of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of a
percentage of the outstanding voting shares of Capital Stock
of the Borrower that exceeds in the aggregate the percentage
of voting shares of Capital Stock then beneficially owned and
controlled, directly or indirectly, by JLL or (B) the board of
directors of the Borrower shall not consist of a majority of
"Continuing Directors" (such term being defined as directors
of the Borrower on the Closing Date and each other director,
if such other director's nomination for election to the board
of directors is recommended by a majority of
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<PAGE> 17
the then Continuing Directors or is recommended by a committee
of the board of directors a majority of which is composed of
the then Continuing Directors); or
(iii) the occurrence (whether before or after an IPO)
of a "Change of Control" as defined in any Subordinated Notes
or Senior Subordinated High Yield Notes or any provision which
requires the repurchase or offer to repurchase of any
Subordinated Notes or Senior Subordinated High Yield Notes
upon a change in ownership of the Borrower.
For purposes of this definition, the amount of voting shares of Capital
Stock deemed owned by the Specified Individuals shall be equal to the product of
(x) the aggregate number of voting shares of Capital Stock owned by the
Management Investor times (y) the percentage of shares of Capital Stock of the
Management Investor owned by the Specified Individuals.
"Closing Date" means the date of the initial Credit Extension
hereunder.
"Closing Date Certificate" means a certificate of an Authorized Officer
of the Borrower substantially in the form of Exhibit D hereto, delivered
pursuant to Section 5.1.5.
"Co-Agents" is defined in the preamble.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, as the context may require, a Lender's Letter of
Credit Commitment, Revolving Loan Commitment, Swing Line Loan Commitment, Term-A
Loan Commitment or Term-B Loan Commitment.
"Commitment Amount" means, as the context may require, the Letter of
Credit Commitment Amount, Revolving Loan Commitment Amount, Swing Line Loan
Commitment Amount, the Term-A Loan Commitment Amount or the Term B-Loan
Commitment Amount.
"Commitment Termination Date" means, as the context may require, the
Revolving Loan Commitment Termination Date or any Term Loan Commitment
Termination Date.
"Commitment Termination Event" means
(a) the occurrence of any Event of Default described in clauses
(a) through (d) of Section 8.1.9; or
(b) the occurrence and continuance of any other Event of Default
and either
(i) the declaration of the Loans to be due and payable
pursuant to Section 8.3, or
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(ii) in the absence of such declaration, the giving
of notice by the Administrative Agent, acting at the direction
of the Required Lenders, to the Borrower that the Commitments
have been terminated.
"Common Stock" means the common stock, par value $.01 per share, of
the Borrower.
"Compliance Certificate" means a certificate duly completed and
executed by the chief financial Authorized Officer of the Borrower,
substantially in the form of Exhibit E hereto.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the Indebtedness of any
other Person or any obligation or any other liability of any other Person except
a Subsidiary (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person's obligation under any
Contingent Liability shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount (or maximum principal amount, if
larger) of the debt, obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion duly executed by an Authorized Officer of the Borrower, substantially
in the form of Exhibit C hereto.
"Controlled Group" means all entities (whether or not incorporated)
which are under common control with the Borrower within the meaning of Section
4001 of ERISA or are treated as a single employer with the Borrower under
Section 414 of the Code.
"Copyright Security Agreement" means any Copyright Security Agreement
executed and delivered by any Obligor in substantially the form of Exhibit C to
any Security Agreement, as amended, supplemented, amended and restated or
otherwise modified.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, the increase in the
face amount of any previously issued Letter of Credit by the Issuer or
the extension of any Stated Expiry Date of any previously issued Letter
of Credit by the Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
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"Current Assets" means, on any date, without duplication, all assets
(other than cash) which, in accordance with GAAP, would be included as current
assets on a consolidated balance sheet of the Borrower and its Subsidiaries at
such date as current assets.
"Current Liabilities" means, on any date, without duplication, all
amounts which, in accordance with GAAP, would be included as current liabilities
on a consolidated balance sheet of the Borrower and its Subsidiaries at such
date, excluding current maturities of Indebtedness.
"Debt" means the outstanding principal amount of all Indebtedness of
the Borrower and its Subsidiaries of the type referred to in clauses (a), (b),
(c) and (e) of the definition of "Indebtedness" or any Contingent Liability in
respect thereof.
"Debt to EBITDA Ratio" means, as of the last day of any Fiscal
Quarter, the ratio of
(a) Debt outstanding on the last day of such Fiscal Quarter to
(b) EBITDA computed for the period consisting of such Fiscal
Quarter and each of the three immediately preceding Fiscal Quarters.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disbursement" is defined in Section 2.6.2.
"Disbursement Date" is defined in Section 2.6.2.
"Disbursement Due Date" is defined in Section 2.6.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Required Lenders.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such on Schedule III hereto or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
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<PAGE> 20
"EBITDA" means, for any applicable period, the sum (without
duplication) of
(a) Net Income,
plus
(b) the amount deducted, in determining Net Income, representing
amortization,
plus
(c) the amount deducted, in determining Net Income, of all income
taxes (whether paid or deferred) of the Borrower and its Subsidiaries,
plus
(d) the amount deducted, in determining Net Income, of Interest
Expense,
plus
(e) the amount deducted, in determining Net Income, representing
depreciation of assets,
plus
(f) an amount equal to the amount of all non-cash expenses and charges
deducted in arriving at Net Income,
plus
(g) the amount deducted, in determining Net Income, of cash expenses
incurred in connection with the closing of the Transactions;
plus
(h) the amount deducted, in determining Net Income, of any loss
associated with the sale or write-down of assets not in the ordinary course
of business;
plus
(i) the amount deducted, in determining Net Income, of cash
restructuring charges and costs;
plus
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<PAGE> 21
(j) non-recurring charges and costs; and
minus
(k) an amount equal to the amount of all non-cash credits and all
extraordinary gains included in arriving at Net Income.
"Effective Date" means the date this Agreement becomes effective pursuant
to Section 10.8.
"Environmental Laws" means all applicable federal, state or local statutes,
laws, ordinances, codes, rules and regulations (including consent decrees and
administrative orders) relating to protection of human health or the
environment.
"Equity Purchase" means (a) the purchase of Common Stock and Preferred
Stock by New World Pasta LLC for approximately $41,700,000 and approximately
$100,600,000 respectively, and (b) the purchase of Common Stock and Preferred
Stock by the Management Investor for approximately $5,300,000 and approximately
$12,800,000, respectively.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any Fiscal Year, the excess (if any), of
(a) EBITDA for such Fiscal Year
less
(b) the sum, without duplication (for such Fiscal Year) of
(i) Interest Expense;
plus
(ii) scheduled payments and optional and mandatory prepayments,
to the extent actually made, of the principal amount of the Term Loans
or any other term Debt (including Capitalized Lease Liabilities) and
mandatory prepayments of the principal amount of the Revolving Loans
pursuant to clause (f) of Section 3.1.1 in connection with a reduction
of the Revolving Loan Commitment Amount;
plus
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<PAGE> 22
(iii) all taxes actually paid in cash by the Borrower and its
Subsidiaries;
plus
(iv) Capital Expenditures permitted and actually made in such
Fiscal Year pursuant to clause (a) of Section 7.2.7 (excluding Capital
Expenditures financed through the incurrence of Indebtedness);
plus
(v) the amount of the net increase (or minus a net decrease), of
Current Assets over Current Liabilities of the Borrower and its
Subsidiaries from the last day of the immediately preceding Fiscal
Year;
plus
(vi) Investments permitted and actually made pursuant to clauses
(d) and (h) of Section 7.2.5;
plus
(vii) Restricted Payments permitted and actually made pursuant to
Section 7.2.6.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.
"Fee Letter" means the confidential fee letter, dated January 28, 1999,
by and among the Borrower and the Administrative Agent.
"Fiscal Quarter" means any quarter beginning and ending on the dates
set forth in Schedule IV.
"Fiscal Year" means the Borrower's fiscal year beginning on January 1
and ending December 31.
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"Fixed Charge Coverage Ratio" means, as of the close of any Fiscal
Quarter, the ratio computed for the period consisting of such Fiscal Quarter and
each of the three immediately prior Fiscal Quarters with respect to the Borrower
and its Subsidiaries on a consolidated basis of:
(a) the excess (for all such Fiscal Quarters) of
(i) EBITDA;
less
(ii) the sum, without duplication, of (a) cash
Capital Expenditures, and (b) Restricted Payments in cash made
pursuant to Section 7.2.6;
to
(b) the sum (for all such Fiscal Quarters) of
(i) cash Interest Expense;
plus
(ii) scheduled, mandatory principal repayments of
Debt other than in respect of Letters of Credit (including
principal repayments of the Term Loans pursuant to the
provisions of clauses (g) and (h) of Section 3.1.1.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous or toxic
chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous or toxic waste, substance or material, all as amended or
hereafter amended.
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<PAGE> 24
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of any Obligor, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause such Obligor to be in default of any of its
obligations under Section 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments for borrowed money in respect thereof;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) net liabilities of such Person under all Hedging
Obligations;
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<PAGE> 25
(e) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding prepaid
interest thereon and interest not yet due) secured by a Lien on
property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title retention
agreements), whether or not such indebtedness shall have been assumed
by such Person or is limited in recourse; provided, however, that, for
purposes of determining the amount of any Indebtedness of the type
described in this clause, if recourse with respect to such Indebtedness
is limited to specific property financed with such Indebtedness, the
amount of such Indebtedness shall be limited to the fair market value
(determined on a basis reasonably acceptable to the Administrative
Agent) of such property or the principal amount of such Indebtedness,
whichever is less; and
(f) all Contingent Liabilities of such Person in respect of
any of the foregoing;
provided, that, Indebtedness shall not include unsecured Indebtedness incurred
in the ordinary course of business in the nature of accrued liabilities and open
accounts extended by suppliers on normal trade terms in connection with
purchases of goods and services, but shall include the Indebtedness incurred
through the borrowing of money or Contingent Liabilities in connection
therewith. For all purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer (to the extent such Person is
liable for such Indebtedness).
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Intercompany Subordination Agreement" means an agreement to be
executed and delivered pursuant to the terms of this Agreement (including clause
(g) of Section 7.2.2), substantially in the form of Exhibit K hereto, as
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with its terms.
"Interest Coverage Ratio" means, at the close of any Fiscal Quarter,
the ratio computed for the period consisting of such Fiscal Quarter and each of
the three immediately prior Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters)
to
(b) cash Interest Expense (for all such Fiscal Quarters);
"Interest Expense" means, for any Fiscal Quarter, the aggregate
consolidated interest expense (net of interest income) of the Borrower and its
Subsidiaries for such Fiscal Quarter, as
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<PAGE> 26
determined in accordance with GAAP, including the portion of any payments made
in respect of Capitalized Lease Liabilities allocable to interest expense, plus
or minus, without duplication, amounts paid or received under interest rate
hedge agreements (with amounts paid under any interest rate cap being amortized
over the life of such cap for purposes of this definition).
"Interest Period" means, relative to any LIBO Rate Loans, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3.1 or
2.4 and shall end on (but exclude) the day which numerically corresponds to such
date one, two, three or six months thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such month), in
either case as the Borrower may select in its relevant notice pursuant to
Section 2.3 or 2.4; provided, however, that
(a) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates
occurring on more than ten different dates;
(b) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest
Period shall end on the Business Day next preceding such numerically
corresponding day); and
(c) no Interest Period for any Loan may end later than the
Stated Maturity Date for such Loan.
"Investment" means, relative to any Person,
(a) any loan or advance (including capital contributions) made
by such Person to any other Person, and
(b) any ownership or similar interest held by such Person in
any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such transfer or exchange.
"IPO" means the initial public offering of common stock of the Borrower
pursuant to an effective registration statement under the Securities Act.
"Issuance Request" means a Letter of Credit request and certificate
duly executed by an Authorized Officer of the Borrower, substantially in the
form of Exhibit N hereto.
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<PAGE> 27
"Issuer" means, collectively, Scotiabank in its individual capacity
hereunder as issuer of the Letters of Credit and such other Lender as may be
designated by Scotiabank (and agreed to by the Borrower and such Lender) in its
individual capacity as the issuer of Letters of Credit.
"JLL" means Joseph Littlejohn & Levy Fund III, L.P., a Delaware limited
partnership.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit J hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 2.1.3.
"Letter of Credit Commitment" means, with respect to the Issuer, the
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.3 and,
with respect to each of the other Lenders that has a Revolving Loan Commitment,
the obligations of each such Lender to participate in such Letters of Credit
pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum
amount of $10,000,000, as such amount may be reduced from time to time pursuant
to Section 2.2.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding Letters of Credit,
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of such Letters of Credit.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans,
the rate of interest equal to the average (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Administrative Agent's LIBOR
Office in the London interbank market as at or about 11:00 a.m. London time two
Business Days prior to the beginning of such Interest Period for delivery on the
first day of such Interest Period, and in an amount approximately equal to the
amount of the Administrative Agent's LIBO Rate Loan and for a period
approximately equal to such Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
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<PAGE> 28
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) -------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be determined by the Administrative Agent on the basis of the LIBOR
Reserve Percentage in effect on, and the applicable rates furnished to and
received by the Administrative Agent from Scotiabank, two Business Days before
the first day of such Interest Period.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such on Schedule III hereto or designated in the Lender Assignment
Agreement or such other office of a Lender as designated from time to time by
notice from such Lender to the Borrower and the Administrative Agent, whether or
not outside the United States, which shall be making or maintaining LIBO Rate
Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S.
Board, having a term approximately equal or comparable to such Interest Period.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or any filing or recording of any
instrument or document in respect of the foregoing, to secure payment of a debt
or performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan" means, as the context may require, a Revolving Loan, a Swing
Line Loan, a Term-A Loan or a Term-B Loan of any type.
"Loan Document" means this Agreement, the Notes, the Fee Letter, each
Pledge Agreement, the Subsidiary Guaranty, each Mortgage, the Intercompany
Subordination Agreement, each Security Agreement, each Patent Security
Agreement, each Trademark Security Agreement, each Copyright Security Agreement,
and each other agreement, document or instrument delivered in connection with
this Agreement or any other Loan Document, whether or not specifically mentioned
herein or therein.
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"Management Investor" means Miller Pasta, LLC, a Delaware limited
liability company.
"Material Adverse Effect" means (a) a material adverse effect on the
financial condition, operations, assets, business or properties of New World
Pasta LLC and its Subsidiaries, taken as a whole, or the Borrower and its
Subsidiaries, taken as a whole, (b) a material impairment of the ability of the
Borrower or any other Obligor to perform its respective material obligations
under the Loan Documents to which it is or will be a party, or (c) an impairment
of the validity or enforceability of, or a material impairment of the rights,
remedies or benefits available to the Administrative Agent, the Issuer or the
Lenders under, this Agreement or any other Loan Document.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means, collectively, each Mortgage or Deed of Trust executed
and delivered pursuant to the terms of this Agreement, including Section 5.1.11
or Section 7.1.9(b), substantially in the form of Exhibit I hereto, as amended,
supplemented, restated or otherwise modified from time to time in accordance
with its terms.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA with respect to which the Borrower or any member of the
Controlled Group has any direct or indirect, fixed or contingent liability.
"Net Debt Proceeds" means, with respect to the incurrence, sale or
issuance (to the extent permitted by the terms of this Agreement) by the
Borrower or any of its Subsidiaries to any Person of any Debt (other than Debt
permitted by Section 7.2.2 as in effect on the date hereof, including the
Subordinated Notes, but Net Debt Proceeds shall include Excess High Yield Net
Debt Proceeds), the excess of:
(a) the gross cash proceeds received by the Borrower or any of
its Subsidiaries from such incurrence, sale or issuance,
less
(b) all reasonable and customary underwriting commissions and
legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred
in connection with such incurrence, sale or issuance (but excluding any
such amounts paid to Affiliates of the Borrower in connection therewith
in transactions which are not permitted under Section 7.2.11).
"Net Disposition Proceeds" means, with respect to a Permitted
Disposition of the assets of the Borrower or any of its Subsidiaries, the excess
of
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(a) the gross cash proceeds received by the Borrower or any of
its Subsidiaries from such Permitted Disposition and any cash payments
received in respect of promissory notes or in respect of other non-cash
consideration delivered to the Borrower or any Subsidiary in respect of
such Permitted Disposition,
less
(b) the sum of
(i) all reasonable and customary fees and expenses
with respect to legal, investment banking, brokerage and
accounting and other professional fees, sales commissions and
disbursements and all other reasonable fees, expenses and
charges, in each case actually incurred in connection with
such Permitted Disposition (but excluding any such amounts in
transactions which are not permitted under Section 7.2.11);
(ii) all taxes and other governmental costs and
expenses actually paid or estimated by the Borrower (in good
faith) to be payable in cash in connection with such Permitted
Disposition;
(iii) payments made by the Borrower or any of its
Subsidiaries to retire Indebtedness (other than the Loans) of
the Borrower or any of its Subsidiaries where payment of such
Indebtedness is required in connection with such Permitted
Disposition; and
(iv) appropriate amounts provided or to be provided
by the Borrower or any of its Subsidiaries as a reserve, in
accordance with GAAP, with respect to any liabilities
associated with a Permitted Disposition;
provided, however, that if, after the payment of all taxes with respect to such
Permitted Disposition, (X) the amount of estimated taxes, if any, pursuant to
clause (b)(ii) above exceeded the tax amount actually paid in cash in respect of
such Permitted Disposition, or (Y) if, with respect to the reserves, if any,
pursuant to clause (b)(iv) above, all or a portion of such reserves exceed the
amount necessary for such purpose for which the reserves were established, the
aggregate amount of any such excess shall be immediately payable, pursuant to
clause (b) of Section 3.1.1, as Net Disposition Proceeds.
"Net Equity Proceeds" means with respect to the sale or issuance by the
Borrower to any Person of any stock, warrants or options or the exercise of any
such warrants or options after the Effective Date (other than pursuant to
capital contributions which are concurrently contributed to the Borrower on the
Effective Date or which are concurrently used to fund a Permitted Acquisition)
the excess of:
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(a) the gross cash proceeds received by the Borrower from such
sale, exercise or issuance,
less
(b) all reasonable and customary underwriting commissions and
legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred
in connection with such sale or issuance (but excluding any such
amounts paid to Affiliates of the Borrower in connection therewith in
transactions which are not permitted under Section 7.2.11).
"Net Income" means, for any period, the net income of the Borrower and
its Subsidiaries for such period on a consolidated basis, excluding
extraordinary gains and losses.
"Non-U.S. Lender" means any Lender (including each Assignee Lender)
that is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized under the laws of the United
States or any state thereof, (iii) any estate that is subject to U.S. federal
income taxation regardless of the source of its income, or (iv) any trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and at least one U.S. Person has authority to
control all substantial decisions of the trust.
"Non-U.S. Subsidiary" means any Subsidiary of the Borrower that is not
incorporated or organized under the laws of the United States or any state
thereof.
"Note" means, as the context may require, a Revolving Note, a Swing
Line Note, a Term-A Note or a Term-B Note.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, the Notes, each Letter of Credit and each other Loan Document, and
Hedging Obligations (in respect of the Loans) owed to a Lender or an Affiliate
thereof (unless the Lender or such Affiliate otherwise agrees).
"Obligor" means the Borrower or any other Person (other than the
Administrative Agent or any Lender) obligated under any Loan Document.
"Organic Document" means, relative to any Obligor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of Capital
Stock.
"Participant" is defined in Section 10.11.2.
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"Patent Security Agreement" means any Patent Security Agreement
executed and delivered by any Obligor in substantially the form of Exhibit A to
any Security Agreement, as amended, supplemented, amended and restated or
otherwise modified.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
entity.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, has or within the prior six years has had any
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a contributing sponsor
under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
relating to Term-A Loans, Term-B Loans or Revolving Loans, as the case may be,
as set forth opposite its name on Schedule II hereto under the applicable column
heading or set forth in Lender Assignment Agreement(s) under the applicable
column heading, as such percentage may be adjusted from time to time pursuant to
Lender Assignment Agreement(s) executed by such Lender and its Assignee
Lender(s) and delivered pursuant to Section 10.11. A Lender shall not have any
Commitment to make Revolving Loans, Term-A Loans or Term-B Loans (as the case
may be) if its percentage under the respective column heading is zero.
"Permitted Disposition" means a sale, disposition or other conveyance
of assets by the Borrower or any of its Subsidiaries in accordance with the
terms of clause (b) of Section 7.2.9.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means, as the context may require, the Borrower
Pledge Agreement, a Shareholder Pledge Agreement or the Subsidiary Pledge
Agreement.
"Preferred Stock" means the 12% Cumulative Redeemable Preferred Stock
of the Borrower.
"Pro Forma Balance Sheet" is defined in clause (b) of Section 5.1.12.
"Qualified Assets" is defined in clause (b) of Section 3.1.1.
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"Quarterly Payment Date" means the last day of each March, June,
September and December; or, if any such day is not a Business Day, the next
succeeding Business Day, commencing with June 30, 1999.
"Recapitalization Agreement" means the Recapitalization Agreement dated
as of December 15, 1998 among HFC, Hershey CRE, Inc., Homestead, Inc., the
Borrower and New World Pasta, LLC and, with respect to certain sections thereof,
JLL.
"Recapitalization Transactions" means the transactions set forth on
Schedule V hereto.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
"Register" is defined in clause (b)(i) of Section 2.7.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Reinstatement Date" is defined in Section 4.1.
"Release" means a "release", as such term is defined in CERCLA.
"Required Lenders" means, at any time,
(a) prior to the date of the making of the initial Credit
Extension hereunder, Lenders having at least 51% of the sum of the
Revolving Loan Commitments, Term-A Loan Commitments and Term-B Loan
Commitments; and
(b) on and after the date of the initial Credit Extension,
Lenders holding at least 51% of the Total Exposure Amount.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Restricted Payments" is defined in Section 7.2.6.
"Revolving Loan" is defined in Section 2.1.2.
"Revolving Loan Commitment" is defined in Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any date, $50,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
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"Revolving Loan Commitment Termination Date" means the earliest of
(a) March 31, 1999, if the Term Loans have not been made on or
prior to such date;
(b) January 28, 2005;
(c) the date on which the Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.2; and
(d) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clauses (c) or (d), the Revolving
Loan Commitments shall terminate automatically and without any further action.
"Revolving Note" means a promissory note of the Borrower payable to any
Lender, substantially in the form of Exhibit A-1 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate indebtedness of the Borrower to such Lender resulting from
outstanding Revolving Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc.
"Scotiabank" is defined in the preamble.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and any successor statute.
"Security Agreement" means, as the context may require, the Borrower
Security Agreement or the Subsidiary Security Agreement.
"Seller Note" is defined in the Recitals to this Agreement.
"Senior Subordinated Increasing Rate Note Purchase Agreement" means the
Senior Subordinated Increasing Rate Note Purchase Agreement dated as of January
28, 1999 between the Borrower and the various institutions party thereto, as it
may hereafter be amended, supplemented, restated or otherwise modified from time
to time in accordance with Section 7.2.10.
"Senior Subordinated High Yield Notes" means unsecured senior
subordinated notes issued by the Borrower having a maturity no earlier than
January 29, 2007, having subordination provisions at least as favorable to the
Lenders as those contained in the Senior Subordinated Increasing Rate Note
Purchase Agreement (although the definition of "Permitted Payments" contained
therein may be expanded to include payments made pursuant to any defeasance
trust established in accordance with the terms of the Indenture (which shall
require that deposits into a
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<PAGE> 35
defeasance trust may not be made in violation of this Agreement) relating to
such Senior Subordinated High Yield Notes, provided the deposits into the
defeasance trust did not violate the subordination provisions contained in the
Senior Subordinated High Yield Notes and were permitted to made pursuant to this
Agreement) and not containing any amortization or mandatory repurchases or
offers to repurchase (other than in connection with the sale of assets (but only
if such offer need not be made to the extent proceeds of such sale are used to
prepay the Obligations) or upon a change of control) prior to January 29, 2007.
"Senior Subordinated Note Indenture" means the Indenture providing for
the issuance of the Senior Subordinated High Yield Notes, as it may hereafter be
amended, supplemented, restated or otherwise modified from time to time in
accordance with Section 7.2.10.
"Shareholder Pledge Agreement" means the Pledge Agreement executed and
delivered by the Management Investor or New World Pasta LLC pursuant to clause
(a) of Section 5.1.9, substantially in the form of Exhibit G-3 hereto, as
amended, supplemented, amended and restated or otherwise modified from time to
time pursuant to the terms thereof.
"Solvent" means, with respect to any Person on a particular date, that
on such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature, and
(d) such Person is not engaged in business or a transaction, and such Person is
not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as 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.
"Specified Individuals" is defined in the definition of "Change of
Control".
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means
(a) in the case of any Revolving Loan, January 28, 2005;
(b) in the case of any Term-A Loan, January 28, 2005; and
(c) in the case of any Term-B Loan, January 28, 2006.
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"Subordinated Guaranty" means the Guaranty executed and delivered by
each Subsidiary of the Borrower included in the terms of the Senior Subordinated
Note Indenture and with respect to the Subordinated Notes so long as the
obligations of the guarantor are subordinated to the same extent as the
Subordinated Notes or the Senior Subordinated High Yield Notes, as the case may
be.
"Subordinated Notes" means $110,000,000 aggregate principal amount of
Senior Subordinated Increasing Rate Notes Due January 28, 2000 issued by the
Borrower pursuant to the Senior Subordinated Increasing Rate Note Purchase
Agreement and includes any Exchange Notes (as defined therein) issued pursuant
thereto. Without limiting the foregoing, the term "Subordinated Notes" shall
also include all additional senior subordinated notes issued to pay accrued and
unpaid interest in respect of such Senior Subordinated Increasing Rate Notes Due
January 28, 2000 or Exchange Notes described in the immediately preceding
sentence or the additional senior subordinated notes issued as contemplated by
this sentence.
"Subordinated Noteholder" means, at any time, any holder of a
Subordinated Note.
"Subordination Provisions" is defined in Section 8.1.11.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which Capital Stock (or other ownership
interest) having ordinary voting power to elect a majority of the board of
directors, managers or other voting members of the governing body of such entity
(irrespective of whether at the time Capital Stock (or other ownership interest)
of any other class or classes of such entity shall or might have voting power
upon the occurrence of any contingency) is at the time directly or indirectly
owned by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person.
"Subsidiary Guarantor" means, on the Effective Date, each Subsidiary of
the Borrower and thereafter, each Subsidiary of the Borrower that is required,
pursuant to clause (a) of Section 7.1.7, to execute and deliver a supplement to
the Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guaranty executed and delivered by each
Subsidiary Guarantor pursuant to the terms of this Agreement, substantially in
the form of Exhibit H-l hereto, as amended, supplemented, amended and restated
or otherwise modified from time to time in accordance with its terms.
"Subsidiary Pledge Agreement" means the Pledge Agreement executed and
delivered by certain Subsidiaries of the Borrower pursuant to the terms of this
Agreement, substantially in the form of Exhibit H-2 hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time in
accordance with its terms.
"Subsidiary Security Agreement" means the Security Agreement executed
and delivered by certain Subsidiaries of the Borrower pursuant to the terms of
this Agreement, substantially in
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the form of Exhibit F-2 hereto, as amended, supplemented, amended and restated
or otherwise modified from time to time in accordance with its terms.
"Swing Line Lender" means Scotiabank (or another Lender designated by
Scotiabank with the consent of the Borrower, if such Lender agrees to be the
Swing Line Lender hereunder), in such Person's capacity as the maker of Swing
Line Loans.
"Swing Line Loan" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment" means, with respect to the Swing Line
Lender, the Swing Line Lender's obligation pursuant to clause (b) of Section
2.1.2 to make Swing Line Loans and, with respect to each Lender with a
Commitment to make Revolving Loans (other than the Swing Line Lender), such
Lender's obligation to participate in Swing Line Loans pursuant to Section
2.3.2.
"Swing Line Loan Commitment Amount" means, on any date, $5,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Swing Line Note" means a promissory note of the Borrower payable to
the Swing Line Lender, in substantially the form of Exhibit A-4 hereto (as such
promissory note may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Indebtedness of the Borrower to the Swing Line
Lender resulting from outstanding Swing Line Loans, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Syndication Agent" is defined in the preamble.
"Taxes" is defined in Section 4.6.
"Term-A Loan" is defined in clause (a) of Section 2.1.1.
"Term-A Loan Commitment" is defined in clause (a) of Section 2.1.1.
"Term-A Loan Commitment Amount" means, on any date, $50,000,000.
"Term-A Loan Commitment Termination Date" means the earliest of
(a) March 31, 1999, if the Term-A Loans have not been made on
or prior to such date;
(b) the Closing Date (immediately after the making of the
Term-A Loans on such date); and
(c) the date on which any Commitment Termination Event occurs.
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Upon the occurrence of any event described in clauses (b) or (c), the Term-A
Loan Commitments shall terminate automatically and without any further action.
"Term-A Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A-2 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term-A Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Term-B Loan" is defined in clause (b) of Section 2.1.1.
"Term-B Loan Commitment" is defined in clause (b) of Section 2.1.1.
"Term-B Loan Commitment Amount" means, on any date, $150,000,000.
"Term-B Loan Commitment Termination Date" means the earliest of
(a) March 31, 1999, if the Term-B Loans have not been made on
or prior to such date;
(b) the Closing Date (immediately after the making of the
Term-B Loans on such date); and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clauses (b) or (c), the Term-B
Loan Commitments shall terminate automatically and without any further action.
"Term-B Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A-3 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term-B Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Term Loans" means collectively, the Term-A Loans and the Term-B Loans.
"Term Loan Commitment Termination Date" means, as the context may
require, the Term-A Loan Commitment Termination Date or the Term-B Loan
Commitment Termination Date.
"Total Exposure Amount" means, on any date of determination, the then
outstanding principal amount of all Term Loans and the then effective Revolving
Loan Commitment Amount or, if the Revolving Loan Commitment has been terminated,
the then outstanding principal amount of all Revolving Loans and undrawn amount
of all outstanding Letters of Credit.
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"Trademark Security Agreement" means any Trademark Security Agreement
executed and delivered by any Obligor substantially in the form of Exhibit B to
any Security Agreement, as amended, supplemented, amended and restated or
otherwise modified from time to time in accordance with the terms of such
Security Agreement.
"Tranche" means, as the context may require, the Loans constituting
Term-A Loans, Term-B Loans, Swing Line Loans or Revolving Loans.
"Transactions" is defined in the Recitals.
"Transferors" means HFC, Hershey CRE, Inc. and Homestead, Inc., a
Delaware corporation.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Waiver" means an agreement executed by a lessor of any real property
leased by the Borrower or any of its Subsidiaries in favor of the Administrative
Agent for the benefit of the Lenders and the Issuer in form and substance
reasonably satisfactory to the Administrative Agent.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA, and to which the Borrower has any liability.
"wholly-owned Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person all of the Capital Stock (and all rights and options
to purchase such Capital Stock) of which, other than directors' qualifying
shares, are owned, beneficially and of record, by such Person and/or one or more
wholly-owned Subsidiaries of such Person.
"Year 1" is defined in clause (a) of Section 7.2.7.
"Year 2" is defined in clause (a) of Section 7.2.7.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each other Loan Document, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.
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SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder (including under Section 7.2.4) shall be made in accordance with
generally accepted accounting principles ("GAAP") as in effect as of December
31, 1997, but all financial statements required to be delivered hereunder or
thereunder shall be prepared in accordance with GAAP as in effect from time to
time.
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
AND NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Article V),
(a) each Lender severally agrees to make Loans (other than
Swing Line Loans) pursuant to the Commitments and the Swing Line Lender
agrees to make Swing Line Loans pursuant to the Swing Line Loan
Commitment in each case as described in this Section 2.1; and
(b) the Issuer agrees that it will issue Letters of Credit
pursuant to Section 2.1.3, and each other Lender that has a Revolving
Loan Commitment severally agrees that it will purchase participation
interests in such Letters of Credit pursuant to Section 2.6.1.
SECTION 2.1.1. Term Loan Commitments. Subject to compliance by the
Borrower with the terms of Sections 5.1 and Section 5.2, in a single Borrowing
on the Closing Date (which shall be a Business Day) occurring on or prior to the
Commitment Termination Date, each Lender that has a Percentage in excess of zero
of the Term-A Loan Commitment or the Term-B Loan Commitment, as applicable,
(a) will make loans (relative to such Lender, its "Term-A
Loans") to the Borrower equal to such Lender's Percentage of the
aggregate amount of the Borrowing of Term-A Loans requested by the
Borrower to be made on the Closing Date (with the commitment of each
such Lender described in this clause (a) herein referred to as its
"Term-A Loan Commitment"); and
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<PAGE> 41
(b) will make loans (relative to such Lender, its "Term-B
Loans") to the Borrower equal to such Lender's Percentage of the
aggregate amount of the Borrowing of Term-B Loans requested by the
Borrower to be made on the Closing Date (with the commitment of each
such Lender described in this clause (b) herein referred to as its
"Term-B Loan Commitment").
No amounts paid or prepaid with respect to Term-A Loans or Term-B Loans may be
reborrowed.
SECTION 2.1.2. Revolving Loan Commitment and Swing Line Loan
Commitment. Subject to compliance by the Borrower with the terms of Section
2.1.4, Section 5.1 and Section 5.2, the Revolving Loans and Swing Line Loans
will be made as set forth below.
(a) From time to time on any Business Day occurring
concurrently with (or after) the making of the Term Loans but prior to
the Revolving Loan Commitment Termination Date, each Lender that has a
Percentage of the Revolving Loan Commitment in excess of zero will make
loans (relative to such Lender, its "Revolving Loans") to the Borrower
equal to such Lender's Percentage of the aggregate amount of the
Borrowing of the Revolving Loans requested by the Borrower to be made
on such day. The Commitment of each Lender described in this clause (a)
is herein referred to as its "Revolving Loan Commitment". On the terms
and subject to the conditions hereof, the Borrower may from time to
time borrow, prepay and reborrow the Revolving Loans.
(b) From time to time on any Business Day occurring
concurrently with (or after) the making of the Term Loans, but prior to
the Revolving Loan Commitment Termination Date, the Swing Line Lender
will make Loans (relative to the Swing Line Lender, its "Swing Line
Loans") to the Borrower equal to the principal amount of the Swing Line
Loans requested by the Borrower. On the terms and subject to the
conditions hereof, the Borrower may from time to time borrow, prepay
and reborrow such Swing Line Loans.
SECTION 2.1.3. Letter of Credit Commitment. Subject to compliance by
the Borrower with the terms of Section 2.1.5, Section 5.1 and Section 5.2, from
time to time on any Business Day occurring from and after the Closing Date but
prior to the Revolving Loan Commitment Termination Date, the Issuer will
(a) issue one or more standby or documentary letters of credit
(each referred to as a "Letter of Credit") for the account of the
Borrower or its Subsidiaries in the Stated Amount requested by the
Borrower on such day; or
(b) extend the Stated Expiry Date of an existing standby
Letter of Credit previously issued hereunder to a date not later than
the earlier of (x) the Revolving Loan Commitment Termination Date and
(y) one year from the date of such extension.
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SECTION 2.1.4. Lenders Not Permitted or Required To Make the Loans. No
Lender shall be permitted or required to, and the Borrower shall not request
that any Lender, make
(a) any Term-A Loan or Term-B Loan (as the case may be) if,
after giving effect thereto, the aggregate original principal amount of
all the Term-A Loans or Term-B Loans (as the case may be):
(i) of all Lenders would exceed the Term-A Loan
Commitment Amount (in the case of Term-A Loans) or the Term-B
Loan Commitment Amount (in the case of Term-B Loans); or
(ii) of such Lender would exceed such Lender's
Percentage of the Term-A Loan Commitment Amount (in the case
of Term-A Loans) or the Term-B Loan Commitment Amount (in the
case of Term-B Loans);
(b) any Revolving Loan or Swing Line Loan if, after giving
effect thereto, the aggregate outstanding principal amount of all the
Revolving Loans and Swing Line Loans
(i) of all the Lenders with Revolving Loan
Commitments, together with the aggregate amount of all Letter
of Credit Outstandings, would exceed the Revolving Loan
Commitment Amount; or
(ii) of such Lender with a Revolving Loan Commitment
(other than the Swing Line Lender), together with such
Lender's Percentage of the aggregate amount of all Letter of
Credit Outstandings, would exceed such Lender's Percentage of
the Revolving Loan Commitment Amount; or
(c) any Swing Line Loan if after giving effect to the making
of such Swing Line Loan, the outstanding principal amount of all Swing
Line Loans would exceed the then existing Swing Line Loan Commitment
Amount.
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of
Credit. No Issuer shall be permitted or required to issue any Letter of Credit
if, after giving effect thereto, (a) the aggregate amount of all Letter of
Credit Outstandings would exceed the Letter of Credit Commitment Amount or (b)
the sum of the aggregate amount of all Letter of Credit Outstandings plus the
aggregate principal amount of all Revolving Loans and Swing Line Loans then
outstanding would exceed the Revolving Loan Commitment Amount.
SECTION 2.2. Reduction of the Commitment Amounts. The Commitment
Amounts are subject to reductions from time to time pursuant to this Section
2.2.
SECTION 2.2.1. Optional. The Borrower may, from time to time on any
Business Day occurring after the time of the initial Credit Extension hereunder,
voluntarily reduce the Swing
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Line Loan Commitment Amount, the Letter of Credit Commitment Amount or the
Revolving Loan Commitment Amount; provided, however, that all such reductions
shall require at least three Business Days' prior notice to the Administrative
Agent and be permanent, and any partial reduction of any Commitment Amount shall
be in a minimum amount of $500,000 and in an integral multiple of $100,000. Any
reduction of the Revolving Loan Commitment Amount which reduces the Revolving
Loan Commitment Amount below the sum of (i) the Swing Line Loan Commitment
Amount and (ii) the Letter of Credit Commitment Amount shall result in an
automatic and corresponding reduction of the Swing Line Loan Commitment Amount
and/or Letter of Credit Commitment Amount (as directed by the Borrower in a
notice to the Administrative Agent delivered together with the notice of such
voluntary reduction in the Revolving Loan Commitment Amount) to an aggregate
amount not in excess of the Revolving Loan Commitment Amount, as so reduced,
without any further action on the part of the Swing Line Lender or the Issuer.
SECTION 2.2.2. Mandatory. Following the prepayment in full of the Term
Loans, the Revolving Loan Commitment Amount shall, without any further action,
automatically and permanently be reduced on the date the Term Loans would
otherwise have been required to be prepaid pursuant to the applicable provisions
of Section 3.1.1 with 100% of any Net Disposition Proceeds, in an amount equal
to the amount by which the Term Loans would otherwise be required to be prepaid
if Term Loans had been outstanding. Any reduction of the Revolving Loan
Commitment Amount which reduces the Revolving Loan Commitment Amount below the
sum of (i) the Swing Line Loan Commitment Amount and (ii) the Letter of Credit
Commitment Amount shall result in an automatic and corresponding reduction of
the Swing Line Loan Commitment Amount and/or Letter of Credit Commitment Amount
(as directed by the Borrower in a notice to the Administrative Agent) to an
aggregate amount not in excess of the Revolving Loan Commitment Amount, as so
reduced, without any further action on the part of the Swing Line Lender or the
Issuer.
SECTION 2.3. Borrowing Procedures and Funding Maintenance. Loans shall
be made by the Lenders in accordance with this Section.
SECTION 2.3.1. Term Loans and Revolving Loans. By delivering a
Borrowing Request to the Administrative Agent on or before 12:00 noon, New York
time, on a Business Day, the Borrower may from time to time irrevocably request,
on not less than one (in the case of Base Rate Loans) and three (in the case of
LIBO Rate Loans) nor more than (in each case) five Business Days' notice, that a
Borrowing be made, in the case of LIBO Rate Loans, in a minimum amount of
$2,500,000 and an integral multiple of $500,000 and in the case of the Base Rate
Loans, in a minimum amount of $500,000 and an integral multiple of $250,000, or,
in either case, in the unused amount of the applicable Commitment. On the terms
and subject to the conditions of this Agreement, each Borrowing shall be
comprised of the type of Loans, and shall be made on the Business Day, specified
in such Borrowing Request. On or before 11:00 a.m., New York time, on such
Business Day each Lender shall deposit with the Administrative Agent same day
funds in an amount equal to such Lender's Percentage of the requested Borrowing.
Such deposit will be made to an account which the Administrative Agent shall
specify from time
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to time by notice to the Lenders. To the extent funds are received from the
Lenders, the Administrative Agent shall make such funds available to the
Borrower by wire transfer to the accounts the Borrower shall have specified in
its Borrowing Request. No Lender's obligation to make any Loan shall be affected
by any other Lender's failure to make any Loan.
SECTION 2.3.2. Swing Line Loans.
(a) By telephonic notice, promptly followed (within three
Business Days) by the delivery of a confirming Borrowing Request, to
the Swing Line Lender on or before 11:00 a.m., New York time, on a
Business Day, the Borrower may from time to time irrevocably request
that Swing Line Loans be made by the Swing Line Lender in an aggregate
minimum principal amount of $500,000 and an integral multiple of
$250,000. Each request by the Borrower for a Swing Line Loan shall
constitute a representation and warranty by the Borrower that on the
date of such request and (if different) the date of the making of the
Swing Line Loan, both immediately before and after giving effect to
such Swing Line Loan and the application of the proceeds thereof, the
statements made in Section 5.2.1 are true and correct in all material
respects with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of
such earlier date). All Swing Line Loans shall be made as Base Rate
Loans and shall not be entitled to be converted into LIBO Rate Loans.
The proceeds of each Swing Line Loan shall be made available by the
Swing Line Lender, by 3:00 p.m., New York time, on the Business Day
telephonic notice is received by it as provided in the preceding
sentences, to the Borrower by wire transfer to the accounts the
Borrower shall have specified in its notice therefor.
(b) If (i) any Swing Line Loan shall be outstanding for more
than four full Business Days or (ii) after giving effect to any request
for a Swing Line Loan or a Revolving Loan the aggregate principal
amount of Revolving Loans and Swing Line Loans outstanding to the Swing
Line Lender, together with the Swing Line Lender's Percentage of all
Letter of Credit Outstandings, would exceed the Swing Line Lender's
Percentage of the Revolving Loan Commitment Amount, the Swing Line
Lender, at any time in its sole and absolute discretion may request
each Lender that has a Revolving Loan Commitment, and each such Lender,
including the Swing Line Lender hereby agrees, to make a Revolving Loan
(which shall always be initially funded as a Base Rate Loan) in an
amount equal to such Lender's Percentage of the amount of the Swing
Line Loans ("Refunded Swing Line Loans") outstanding on the date such
notice is given. On or before 11:00 a.m. (New York time) on the first
Business Day following receipt by each Lender of a request to make
Revolving Loans as provided in the preceding sentence, each such Lender
(other than the Swing Line Lender) shall deposit in an account
specified by the Administrative Agent to the Lenders from time to time
the amount so requested in same day funds, whereupon such funds shall
be immediately delivered to the Swing Line Lender (and not the
Borrower) and applied to repay the Refunded Swing Line Loans. On the
day such Revolving Loans are made, the Swing Line Lender's Percentage
of the Refunded Swing Line Loans shall be deemed to be paid. Upon the
making of any
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Revolving Loan pursuant to this clause, the amount so funded shall
become due under such Lender's Revolving Note and shall no longer be
owed under the Swing Line Note. Each Lender's obligation to make the
Revolving Loans referred to in this clause shall be absolute and
unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set-off, counterclaim, recoupment, defense
or other right which such Lender may have against the Swing Line
Lender, the Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of any Default; (iii) any adverse
change in the condition (financial or otherwise) of the Borrower or any
other Obligor subsequent to the date of the making of a Swing Line
Loan; (iv) the acceleration or maturity of any Loans or the termination
of the Revolving Loan Commitment after the making of any Swing Line
Loan; (v) any breach of this Agreement by the Borrower or any other
Lender; or (vi) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
(c) In the event that (i) the Borrower or any Subsidiary is
subject to any bankruptcy or insolvency proceedings as described in
Section 8.1.9 or (ii) the Swing Line Lender otherwise requests, each
Lender with a Revolving Loan Commitment shall acquire without recourse
or warranty an undivided participation interest equal to such Lender's
Percentage of any Swing Line Loan otherwise required to be repaid by
such Lender pursuant to the preceding clause by paying to the Swing
Line Lender on the date on which such Lender would otherwise have been
required to make a Revolving Loan in respect of such Swing Line Loan
pursuant to the preceding clause, in same day funds, an amount equal to
such Lender's Percentage of such Swing Line Loan, and no Revolving
Loans shall be made by such Lender pursuant to the preceding clause.
From and after the date on which any Lender purchases an undivided
participation interest in a Swing Line Loan pursuant to this clause,
the Swing Line Lender shall distribute to such Lender (appropriately
adjusted, in the case of interest payments, to reflect the period of
time during which such Lender's participation interest is outstanding
and funded) its ratable amount of all payments of principal and
interest in respect of such Swing Line Loan in like funds as received;
provided, however, that in the event such payment received by the Swing
Line Lender is required to be returned to the Borrower, such Lender
shall return to the Swing Line Lender the portion of any amounts which
such Lender had received from the Swing Line Lender in like funds.
(d) Notwithstanding anything herein to the contrary, the Swing
Line Lender shall not be obligated to make any Swing Line Loans if it
has elected after the occurrence and during the continuance of a
Default not to make Swing Line Loans and has notified the Borrower in
writing or by telephone of such election. The Swing Line Lender shall
promptly give notice to the Lenders of such election not to make Swing
Line Loans. No Lender shall be obligated to acquire its pro rata
participation interest of any Swing Line Loan to the extent such Swing
Line Loan was made after the Swing Line Lender is aware of a Default
and has made such Swing Line Loan without the consent of the Lenders
having Revolving Loan Commitments.
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SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
noon, New York time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than one (in the case of a conversion of LIBO
Rate Loans to Base Rate Loans) and three (in the case of a continuation of LIBO
Rate Loans or a conversion of Base Rate Loans into LIBO Rate Loans) nor more
than (in each case) five Business Days' notice that all, or any portion in an
aggregate minimum amount of $2,500,000 and an integral multiple of $500,000, in
the case of the continuation of, or conversion into, LIBO Rate Loans, or an
aggregate minimum amount of $500,000 and an integral multiple of $250,000, in
the case of the conversion into Base Rate Loans (other than Swing Line Loans as
provided in clause (a) of Section 2.3.2), be, in the case of Base Rate Loans,
converted into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted
into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of
delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan
at least three Business Days before the last day of the then current Interest
Period with respect thereto, such LIBO Rate Loan shall, on such last day,
automatically convert to a Base Rate Loan); provided, however, that (x) each
such conversion or continuation shall be pro rated among the applicable
outstanding Loans of the relevant Lenders, and (y) no portion of the outstanding
principal amount of any Loans may be continued as, or be converted into, LIBO
Rate Loans when any Default has occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan, so long as such
action does not result in increased costs to the Borrower; provided, however,
that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be
held by such Lender, and the obligation of the Borrower to repay such LIBO Rate
Loan shall nevertheless be to such Lender for the account of such foreign
branch, Affiliate or international banking facility; and provided, further,
however, that such Lender shall cause such foreign branch, Affiliate or
international banking facility to comply with the applicable provisions of
clause (b) of Section 4.6 with respect to such LIBO Rate Loan. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank eurodollar market.
SECTION 2.6. Issuance Procedures. By delivering to the Administrative
Agent an Issuance Request on or before 12:00 noon, New York time, on a Business
Day, the Borrower may, from time to time irrevocably request, on not less than
three nor more than ten Business Days' notice (or such shorter notice as may be
acceptable to the Issuer), in the case of an initial issuance of a Letter of
Credit, and not less than three nor more than ten Business Days' notice (unless
a shorter notice period is acceptable to the Issuer) prior to the then existing
Stated Expiry Date of a Letter of Credit, in the case of a request for the
extension of the Stated Expiry Date of a Letter of Credit, that the Issuer
issue, or extend the Stated Expiry Date of, as the case may be, an irrevocable
Letter of Credit for the Borrower's account or for the account of any
wholly-owned Subsidiary of the Borrower that is a signatory to the Subsidiary
Guaranty and Subsidiary
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Security Agreement and whose outstanding Capital Stock is pledged to the
Administrative Agent for the benefit of the Lenders pursuant to a Pledge
Agreement, in such form as may be requested by the Borrower and approved by the
Issuer, solely for the purposes described in Section 7.1.9. The obligations of
the Borrower and the Letter of Credit Issuer in respect of Letters of Credit may
at the election of the Letter of Credit Issuer be subject to The International
Standby Practices (ISP 98). Notwithstanding anything to the contrary contained
herein or in any separate application for any Letter of Credit, the Borrower
hereby acknowledges and agrees that it shall be obligated to reimburse the
Issuer upon each Disbursement of a Letter of Credit, and it shall be deemed to
be the obligor for purposes of each such Letter of Credit issued hereunder
(whether the account party on such Letter of Credit is the Borrower or a
Subsidiary of the Borrower). Upon receipt of an Issuance Request, the
Administrative Agent shall promptly notify the Issuer and each Lender with a
Revolving Loan Commitment thereof. Each Letter of Credit shall by its terms be
stated to expire on a date (its "Stated Expiry Date") no later than the earlier
to occur of (i) the Revolving Loan Commitment Termination Date or (ii) in the
case of standby Letters of Credit, one year from the date of its issuance and,
in the case of documentary Letters of Credit, 180 days from the date of its
issuance. The Issuer will make available to the beneficiary thereof the original
of each Letter of Credit which it issues hereunder.
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit issued by the Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) that has a Revolving Loan Commitment
shall be deemed to have irrevocably purchased from the Issuer, to the extent of
its Percentage in respect of Revolving Loans, and the Issuer shall be deemed to
have irrevocably granted and sold to such Lender a participation interest in
such Letter of Credit (including the Contingent Liability and any Reimbursement
Obligation and all rights with respect thereto), and such Lender shall, to the
extent of its Percentage in respect of Revolving Loans, be responsible for
reimbursing promptly (and in any event within one Business Day) the Issuer for
Reimbursement Obligations which have not been reimbursed by the Borrower in
accordance with Section 2.6.3. In addition, such Lender shall, to the extent of
its Percentage in respect of Revolving Loans, be entitled to receive a ratable
portion of the Letter of Credit fees payable pursuant to Section 3.3.3 with
respect to each Letter of Credit and of interest payable pursuant to Section 3.2
with respect to any Reimbursement Obligation. To the extent that any Lender has
reimbursed the Issuer for a Disbursement as required by this Section, such
Lender shall be entitled to receive its ratable portion of any amounts
subsequently received (from the Borrower or otherwise) in respect of such
Disbursement.
SECTION 2.6.2. Disbursements; Conversion to Revolving Loans. The Issuer
will notify the Borrower and the Administrative Agent promptly of the
presentment for payment of any Letter of Credit issued by the Issuer, together
with notice of the date (the "Disbursement Date") such payment shall be made
(each such payment, a "Disbursement"). Subject to the terms and provisions of
such Letter of Credit and this Agreement, the Issuer shall make such payment to
the beneficiary (or its designee) of such Letter of Credit. The Borrower agrees
to reimburse the Administrative Agent for the account of the Issuer, upon
receipt by the Borrower of notice from the Issuer of the date and amount of a
draft presented under any Letter of Credit and paid by the Issuer, prior to 1:00
p.m., New York time, on the first Business Day following the date of
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such notice (the "Disbursement Due Date"), for all amounts which the Issuer has
disbursed under such Letter of Credit, together with interest thereon at the
rate per annum otherwise applicable to Revolving Loans (made as Base Rate Loans)
from and including the Disbursement Date to but excluding the Disbursement Due
Date and, thereafter (unless such Disbursement is converted into a Base Rate
Loan on the Disbursement Due Date), at a rate per annum equal to the rate per
annum then in effect with respect to overdue Revolving Loans (made as Base Rate
Loans) pursuant to Section 3.2.2 for the period from the Disbursement Due Date
through the date of such reimbursement; provided, however, that, if no Default
shall have then occurred and be continuing, unless the Borrower has notified the
Administrative Agent no later than one Business Day prior to the Disbursement
Due Date that it will reimburse the Issuer for the applicable Disbursement, then
the amount of the Disbursement shall be deemed to be a Revolving Loan
constituting a Base Rate Loan and following the giving of notice thereof by the
Administrative Agent to the Lenders, each Lender with a commitment to make
Revolving Loans (other than the Issuer) will deliver to the Issuer on the
Disbursement Due Date immediately available funds in an amount equal to such
Lender's Percentage of such Revolving Loan. Each conversion of Disbursement
amounts into Revolving Loans shall constitute a representation and warranty by
the Borrower that on the date of the making of such Revolving Loan all of the
statements set forth in Section 5.2.1 are true and correct in all material
respects with the same effect as if then made (unless stated to relate solely to
an earlier date, in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date).
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with
respect to each Disbursement (including interest thereon) not converted into a
Base Rate Loan pursuant to Section 2.6.2, and, upon the failure of the Borrower
to reimburse the Issuer and the giving of notice thereof by the Administrative
Agent to the Lenders, each Lender's (to the extent it has a Revolving Loan
Commitment) obligation under Section 2.6.1 to reimburse the Issuer or fund its
Percentage of any Disbursement converted into a Base Rate Loan, shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Borrower or such
Lender, as the case may be, may have or have had against the Issuer or any such
Lender, including any defense based upon the failure of any Disbursement to
conform to the terms of the applicable Letter of Credit (if, in the Issuer's
good faith opinion, such Disbursement is determined to be appropriate) or any
non-Application or misapplication by the beneficiary of the proceeds of such
Letter of Credit; provided, however, that after paying in full its Reimbursement
Obligation hereunder, nothing herein shall adversely affect the right of the
Borrower or such Lender, as the case may be, to commence any proceeding against
the Issuer for any wrongful Disbursement made by the Issuer under a Letter of
Credit as a result of acts or omissions constituting gross negligence or willful
misconduct on the part of the Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Event of Default of the type described in Section 8.1.9 or,
with notice from the Administrative Agent acting at the direction of the
Required Lenders, upon the occurrence and during the continuation of any other
Event of Default,
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(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn
and available under all Letters of Credit issued and outstanding shall,
without demand upon or notice to the Borrower or any other Person, be
deemed to have been paid or disbursed by the Issuer under such Letters
of Credit (notwithstanding that such amount may not in fact have been
so paid or disbursed); and
(b) upon notification by the Administrative Agent to the
Borrower of its obligations under this Section, the Borrower shall be
immediately obligated to reimburse the Issuer for the amount deemed to
have been so paid or disbursed by the Issuer.
Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash with the Administrative Agent and held as collateral security
for the Obligations in connection with the Letters of Credit issued by the
Issuer and shall be applied to such Obligations as they become due and payable.
At such time when the Events of Default giving rise to the deemed disbursements
hereunder shall have been cured or waived, the Administrative Agent shall return
to the Borrower all amounts then on deposit with the Administrative Agent
pursuant to this Section, together with accrued interest at the Federal Funds
Rate, which have not been applied to the satisfaction of such Obligations.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower and,
to the extent set forth in Section 2.6.1, each Lender with a Revolving Loan
Commitment, shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of
its own gross negligence or willful misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit.
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None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Issuer or any Lender with a Revolving Loan
Commitment hereunder. In furtherance and extension and not in limitation or
derogation of any of the foregoing, any action taken or omitted to be taken by
the Issuer in good faith (and not constituting gross negligence or willful
misconduct) shall be binding upon the Borrower, each Obligor and each such
Lender, and shall not put the Issuer under any resulting liability to the
Borrower, any Obligor or any such Lender, as the case may be.
SECTION 2.7. Register; Notes.
(a) Each Lender may maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of the
Borrower to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder. In the case of a Lender that
does not request, pursuant to clause (b)(ii) below, execution and
delivery of a Note evidencing the Loans made by such Lender to the
Borrower, such account or accounts shall, to the extent not
inconsistent with the notations made by the Administrative Agent in the
Register, be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to maintain
such account or accounts shall not limit or otherwise affect any
Obligations of the Borrower or any other Obligor.
(b) (i) The Borrower hereby designates the Administrative
Agent to serve as the Borrower's agent, solely for the purpose of this
clause (b), to maintain a register (the "Register") on which the
Administrative Agent will record each Lender's name, address and
Commitment, the Loans made by each Lender and each repayment in respect
of the principal amount of the Loans of each Lender and annexed to
which the Administrative Agent shall retain a copy of each Lender
Assignment Agreement delivered to the Administrative Agent pursuant to
Section 10.11.1. Failure to make any recordation, or any error in such
recordation, shall not affect the Borrower's obligation in respect of
such Loans. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent
and the Lenders shall treat each Person in whose name a Loan (and, as
provided in clause (ii), the Note evidencing such Loan, if any) is
registered as the owner thereof for all purposes of this Agreement,
notwithstanding notice or any provision herein to the contrary. A
Lender's Commitment and the Loans made pursuant thereto may be assigned
or otherwise transferred in whole or in part only by registration of
such assignment or transfer in the Register. Any assignment or transfer
of a Lender's Commitment or the Loans made pursuant thereto shall be
registered in the Register only upon delivery to the Administrative
Agent of a Lender Assignment Agreement duly executed by the assignor
thereof and the compliance by the parties thereto with the other
requirements of Section 10.11.1. No assignment or transfer of a
Lender's Commitment or the Loans made pursuant thereto shall be
effective unless such assignment or transfer shall have been recorded
in the Register by the Administrative Agent as provided in this
Section.
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(ii) The Borrower hereby agrees that, upon the
request to the Administrative Agent by any Lender, the Borrower will
execute and deliver to such Lender, as applicable, a Revolving Note, a
Swing Line Note, Term-A Note or a Term-B Note evidencing the Loans made
by such Lender. The Borrower hereby irrevocably authorizes each Lender
to make (or cause to be made) appropriate notations on the grid
attached to such Lender's Notes (or on any continuation of such grid),
which notations, if made, shall evidence, inter alia, the date of, the
outstanding principal amount of, and the interest rate and Interest
Period applicable to the Loans evidenced thereby. Such notations shall,
to the extent not inconsistent with the notations made by the
Administrative Agent in the Register, be conclusive and binding on the
Borrower absent manifest error; provided, however, that the failure of
any Lender to make any such notations shall not limit or otherwise
affect any Obligations of the Borrower or any other Obligor. The Loans
evidenced by any Note and interest thereon shall at all times
(including after assignment pursuant to Section 10.11.1) be payable to
the order of the payee named therein and its registered assigns.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any
(i) Loans, provided, however, that
(A) any such prepayment of the Term-A Loans,
or the Term-B Loans, shall be made pro rata among
Term-A Loans and Term-B Loans, as applicable, of the
same type and if applicable, having the same Interest
Period of all Lenders that have made such Term-A
Loans or Term-B Loans, and any such prepayment of
Revolving Loans shall be made pro rata among the
Revolving Loans of the same type and, if applicable,
having the same Interest Period of all Lenders that
have made such Revolving Loans;
(B) the Borrower shall comply with Section
4.4 in the event that any LIBO Rate Loan is prepaid
on any day other than the last day of the Interest
Period for such Loan;
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(C) all such voluntary prepayments shall
require at least three Business Days' prior written
notice to the Administrative Agent provided that
voluntary prepayments of Revolving and Swing Line
Base Rate Loans may be made on same-day telephonic
notice; and
(D) all such voluntary partial prepayments
shall be, in the case of LIBO Rate Loans, in an
aggregate minimum amount of $500,000 and an integral
multiple of $500,000 and, in the case of Base Rate
Loans, in an aggregate minimum amount of $250,000 and
an integral multiple of $100,000; and
(ii) Swing Line Loans, provided that all such
voluntary prepayments shall require prior telephonic notice to
the Swing Line Lender on or before 1:00 p.m., New York time,
on the day of such prepayment (such notice to be confirmed in
writing within 24 hours thereafter);
(b) shall, no later than one Business Day following the
receipt of any Net Disposition Proceeds, deliver to the Administrative
Agent a calculation of the amount of such Net Disposition Proceeds and,
subject to the following proviso, make a mandatory prepayment of the
Term Loans in an amount equal to 100% of such Net Disposition Proceeds,
to be applied as set forth in Section 3.1.2; provided, that, at the
option of the Borrower and so long as no Default shall have occurred
and be continuing, the Borrower may use or cause the appropriate
Subsidiary to use the Net Disposition Proceeds to purchase assets
useful in the business of the Borrower and its Subsidiaries (with such
assets collectively referred to as "Qualified Assets") within 365 days
after the consummation of such sale, conveyance or disposition, and in
the event the Borrower elects to exercise its right to purchase
Qualified Assets with the Net Disposition Proceeds pursuant to this
clause, the Borrower shall deliver a certificate of an Authorized
Officer to the Administrative Agent within 30 days following the
receipt of Net Disposition Proceeds setting forth the amount of the Net
Disposition Proceeds which the Borrower expects to use to purchase
Qualified Assets during such 365 day period; provided, further, that
the Borrower and its Subsidiaries shall be only permitted to reinvest
Net Disposition Proceeds in Qualified Assets in an aggregate amount of
more than $2,000,000 during any period of 12 consecutive months (and no
more than $5,000,000 after the date of this Agreement) and provided,
further, that no prepayment shall be required hereunder until there are
Net Disposition Proceeds available therefor (and not applied in
previous prepayment) of at least $1,000,000. If and to the extent that
the Borrower has elected to reinvest Net Disposition Proceeds as
permitted above, then on the date which is 365 days (in the case of
clause (b)(i) below) and 370 days (in the case of clause (b)(ii) below)
after the relevant sale, conveyance or disposition, the Borrower shall
(i) deliver a certificate of an Authorized Officer to the
Administrative Agent certifying as to the amount and use of such Net
Disposition Proceeds actually used to purchase Qualified Assets and
(ii) deliver to the Administrative Agent, for application in accordance
with this clause and Section 3.1.2, an amount equal to the remaining
unused Net Disposition Proceeds;
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(c) shall no later than 5 Business Days following the delivery
of the Borrower's annual audited financial reports required pursuant to
clause (b) of Section 7.1.1 (beginning with the audited financial
reports delivered in respect of the 1999 Fiscal Year), deliver to the
Administrative Agent a calculation of the Excess Cash Flow for the
prior Fiscal Year and no later than 5 Business Days following the
delivery of such calculation, make a mandatory prepayment of the Term
Loans in an amount equal to (i) 75% so long as the Debt to EBITDA Ratio
as of the end of the Fiscal Year in respect of which the prepayment is
to be made is greater than or equal to 4.00 to 1:00, (ii) 50% so long
as such Debt to EBITDA Ratio is greater than or equal to 2.50 to 1:00
but less than 4.00 to 1:00 and (iii) 0% so long as such Debt to EBITDA
is less than 2.50 to 1:00, of the Excess Cash Flow (if any) for such
Fiscal Year to be applied as set forth in Section 3.1.2;
(d) shall, concurrently with the receipt by the Borrower of
any Net Equity Proceeds of the IPO or the Borrower or any of its
Subsidiaries of any Net Debt Proceeds (which in the case of any Net
Debt Proceeds from the sale of Senior Subordinated High Yield Notes
shall be limited to the Excess High Yield Net Debt Proceeds), deliver
to the Administrative Agent a calculation of the amount of such Net
Debt Proceeds (or, if applicable, the Excess High Yield Net Debt
Proceeds) or Net Equity Proceeds of the IPO, and no later than 5
Business Days following the delivery of such calculation, make a
mandatory prepayment of the Term Loans in an amount equal to, in the
case of Net Equity Proceeds of the IPO, (i) 50% so long as the Debt to
EBITDA Ratio as of the end of the Fiscal Year in respect of which the
prepayment is to be made is greater than 3.50 to 1:00 and (ii) 35% if
such Debt to EBITDA Ratio is less than or equal to 3.50 to 1:00 of such
Net Equity Proceeds of the IPO and, in the case of Net Debt Proceeds,
100% of the Net Debt Proceeds (or, if applicable, the Excess High Yield
Net Debt Proceeds), in each case to be applied as set forth in Section
3.1.2;
(e) shall, within 60 days following the receipt by the
Borrower or any of its Subsidiaries of any Casualty Proceeds in excess
of $500,000 (individually or in the aggregate over the course of a
Fiscal Year), make a mandatory prepayment of the Term Loans and
Revolving Loans in an amount equal to 100% of such Casualty Proceeds,
to be applied as set forth in Section 3.1.2; provided, that no
mandatory prepayment of Casualty Proceeds shall be required under this
clause if (i) the Borrower informs the Administrative Agent no later
than 60 days following the occurrence of the Casualty Event resulting
in such Casualty Proceeds of its or its Subsidiary's good faith
intention to apply such Casualty Proceeds to the rebuilding or
replacement of such damaged, destroyed or condemned assets or property
and in fact uses such Casualty Proceeds to rebuild or replace the
damaged, destroyed or condemned asset or property within 365 days
following the receipt of such Casualty Proceeds (or, if (i) the
intended rebuilding or replacement cannot be completed within such 365
day period, (ii) the Borrower, during such 365 day period, has entered
into binding commitments with third parties to complete such rebuilding
or replacement, and (iii) the Borrower diligently pursues such
rebuilding or replacement thereafter and completes such rebuilding or
replacement within 540 days following the receipt of such Casualty
Proceeds, 540 days), with the amount of Casualty
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Proceeds unused after such 365 (or 540, as applicable) day period being
applied to the Loans pursuant to Section 3.1.2; provided, further,
however, that at any time when any Default shall have occurred and be
continuing or Casualty Proceeds not applied as provided above shall
exceed $1,000,000, such Casualty Proceeds will be deposited in an
account maintained with the Administrative Agent for disbursement at
the request of the Borrower to pay for such rebuilding or replacement;
(f) shall, on each date when any reduction in the Revolving
Loan Commitment Amount shall become effective, including pursuant to
Section 2.2 or Section 3.1.2, make a mandatory prepayment of Revolving
Loans and (if necessary) Swing Line Loans, and (if necessary) deposit
with the Administrative Agent cash collateral for Letter of Credit
Outstandings) in an aggregate amount equal to the excess, if any, of
the aggregate outstanding principal amount of all Revolving Loans,
Swing Line Loans and Letters of Credit Outstanding over the Revolving
Loan Commitment Amount as so reduced;
(g) shall, on the Stated Maturity Date and on each Quarterly
Payment Date occurring on or during any period set forth below, make a
scheduled repayment of the aggregate outstanding principal amount, if
any, of all Term-A Loans in an amount equal to the amount set forth
below opposite the Stated Maturity Date or such Quarterly Payment Date
(as such amounts may have otherwise been reduced pursuant to this
Agreement), as applicable:
6/30/99 $1,250,000
9/30/99 $1,250,000
12/31/99 $1,250,000
3/31/00 $1,250,000
6/30/00 $1,875,000
9/30/00 $1,875,000
12/31/00 $1,875,000
3/31/01 $1,875,000
6/30/01 $1,875,000
9/30/01 $1,875,000
12/31/01 $1,875,000
3/31/02 $1,875,000
6/30/02 $2,500,000
9/30/02 $2,500,000
12/31/02 $2,500,000
3/31/03 $2,500,000
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6/30/03 $2,500,000
9/30/03 $2,500,000
12/31/03 $2,500,000
3/31/04 $2,500,000
6/30/04 $2,500,000
9/30/04 $2,500,000
12/31/04 $2,500,000
Stated Maturity Date for $2,500,000 or
Term-A Loans the then outstanding principal amount of
all Term-A Loans, if different;
(h) shall, on the Stated Maturity Date and on each Quarterly
Payment Date occurring on or during any period set forth below, make a
scheduled repayment of the aggregate outstanding principal amount, if
any, of all Term-B Loans in an amount equal to the amount set forth
below opposite the Stated Maturity Date or such Quarterly Payment Date,
as applicable (as such amounts may have otherwise been reduced pursuant
to this Agreement):
6/30/99 $ 375,000
9/30/99 $ 375,000
12/31/99 $ 375,000
3/31/00 $ 375,000
6/30/00 $ 375,000
9/30/00 $ 375,000
12/31/00 $ 375,000
3/31/01 $ 375,000
6/30/01 $ 375,000
9/30/01 $ 375,000
12/31/01 $ 375,000
3/31/02 $ 375,000
6/30/02 $ 375,000
9/30/02 $ 375,000
12/31/02 $ 375,000
3/31/03 $ 375,000
6/30/03 $ 375,000
9/30/03 $ 375,000
12/31/03 $ 375,000
3/31/04 $ 375,000
6/30/04 $ 375,000
9/30/04 $ 375,000
12/31/04 $ 375,000
3/31/05 $ 375,000
6/30/05 $35,250,000
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9/30/05 $35,250,000
12/31/05 $35,250,000
Stated Maturity Date for $35,250,000 or
Term-B Loans the then outstanding principal amount of
all Term-B Loans, if different;
(i) shall, immediately upon any acceleration of the Stated
Maturity Date of any Loans or Obligations pursuant to Section 8.2 or
Section 8.3, repay all Loans and provide the Administrative Agent with
cash collateral in an amount equal to the Letter of Credit
Outstandings.
Each prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by Section 4.4. No
prepayment of principal of any Revolving Loans or Swing Line Loans pursuant to
clause (a) of Section 3.1.1 shall cause a reduction in the Swing Line Loan
Commitment Amount or the Revolving Loan Commitment Amount, as the case may be.
Notwithstanding the foregoing provisions of this Section 3.1.1, if at
any time any prepayment of the Loans pursuant to clauses (b), (c), (d) or (e)
would result, after giving effect to the procedures set forth in this Agreement,
in the Borrower incurring breakage costs under Section 4.4 as a result of LIBO
Rate Loans being prepaid other than on the last day of an Interest Period with
respect thereto, then the Borrower may, so long as no Default shall have
occurred and be continuing, in its sole discretion, deposit a portion of the
amounts that otherwise would have been paid in respect of such LIBO Rate Loans
with the Administrative Agent (which deposit must be equal in amount to the
amount of such LIBO Rate Loans not immediately prepaid) to be held as security
for the Obligations (including the obligation to make such prepayment) pursuant
to a cash collateral agreement (creating a first priority security interest) to
be entered into on terms reasonably satisfactory to the Administrative Agent,
with such cash collateral to be invested in Cash Equivalent Investments
reasonably acceptable to the Borrower and the Administrative Agent to be
directly applied upon the first occurrence thereafter of the last day of an
Interest Period with respect to such LIBO Rate Loans (or such earlier date or
dates as shall be requested by the Borrower). All such unpaid LIBO Rate Loans
will continue to bear interest in accordance with this Agreement until such
unpaid LIBO Rate Loan has been prepaid.
SECTION 3.1.2. Application. (a) Subject to clause (b), each prepayment
or repayment of the principal of the Loans shall be applied, to the extent of
such prepayment or repayment, first, to the principal amount thereof being
maintained as Base Rate Loans, and second, to the principal amount thereof being
maintained as LIBO Rate Loans.
(b) (i) Each voluntary prepayment pursuant to clause (a) of
Section 3.1.1 of Term Loans shall be applied pro rata to any remaining scheduled
amortization payments, (ii) each prepayment of Term Loans made pursuant to
clause (d) of Section 3.1.1 from the issuance of Senior Subordinated High Yield
Notes at any time prior to the 180 days after the Closing Date shall be made
solely out of Excess High Yield Net Debt Proceeds and shall be applied to a
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mandatory prepayment of the outstanding principal amount of all Term-A Loans
(with the amount of such prepayment of the Term-A Loans being applied to the
remaining Term-A Loan amortization payments required pursuant to clause (g) of
Section 3.1.1, pro rata in accordance with the amount of each such remaining
Term Loan amortization payment), until all such Term-A Loans have been paid in
full and any remaining amounts shall be applied as set forth in clause (iii)
below, and (iii) each prepayment of Term Loans made pursuant to clauses (b),
(c), (d) (other than with Excess High Yield Net Debt Proceeds from the issuance
of Senior Subordinated High Yield Notes at any time prior to 180 days after the
Closing Date), (e) and (i) of Section 3.1.1 shall be applied pro rata to a
mandatory prepayment of the outstanding principal amount of all Term-A Loans and
Term-B Loans (with the amount of such prepayment of the Term-A Loans and the
Term-B Loans being applied to the remaining Term-A Loan or Term-B Loan
amortization payments required pursuant to clauses (g) and (h) of Section 3.1.1,
in each case pro rata in accordance with the amount of each such remaining Term
Loan amortization payment), until all such Term-A Loans and Term-B Loans have
been paid in full; provided, however, that in the case of each prepayment of
Term Loans required pursuant to clauses (b), (c), (d) and (e) and (i) of Section
3.1.1, any Lender that has Term-B Loans outstanding may, by delivering a notice
to the Administrative Agent at least one Business Day prior to the date that
such prepayment is to be made, elect not to have its pro rata share of Term-B
Loans prepaid, and upon any such election the Administrative Agent shall apply
50% of the amount that otherwise would have prepaid such Lender's Term-B Loans
to a mandatory prepayment of the Term-A Loans (until repaid in full), and then
to a reduction in the Term-B Loans (until repaid in full) and, in the case of
each prepayment of Term Loans required pursuant to clauses (b) and (e) of
Section 3.1.l, to a reduction in the Revolving Loan Commitment Amount, with the
Borrower being entitled to use the other 50% for any purpose otherwise permitted
under this Agreement; provided, further, that the Lenders holding Term-B Loans
may not make the election in the foregoing proviso after the Term-A Loans have
been repaid in full, and in such case, all such mandatory prepayments shall be
applied to the Term-B Loans until paid in full.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. Rates. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrower may elect that Loans
comprising a Borrowing accrue interest at a rate per annum:
(a) with respect to Revolving Loans and Term-A Loans,
(i) on that portion maintained from time to time as a
Base Rate Loan, equal to the sum of the Alternate Base Rate
from time to time in effect plus the Applicable Margin for
such Loans; and
(ii) on that portion maintained as a LIBO Rate Loan,
during each Interest Period applicable thereto, equal to the
sum of the LIBO Rate (Reserve Adjusted) for such Interest
Period plus the Applicable Margin for such Loans;
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(b) with respect to Term-B Loans,
(i) on that portion maintained from time to time as a
Base Rate Loan, equal to the sum of the Alternate Base Rate
from time to time in effect plus the Applicable Margin for
such Loans; and
(ii) on that portion maintained as a LIBO Rate Loan,
during each Interest Period applicable thereto, equal to the
sum of the LIBO Rate (Reserve Adjusted) for such Interest
Period plus the Applicable Margin for such Loans; and
(c) with respect to Swing Line Loans, equal to the sum of the
Alternate Base Rate from time to time in effect plus the Applicable
Margin then in effect for Revolving Loans denominated as Base Rate
Loans.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount
of any Loan shall have become due and payable (whether on the Stated Maturity
Date, upon acceleration or otherwise), or any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on such
amounts at a rate per annum equal to the rate that would otherwise be applicable
to Base Rate Loans plus 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) in the case of Term Loans and LIBO Rate Loans only, on the
date of any payment or prepayment, in whole or in part, of principal
outstanding on such Loan but only on the amount of any payment or
prepayment;
(c) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the date of the initial Borrowing hereunder;
(d) with respect to LIBO Rate Loans, the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, on the third month anniversary of such Interest Period);
and
(e) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
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Interest accrued on Loans, Reimbursement Obligations or other monetary
Obligations arising under this Agreement or any other Loan Document after the
date such amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender that has a Revolving Loan
Commitment, for the period (including any portion thereof when any of the
Lender's Commitments are suspended by reason of the Borrower's inability to
satisfy any condition of Article V) commencing on the Effective Date and
continuing through the Revolving Loan Commitment Termination Date, a commitment
fee at the rate of the Applicable Commitment Fee Margin on such Lender's
Percentage of the average daily unused portion of the Revolving Loan Commitment
(net of Letter of Credit Outstandings). Such commitment fees shall be payable by
the Borrower in arrears on each Quarterly Payment Date, commencing with the
first such day following the Effective Date, and on the Revolving Loan
Commitment Termination Date. The making of Swing Line Loans by the Swing Line
Lender shall constitute the usage of the Revolving Loan Commitment with respect
to the Swing Line Lender only and the commitment fees to be paid by the Borrower
to the Lenders (other than the Swing Line Lender) shall be calculated and paid
accordingly.
SECTION 3.3.2. Administrative Agent's Fee. The Borrower agrees to pay
to the Administrative Agent, for its own account, the non-refundable fees in the
amounts and on the dates set forth in the Fee Letter. The Administrative Agent
may charge the account of the Borrower for such fees.
SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay to the
Administrative Agent, for the pro rata account of the Issuer and each other
Lender that has a Revolving Loan Commitment, a Letter of Credit fee in an amount
equal to the Applicable Margin per annum for Revolving Loans that are maintained
as LIBO Rate Loans multiplied by the Stated Amount of each such Letter of
Credit, such fee being payable quarterly in arrears on each Quarterly Payment
Date. The Borrower further agrees to pay to the Issuer for its own account (or,
in the case a new Issuer shall be appointed, for the account of any predecessor
Issuer with respect to Letters of Credit of such predecessor Issuer which remain
outstanding after the appointment of the new Issuer) on the dates and in the
amounts in respect of each Letter of Credit the issuance and fronting fees set
forth in the applicable Fee Letter.
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ARTICLE VIII
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrower and the Lenders,
be conclusive and binding on the Borrower) that the introduction of or any
change in or in the interpretation of any law makes it unlawful, or any central
bank or other governmental authority asserts that it is unlawful, for such
Lender to make, continue or maintain any Loan as, or to convert any Loan into, a
LIBO Rate Loan, the obligations of such Lender to make, continue, maintain or
convert any Loans as LIBO Rate Loans shall, upon such determination, forthwith
be suspended until such Lender shall notify the Administrative Agent that the
circumstances causing such suspension no longer exist (with the date of such
notice being the "Reinstatement Date"), and (i) all LIBO Rate Loans previously
made by such Lender shall automatically convert into Base Rate Loans at the end
of the then current Interest Periods with respect thereto or sooner, if required
by such law or assertion and (ii) all Loans thereafter made by such Lender and
outstanding prior to the Reinstatement Date shall be made as Base Rate Loans,
with interest thereon being payable on the same date that interest is payable
with respect to corresponding Borrowing of LIBO Rate Loans made by Lenders not
so affected.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to the Administrative Agent
in the Eurodollar market; or
(b) by reason of circumstances affecting the Eurodollar
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans,
then, upon notice from the Administrative Agent to the Borrower and the Lenders,
the obligations of all Lenders under Section 2.3 and Section 2.4 to make or
continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until the Administrative Agent shall notify the Borrower
and the Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees
to reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, LIBO Rate Loans (excluding any items or amounts, whether or not
constituting Taxes, referred to in Section 4.6) arising after the date of any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of
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any court, central bank, regulator or other governmental authority made
subsequent to the date hereof (or, if later, the date on which such Lender
becomes a Lender) that results in such increase in cost or reduction in amounts
receivable which a Lender deems to be material. Such Lender shall promptly
notify the Administrative Agent and the Borrower in writing of the occurrence of
any such event, such notice to state, in reasonable detail, the reasons therefor
and the additional amount required fully to compensate such Lender for such
increased cost or reduced amount. Such additional amounts shall be payable by
the Borrower directly to such Lender within five days of its receipt of such
notice, and such notice shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
Section 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/Conversion Notice
therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to the
Administrative Agent), the Borrower shall, within five days of its receipt
thereof, pay directly to such Lender such amount as will (in the reasonable
determination of such Lender) reimburse such Lender for such loss or expense.
Such written notice (which shall include calculations in reasonable detail)
shall, in the absence of manifest error, be conclusive and binding on the
Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitments, participation in Letters of Credit or the Loans
made by such Lender is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by such
Lender to the Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return. A
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statement of such Lender as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall, in the absence of manifest
error, be conclusive and binding on the Borrower. In determining such amount,
such Lender may use any method of averaging and attribution that it (in its sole
and absolute discretion) shall deem applicable.
SECTION 4.6. Taxes. (a) All payments by the Borrower of principal of,
and interest on, the Loans and all other amounts payable hereunder (including
Reimbursement Obligations and fees) shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and
other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding any such taxes
imposed, fees, duties, withholdings and other charges on the Administrative
Agent as a result of a present or former connection between the Administrative
Agent, or the applicable lending office, or any branch or affiliate, of the
Administrative Agent, and taxes imposed on any Lender as a result of a present
or former connection between such Lender, or the applicable lending office, or
any branch or affiliate, of such Lender, in each case and the jurisdiction of
the governmental authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from the Administrative Agent or such Lender having executed, delivered
or performed its obligations or received a payment under, or taken any action to
enforce, this Agreement) (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will
(i) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an
official receipt (or a certified copy thereof) or other
documentation satisfactory to the Administrative Agent
evidencing such payment to such authority; and
(iii) pay to the Administrative Agent for the account
of the affected Lenders such additional amount or amounts as
is necessary to ensure that the net amount actually received
by each Lender will equal the full amount such Lender would
have received had no such withholding or deduction been
required, provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Non-U.S.
Lender if such Lender fails to comply with the requirements of
clause (b) of Section 4.6.
Moreover, if any Taxes are directly asserted against the Administrative Agent or
any Lender with respect to any payment received by the Administrative Agent or
such Lender hereunder, the Administrative Agent or such Lender may pay such
Taxes and the Borrower will promptly pay to such Person such additional amounts
(including any penalties, interest or expenses) as is necessary in order that
the net amount received by such Person (including any Taxes on such additional
amount) shall equal the amount of such Taxes paid by such Person.
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If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent, for
the account of the affected Lenders, the required receipts or other required
documentary evidence, the Borrower shall indemnify the Lenders for any
incremental Taxes, interest or penalties that may become payable by any Lender
as a result of any such failure.
(b) Each Non-U.S. Lender shall, (i) on or prior to the date of the
execution and delivery of this Agreement, in the case of each Lender listed on
the signature pages hereof, or, in the case of an Assignee Lender, on or prior
to the date it becomes a Lender, execute and deliver to the Borrower and the
Administrative Agent, two or more (as the Borrower or the Administrative Agent
may reasonably request) United States Internal Revenue Service Forms 4224 or
Forms 1001 (or successor applicable forms) and a United States Internal Revenue
Service Form W-8 or Form W-9 (or successor applicable forms) or, solely if such
Lender is claiming exemption from United States withholding tax under Section
871(h) or 881(c) of the Code with respect to payments of "portfolio interest",
United States Internal Revenue Service Forms W-8 and a certificate in usual and
customary form signed by a duly authorized officer of such Lender representing
that such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Code, and such other certifications (or successor forms or documents),
appropriately completed, as may be applicable to establish that such Lender is
exempt from withholding or deduction of Taxes, and, to the extent legally
entitled to do so, upon reasonable request by the Borrower, such other forms as
may be reasonably required in order to establish the legal entitlement of such
Lender to an exemption from withholding with respect to payments under this
Agreement and any Notes; (ii) deliver to the Borrower and the Administrative
Agent two further copies of any such form or documents on or before the date
that any such form or document expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent such form or
document previously delivered by it to the Borrower; and (iii) obtain such
extensions of time for filing and completing such forms or documents as may
reasonably be requested by the Borrower or the Administrative Agent, unless in
any such case, any change in treaty, law or regulation has occurred after the
date such Person becomes a Lender hereunder which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Such Lender shall certify (x) in the case
of a Form 1001 or 4224, that it is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes and (y) in the case of a Form W-8 or W-9, that it is
entitled to an exemption from United States withholding tax.
(c) Notwithstanding anything herein to the contrary, no
Assignee Lender or Participant shall be entitled to receive any greater payment
under clause (a) of this Section 4.6 than the Lender making such assignment or
participation would have been entitled to receive with respect to the rights
assigned, participated or otherwise transferred unless, but solely with respect
to an assignment, (x) such assignment shall have been made at a time when the
circumstances giving rise to such greater payment did not exist or had not yet
occurred or (y) such assignment shall have been at the request of the Borrower.
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SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by or on behalf of the Borrower pursuant to this
Agreement, the Notes, each Letter of Credit or any other Loan Document shall be
made by the Borrower to the Administrative Agent for the pro rata account of the
Lenders entitled to receive such payment. All such payments required to be made
to the Administrative Agent shall be made, without setoff, deduction or
counterclaim, not later than 12:00 noon, New York time, on the date due, in same
day or immediately available funds, to such account as the Administrative Agent
shall specify from time to time by notice to the Borrower. Funds received after
that time shall be deemed to have been received by the Administrative Agent on
the next succeeding Business Day. The Administrative Agent shall promptly remit
in same day funds to each Lender its share, if any, of such payments received by
the Administrative Agent for the account of such Lender. All interest and fees
shall be computed on the basis of the actual number of days (including the first
day but excluding the last day) occurring during the period for which such
interest or fee is payable over a year comprised of 360 days (or, in the case of
interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever
any payment to be made shall otherwise be due on a day which is not a Business
Day, such payment shall (except as otherwise required by clause (c) of the
definition of the term "Interest Period" be made on the next succeeding Business
Day and such extension of time shall be included in computing interest and fees,
if any, in connection with such payment.
SECTION 8.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan or any Reimbursement Obligation
(other than pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its
pro rata share of payments then or therewith obtained by all Lenders entitled
thereto, such Lender shall purchase from the other Lenders such participation in
Credit Extensions made by them as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Lender's
ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to
the purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 4.9) with respect to such participation as
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fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this Section to share in the benefits of any
recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any
Default described in clauses (a) through (d) of Section 8.1.9 or, with the
consent of the Required Lenders, upon the occurrence of any other Event of
Default, have the right to appropriate and apply to the payment of the
Obligations owing to it (whether or not then due), and (as security for such
Obligations) the Borrower hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter maintained with or otherwise held by such Lender;
provided, however, that any such appropriation and application shall be subject
to the provisions of Section 4.8. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Lender; provided, however, that 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 other rights of setoff under applicable law or otherwise) which such
Lender may have.
SECTION 4.10. Mitigation.
(a) Each Lender agrees that if it makes any demand for payment
under Sections 4.3, 4.5, or 4.6, or if any adoption or change of the
type described in Section 4.1 shall occur with respect to it, it will
use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to
designate a different lending office if the making of such a
designation would reduce or obviate the need for the
Borrower to make payments under Sections 4.3, 4.5 or 4.6, or would
eliminate or reduce the effect of any adoption or change described in
Section 4.1.
(b) If (x) the Borrower shall become obligated to pay
additional amounts pursuant to Section 4.3, 4.5 or 4.6 and any affected
Lender shall not have promptly taken steps necessary to avoid the need
for payments under Section 4.3, 4.5 or 4.6 or (y) any Lender shall have
defaulted in any of its obligations in respect of its Revolving Loan
Commitment hereunder, the Borrower shall have the right, for so long as
such obligation remains, (i) to seek one or more substitute Lenders
reasonably satisfactory to the Administrative Agent and the Borrower to
purchase the affected Loan, in whole or in part, without recourse or
warranty from the affected Lender, except as to title, at an aggregate
cash price no less than such Loan's principal amount plus accrued
interest, and assume the affected obligations under this Agreement, or
in the case of (x) or, if applicable, (y), (ii) upon at least four
Business Days irrevocable notice to the Administrative Agent, to prepay
the affected Loan, in whole or in part, without premium or penalty. In
the case of
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the substitution of a Lender, the Borrower, the Administrative Agent,
the affected Lender, and any substitute Lender shall execute and
deliver an appropriately completed Lender Assignment Agreement pursuant
to Section 10.11.1(d) to effect the assignment of rights to, and the
assumption of obligations by, the substitute Lender; provided that any
fees required to be paid by such Lender pursuant to Section 10.11.1(e)
in connection with such assignment shall be paid by the Borrower or the
substitute Lender. In the case of a prepayment of an affected Loan, the
amount specified in the notice shall be due and payable on the date
specified therein, together with any accrued interest to such date on
the amount prepaid. In the case of each of the substitution of a Lender
and of the prepayment of an affected Loan, the Borrower shall first pay
the affected Lender any additional amounts owing under Sections 4.3,
4.4, 4.5 and 4.6 (as well as any commitment fees, expense
reimbursements, and indemnities and other amounts then due and owing to
such Lender, including, without limitation, any amounts under this
Section and breakage fees with respect to any LIBO Rate Loan computed
as if such Loan were being prepaid) prior to such substitution or
prepayment. Such affected Lender shall consummate such sale in
accordance with such terms (and, if such affected Lender is the Issuer,
such other terms as may be necessary to compensate fully such affected
Lender) within a reasonable time not exceeding 60 days from the date
such Borrower designated a substitute Lender, and thereupon such
affected Lender shall no longer be a party hereto or have any
obligations or rights hereunder (except rights which, pursuant to the
provisions of this Agreement, survive the termination of this Agreement
and the repayment of the Notes, and the substitute Lender shall succeed
to such obligations and rights. No Lender shall be obligated to become
or assist in finding a substitute Lender.
(c) If the Administrative Agent or any Lender receives a
refund (it being understood that the Administrative Agent and the
Lenders are under no duty to seek to obtain any refund) directly
attributable to Taxes for which Borrower has made additional payments
pursuant to Section 4.6, the Administrative Agent or such Lender, as
the case may be, shall promptly notify the Borrower and shall promptly
pay such refund (together with any interest with respect thereto
received from the relevant taxing authority) to the Borrower, provided,
however, that the Borrower agrees promptly to return such refund
(together with any interest with respect thereto due to the relevant
taxing authority) (free of all Taxes) to the Administrative Agent or
the applicable Lender, as the case may be, upon receipt of a notice
that such refund is required to be repaid to the relevant taxing
authority.
(d) For purposes of Section 4.6, a change in treaty, law, rule
or regulation shall not include the ratification or entry into force of
the income tax treaty between the Luxembourg and the United States of
America.
(e) The obligations of a Lender under this Section 4.10 shall
survive the termination of this Agreement and the payment of the Loans
and all amounts payable hereunder.
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ARTICLE X
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. Initial Credit Extension. The obligations of the Lenders
to fund the initial Credit Extensions shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set forth in this
Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Administrative Agent shall have
received from each Obligor other than a natural Person a certificate, dated the
date of the initial Credit Extension, of its Secretary or Assistant Secretary as
to
(a) resolutions of its Board of Directors then in full force
and effect authorizing the execution, delivery and performance of each
Loan Document to be executed by it; and
(b) the incumbency and signatures of those of its officers
authorized to act with respect to each Loan Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary of such Obligor canceling or
amending such prior certificate.
SECTION 5.1.2. Recapitalization Documents. The Administrative Agent
shall have received (with copies for each Lender) a fully executed copy of the
Recapitalization Agreement, and, to the extent required by Section 5.1.3, all
other documents and instruments delivered in connection with the consummation of
the Recapitalization Transactions that are required to be delivered pursuant to
the terms of the Recapitalization Agreement. The Recapitalization Agreement
shall be in full force and effect and shall not have been modified or waived in
any material respect, nor shall there have been any forbearance to exercise any
material rights with respect to any of the terms or provisions relating to the
conditions to the consummation of the Transactions in the Recapitalization
Agreement unless otherwise agreed to by the Required Lenders.
SECTION 5.1.3. Transaction Certificate. The Administrative Agent shall
have received a certificate, dated the date of the initial Credit Extension, of
an Authorized Officer of the Borrower certifying as to a true and complete copy
of (i) the Recapitalization Agreement and the Senior Subordinated Increasing
Rate Note Purchase Agreement (and, to the extent requested by the Administrative
Agent, all other certificates, filings, documents (including shareholder
agreements), consents, approvals, board of directors resolutions and opinions
furnished pursuant to or in connection with the Recapitalization Agreement and
the Senior Subordinated Increasing Rate Note Purchase Agreement).
SECTION 5.1.4. Consummation of Transactions. The Administrative Agent
shall have received evidence satisfactory to it that the Transactions have been
consummated in accordance
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with their terms and the aggregate consideration paid, including up to
$19,000,000 of Transaction expenses, shall not exceed $472,000,000.
SECTION 5.1.5. Closing Date Certificate. The Administrative Agent
shall have received, with counterparts for each Lender, the Closing Date
Certificate, substantially in the form of Exhibit D hereto, dated the date of
the initial Credit Extension and duly executed and delivered by the chief
executive or chief financial (or equivalent) Authorized Officer of the Borrower,
in which certificate the Borrower shall agree and acknowledge that the
statements made therein shall be deemed to be true and correct representations
and warranties of the Borrower made as of such date under this Agreement, and,
at the time such certificate is delivered, such statements shall in fact be true
and correct.
SECTION 5.1.6. Delivery of Notes. If requested to do so by any Lender,
the Borrower shall have executed and delivered to the Administrative Agent, for
the account of each such Lender, its Notes duly executed and delivered by the
Borrower.
SECTION 5.1.7. Payment of Outstanding Indebtedness, etc. All
Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the
Disclosure Schedule, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, shall have been paid in full
(including, to the extent necessary, from proceeds of the initial Borrowing),
and all Liens securing payment of any such Indebtedness have been released and
the Administrative Agent shall have received all executed Uniform Commercial
Code Form UCC-3 termination statements or other instruments as may be suitable
or appropriate in connection therewith (or arrangements satisfactory to the
Administrative Agent shall have been entered into relating to such release
promptly following the initial Credit Extension).
SECTION 5.1.8. Subsidiary Guaranty. The Administrative Agent shall
have received executed counterparts of the Subsidiary Guaranty, executed by each
Subsidiary Guarantor.
SECTION 5.1.9. Pledge Agreements. The Administrative Agent shall have
received executed counterparts of
(a) the Shareholder Pledge Agreements, each dated as of the
date hereof, duly executed by the Management Investor or an Authorized
Officer of New World Pasta, LLC, together with the certificates
evidencing all of the issued and outstanding shares of Capital Stock of
the Borrower owned by the Management Investor or New World Pasta, LLC
(which shall constitute at least 88.8% of the outstanding Preferred
Stock of the Borrower and at least 83.4% of the outstanding Common
Stock of the Borrower) which shall be pledged pursuant to the
Shareholder Pledge Agreement, which certificates shall in each case be
accompanied by undated stock powers duly executed in blank;
(b) the Borrower Pledge Agreement, dated as of the date
hereof, duly executed by the Borrower (after giving effect to the
Recapitalization Transactions), together with the certificates
evidencing all of the issued and outstanding shares of Capital Stock of
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each Subsidiary of the Borrower which shall be pledged pursuant to the
Borrower Pledge Agreement, which certificates shall in each case be
accompanied by undated stock powers duly executed in blank;
If any securities pledged pursuant to a Pledge Agreement are uncertificated
securities, the Administrative Agent shall have received confirmation and
evidence satisfactory to it that the security interest in such uncertificated
securities has been transferred to and perfected through "control" by the
Administrative Agent for the benefit of the Lenders in accordance with Article 8
of the UCC.
SECTION 5.1.10. Security Agreements. The Administrative Agent shall
have received executed counterparts of the Security Agreements dated as of the
date hereof, duly executed by the Borrower or Subsidiary Guarantor, together
with
(a) Uniform Commercial Code financing statements (Form UCC-1)
naming the Borrower or Subsidiary Guarantor, as appropriate, as the
debtor and the Administrative Agent as the secured party, or other
similar instruments or documents, to be filed under the Uniform
Commercial Code of all jurisdictions as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the security
interest of the Administrative Agent pursuant to the Security
Agreement; and
(b) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11), or a similar search report
certified by a party acceptable to the Administrative Agent, dated a
date reasonably near to the date of the initial Borrowing, listing all
effective financing statements which name the Borrower and each
Subsidiary Guarantor (in each case, under its present name and any
previous names) as the debtor and which are filed in the jurisdictions
in which filings were made pursuant to clause (a) above, together with
copies of such financing statements.
SECTION 5.1.11. Mortgages. The Administrative Agent shall have
received counterparts of each Mortgage relating to each property listed on Item
5.1.11 ("Mortgaged Properties") of the Disclosure Schedule, each dated as of the
date hereof, duly executed by the Borrower, together with
(a) evidence of the completion (or satisfactory arrangements
for the completion) of all recordings and filings of such Mortgage as
may be necessary or, in the reasonable opinion of the Administrative
Agent, desirable to create a valid, perfected first priority Lien,
subject to Liens permitted by Section 7.2.3, against the properties
purported to be covered thereby; and
(b) mortgagee's title insurance policies in favor of the
Administrative Agent and the Lenders in amounts and in form and
substance and issued by insurers, reasonably satisfactory to the
Administrative Agent, with respect to the property purported to be
covered by such Mortgage, insuring that title to such property is
marketable and that the
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interests created by the Mortgage constitute valid first Liens thereon
free and clear of all defects and encumbrances, except as permitted
pursuant to Section 7.2.3, and such policies shall also include a
revolving credit endorsement, if available, and such other endorsements
as the Administrative Agent shall reasonably request and shall be
accompanied by evidence of the payment in full of all premiums thereon.
SECTION 5.1.12. Financial Information, etc. The Administrative Agent
shall have received, with counterparts for each Lender,
(a) the (i) unqualified audited Combined Statements of Income
and Parent Company's Investment and Advances of the Business for the
fiscal years ended December 31, 1996 and December 31, 1997, Combined
Balance Sheets of the Business for the fiscal years ended December 31,
1996 and December 31, 1997 and the Combined Statements of Cash Flows
for the Business for the fiscal years ended December 31, 1996 and
December 31, 1997, and (ii) the unaudited Combined Statement of
Adjusted Operating Profit of the Business for the nine month period
ended October 4, 1998 and the Combined Statement of Adjusted Net Assets
of the Business as at October 4, 1998, prepared on a basis
substantially comparable to the basis used to prepare the audited
financial statements of the Borrower and its Subsidiaries referred to
in clause (a)(i); and
(b) a pro forma consolidated balance sheet of the Borrower, as
of the Closing Date (the "Pro Forma Balance Sheet"), certified by the
chief financial or accounting Authorized Officer of the Borrower,
giving effect to the consummation of the Transaction (including all the
transactions contemplated by this Agreement and reflecting the proposed
capital structure of the Borrower, which shall be satisfactory in all
respects to the Administrative Agent).
SECTION 5.1.13. Solvency, etc. The Administrative Agent shall have
received a solvency certificate of a senior executive Authorized Officer of the
Borrower, dated the date of the initial Credit Extension, in form and substance
satisfactory to the Administrative Agent.
SECTION 5.1.14. Equity Purchase and Bridge Financing. The
Administrative Agent shall have received evidence satisfactory to it that the
Equity Purchase and the Bridge Financing shall have been consummated in
accordance with terms satisfactory to the Administrative Agent. JLL and the
Management Investor shall have paid at least $47,000,000 in cash for the Common
Stock to be purchased by them under the Recapitalization Agreement and at least
$113,315,000 in cash for the Preferred Stock to be purchased by them under the
Recapitalization Agreement, and the Administrative Agent shall have received
evidence thereof.
SECTION 5.1.15. Closing Fees, Expenses, etc. The Administrative Agent
shall have received for its own account, or for the account of each Lender, as
the case may be, all fees, costs and expenses due and payable pursuant to
Sections 3.3 and 10.3, if then invoiced.
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SECTION 5.1.16. Trademark Security Agreements, Copyright Security
Agreement, Patent Security Agreement. The Administrative Agent shall have
received each Trademark Security Agreement, Copyright Security Agreement and
Patent Security Agreement, each dated as of the date of the initial Credit
Extension, duly executed and delivered by the Borrower and the Subsidiaries.
SECTION 5.1.17. Litigation. The Administrative Agent shall be
satisfied in all respects that there exists no litigation, inquiry or
investigation contesting the Transactions, including the Recapitalization
Transactions, the Bridge Financing, the Equity Purchase, this Agreement or any
other aspect of the Transaction, or which would have a material adverse effect
on the property, assets, financial condition, operations or business of the
Business or the Borrower and its subsidiaries, taken as a whole.
SECTION 5.1.18. Material Adverse Change. The Lenders shall be
satisfied (as evidenced by the delivery of their respective executed signature
page to this Agreement) that there has been no material adverse change in the
property, assets, financial condition, or operations of the Borrower and its
Subsidiaries taken as a whole or the Business since December 31, 1997.
SECTION 5.1.19. Reliance Letters. The Administrative Agent shall have
received reliance letters, dated the date of the making of the initial Credit
Extension and addressed to each Lender and the Administrative Agent, in respect
of each of the legal opinions delivered in connection with the Recapitalization
or the other Transactions if the attorneys rendering the opinions have agreed to
permit such persons to rely upon such opinions.
SECTION 5.1.20. Intentionally Omitted.
SECTION 5.1.21. Opinions of Counsel. The Administrative Agent shall
have received opinions, dated the date of the initial Credit Extension and
addressed to the Administrative Agent and all Lenders, from
(a) Skadden, Arps, Slate Meagher & Flom LLP, special New York
counsel to the Borrower and each Obligor, substantially in the form of
Exhibit L-1 hereto;
(b) Andrews & Kurth, special California counsel to the
Administrative Agent, in form and substance satisfactory to the
Administrative Agent;
(c) Morrison & Hecker, special Kansas counsel to the
Administrative Agent, in form and substance satisfactory to the
Administrative Agent;
(d) Greenbaum, Doll & McDonald PLLC, special Kentucky counsel
to the Administrative Agent, in form and substance satisfactory to the
Administrative Agent;
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(e) Kutak Rock, special Nebraska counsel to the Administrative
Agent, in form and substance satisfactory to the Administrative Agent;
(f) Buchanan & Ingersoll, special Pennsylvania counsel to the
Administrative Agent, in form and substance satisfactory to the
Administrative Agent; and
(g) Ballard Spahr Andrews & Ingersoll, LLP, special Virginia
counsel to the Administrative Agent, in form and substance satisfactory
to the Administrative Agent.
SECTION 5.2. All Credit Extensions. The obligation of each Lender and
the Issuer to make any Credit Extension (including the initial Credit Extension)
shall be subject to the satisfaction of each of the conditions precedent set
forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both
before and after giving effect to any Credit Extension the following statements
shall be true and correct:
(a) both before and after giving effect to the Acquisition,
the representations and warranties set forth in Article VI and in each
other Loan Document shall, in each case, be true and correct in all
material respects with the same effect as if then made (unless stated
to relate solely to an earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of
such earlier date);
(b) no material adverse development shall have occurred after
the date of the initial Credit Extension in any litigation, action,
proceeding, labor controversy, arbitration or governmental
investigation disclosed in Item 6.7 of the Disclosure Schedule pursuant
to Section 6.7 which development would have constituted a breach of
Section 6.7 had it occurred on the date hereof;
(c) the sum of (x) the aggregate outstanding principal amount
of all Revolving Loans and Swing Line Loans and (y) all Letter of
Credit Outstandings does not exceed the Revolving Loan Commitment
Amount; and
(d) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request. The Administrative Agent
shall have received a Borrowing Request, if Loans (other than Swing Line Loans)
are being requested, or an Issuance Request, if a Letter of Credit is being
issued or extended or increased. The delivery of a Borrowing Request and the
acceptance by the Borrower of the proceeds of such Credit Extension shall
constitute a representation and warranty by the Borrower that on the date of
such Credit Extension (both immediately before and after giving effect to such
Credit Extension and the application of the proceeds thereof) the statements
made in Section 5.2.1 are true and correct in all material respects with the
same effect as if then made (unless stated to relate solely to an earlier date,
in which case such representations and warranties shall be true and correct in
all material respects as of such earlier date).
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuer and the Administrative Agent
to enter into this Agreement and to make Credit Extensions hereunder, the
Borrower represents and warrants unto the Administrative Agent, the Issuer and
each Lender as set forth in this Article VI.
SECTION 6.1. Organization, etc. Each of New World Pasta LLC, the
Borrower and each of the Borrower's Subsidiaries (a) is a corporation or limited
liability company validly organized and existing and in good standing under the
laws of the state of its organization, is duly qualified to do business and is
in good standing as a foreign corporation or limited liability company in each
jurisdiction where the nature of its business requires such qualification,
except to the extent that the failure to qualify would not reasonably be
expected to result in a Material Adverse Effect, and (b) has full power and
authority and holds all requisite governmental licenses, permits and other
approvals to (i) enter into and perform its Obligations in connection with the
Transaction and under each Loan Document to which it is a party and (ii) own and
hold under lease its property and to conduct its business substantially as
currently conducted by it except, in the case of this clause (b)(ii), where the
failure could not reasonably be expected to result in a Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement, the Notes and each
other Loan Document executed or to be executed by it, and the execution,
delivery and performance by each other Obligor of each Loan Document executed or
to be executed by it and the Borrower's and, where applicable, each such other
Obligor's participation in the consummation of the Transactions are within the
Borrower's and each such Obligor's corporate powers, have been duly authorized
by all necessary corporate action, and do not
(a) contravene the Borrower's or any such Obligor's Organic
Documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting New World
Pasta LLC, the Borrower or any such Obligor, where such contravention,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect; or
(c) result in, or require the creation or imposition of, any Lien
on any of the Borrower's or any other Obligor's properties, except
pursuant to the terms of a Loan Document.
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person, is required for the due execution,
delivery or performance by the Borrower or any
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other Obligor of this Agreement, the Notes or any other Loan Document to which
it is a party, or for the Borrower's and each such other Obligor's participation
in the consummation of the Transactions, except as have been duly obtained or
made and are in full force and effect or those which the failure to obtain or
make could not reasonably be expected to have a Material Adverse Effect. Neither
New World Pasta LLC, the Borrower nor any of the Borrower's Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed by the Borrower will, on the due execution
and delivery thereof, constitute, the legal, valid and binding obligations of
the Borrower enforceable in accordance with their respective terms; and each
Loan Document executed pursuant hereto by each other Obligor will, on the due
execution and delivery thereof by such Obligor, be the legal, valid and binding
obligation of such Obligor enforceable in accordance with its terms, in each
case with respect to this Section 6.4 subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
SECTION 6.5. Financial Information. The
(a) audited Combined Statements of Income and Parent Company's
Investment and Advances of the Business for the fiscal years ended
December 31, 1996 and December 31, 1997, Combined Balance Sheets of the
Business for the fiscal years ended December 31, 1996 and December 31,
1997 and the Combined Statements of Cash Flows of the Business for the
fiscal years ended December 31, 1996 and December 31, 1997, and
(b) unaudited Combined Statement of Adjusted Operating Profit of
the Business for the nine month period ended October 4, 1998 and the
Combined Statement of Adjusted Net Assets of the Business as at October
4, 1998;
copies of which have been furnished to the Administrative Agent and each Lender,
have, in each case, been prepared in accordance with GAAP consistently applied
(in the case of clause (a)) and, in the case of clause (b), on a basis
substantially comparable to the basis used to prepare the financial statements
referred to in clause (a), and present fairly the consolidated financial
condition of the Business as at the dates thereof and the results of its
operations for the periods then ended, subject, in the case of clause (b), to
normal year end audit adjustments.
SECTION 6.6. No Material Adverse Change. Except as set forth in Item
6.6 of the Disclosure Schedule, since December 31, 1997, there has been no
material adverse change in the
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financial condition, operations, assets, business or properties of the Borrower
or the Business, taken as a whole.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Borrower, threatened litigation, action, proceeding,
labor grievance, arbitration or governmental investigation affecting any
Obligor, or any of their respective properties, businesses, assets or revenues,
which (a) could reasonably be expected to result in a Material Adverse Effect,
or (b) purports to affect the legality, validity or enforceability of the
Recapitalization Transactions, the Transactions, the Equity Purchase, the Bridge
Financing, this Agreement, the Notes or any other Loan Document, except as
disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.8. Subsidiaries. Neither New World Pasta LLC nor the Borrower
has any Subsidiaries, except (after giving effect to the Recapitalization
Transactions and the Transactions) those Subsidiaries
(a) which are identified in Item 6.8 ("Existing Subsidiaries") of
the Disclosure Schedule; or
(b) which are permitted to have been acquired or created in
accordance with Section 7.2.5 or 7.2.8.
SECTION 6.9. Ownership of Properties. The Borrower and each of its
Subsidiaries owns good title to, or has a valid leasehold interest in, all of
its properties and assets (other than insignificant properties and assets), real
and personal, tangible and intangible, of any nature whatsoever (including
patents, trademarks, trade names, service marks and copyrights), free and clear
of all Liens or material claims which could reasonably be expected to be
adversely determined (including material infringement claims with respect to
material patents, trademarks, copyrights and the like) except as disclosed in
Item 6.9 of the Disclosure Schedule or as permitted pursuant to Section 7.2.3 or
the Loan Documents.
SECTION 6.10. Taxes. Each of New World Pasta LLC, the Borrower and each
of the Borrower's Subsidiaries has filed all federal, state and other material
tax returns and reports required by law to have been filed by it and has paid
all taxes and governmental charges thereby shown to be owing, except any such
taxes or charges which are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
SECTION 6.11. Pension and Welfare Plans. During the six-year period
prior to the date of the execution and delivery of this Agreement and prior to
the date of any Credit Extension hereunder, no Pension Plan has been terminated
and neither the Borrower nor any member of the Controlled Group has incurred a
withdrawal from any Multiemployer Plan that, in each case, has resulted in a
liability to the Borrower of more than $250,000 which remains outstanding as of
the date of this Agreement and any Credit Extension hereunder, and no
contribution failure has
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occurred with respect to any Pension Plan sufficient to give rise to a Lien
under section 302(f) of ERISA or Section 412(n) of the Code in excess of
$1,000,000 which remains outstanding as of the date of this Agreement and any
Credit Extension hereunder. To the knowledge of the Borrower, no condition
exists or event or transaction has occurred with respect to any Pension Plan or
any Multiemployer Plan which could reasonably be expected to have a Material
Adverse Effect. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of
the Disclosure Schedule, since the date of the last financial statement the
Borrower has not materially increased any contingent liability with respect to
any post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Subtitle B of Title I of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in Item
6.12 ("Environmental Matters") of the Disclosure Schedule or as, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect:
(a) all facilities and property owned or leased by the Borrower
or any of its Subsidiaries have been, and continue to be, owned or
leased by the Borrower and its Subsidiaries in compliance with all
Environmental Laws;
(b) to the knowledge of the Borrower there have been no past, and
there are no pending or threatened
(i) written claims, complaints, notices or requests for
information received by the Borrower or any of its Subsidiaries
with respect to any alleged violation of any Environmental Law, or
(ii) written complaints, notices or inquiries to the Borrower
or any of its Subsidiaries regarding potential liability under any
Environmental Law;
(c) to the knowledge of the Borrower, there have been no Releases
of Hazardous Materials at, on or under any property now or previously
owned or leased by the Borrower or any of its Subsidiaries;
(d) the Borrower and its Subsidiaries have been issued and are in
compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters that are
necessary for their businesses;
(e) to the knowledge of the Borrower or any of its Subsidiaries,
no property now or previously owned or leased by the Borrower or any of
its Subsidiaries is listed or proposed for listing (with respect to
owned property only) on the National Priorities List pursuant to CERCLA
or on any similar state list;
(f) to the knowledge of the Borrower, there are no underground
storage tanks, active or abandoned, including petroleum storage tanks,
on or under any property now or previously owned or leased by the
Borrower or any of its Subsidiaries;
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(g) the Borrower and its Subsidiaries have not directly
transported or directly arranged for the transportation of any
Hazardous Material to any location (i) which to the knowledge of the
Borrower or any of its Subsidiaries, is listed or proposed for listing
on the National Priorities List pursuant to CERCLA or on any similar
state list, or (ii) which is the subject of federal, state or local
environmental enforcement actions or remediations required by federal,
state or local authorities;
(h) to the knowledge of the Borrower, there are no
polychlorinated biphenyls present in concentrations greater than 50
parts per million or friable asbestos present in a damaged condition at
any property now or previously owned or leased by the Borrower or any
Subsidiary of the Borrower; and
(i) to the knowledge of the Borrower, no conditions exist at, on
or under any property now or previously owned or leased by the Borrower
or any of its Subsidiaries which, with the passage of time, or the
giving of notice or both, would give rise to liability under any
Environmental Law.
SECTION 6.13. Regulations U and X. Neither New World Pasta LLC nor the
Borrower is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Credit Extensions
will be used to purchase or carry any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any
"margin stock". Terms for which meanings are provided in F.R.S. Board Regulation
U or X or any regulations substituted therefor, as from time to time in effect,
are used in this Section with such meanings.
SECTION 6.14. Accuracy of Information. The written information,
reports, financial statements, exhibits and schedules heretofore or
contemporaneously furnished by or on behalf of New World Pasta LLC, the Borrower
or any other Obligor (other than projections) in writing to the Administrative
Agent, the Issuer or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby or with respect to the
Transaction do not, and all other such written information, reports, financial
statements, exhibits and schedules furnished by or on behalf of New World Pasta
LLC, the Borrower or any other Obligor (other than projections) to the
Administrative Agent, the Issuer or any Lender will not contain any material
misstatement of fact or omit to state any material fact necessary to make such
information not misleading in light of the circumstances in which such
statements were made.
All projections furnished to the Administrative Agent, the Issuer or
any Lender (whether before or after the Effective Date) have been or will be
prepared in good faith on the basis of reasonable assumptions and represent or
will represent the Borrower's good faith estimate of its future performance, it
being understood that actual results may differ from projections.
SECTION 6.15. Seniority of Obligations, etc. The Borrower has the power
and authority to incur the Indebtedness evidenced by the Subordinated Notes as
provided for under the Senior Subordinated Increasing Rate Note Purchase
Agreement and has (or will have) duly
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authorized, executed and delivered the Senior Subordinated Increasing Rate Note
Purchase Agreement. The Borrower has (or will have) issued, pursuant to due
authorization, the Subordinated Notes. Once executed and delivered by the
Borrower, the Senior Subordinated Increasing Rate Note Purchase Agreement will
constitute the legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing. The subordination
provisions of the Subordinated Notes and, when issued, the Senior Subordinated
High Yield Notes will be enforceable against the holders of the Subordinated
Notes or Senior Subordinated High Yield Notes, as applicable, by the holder of
the "Designated Senior Indebtedness" or similar term referring to the
Obligations, which has not effectively waived the benefits thereof. All monetary
Obligations, including those to pay principal of and interest (including
post-petition interest, whether or not permitted as a claim) on the Loans and
Reimbursement Obligations, and indemnities (including environmental
indemnities), fees and expenses in connection therewith, constitute "Designated
Senior Indebtedness" or similar term referring to the Obligations in the
Subordinated Notes and, when issued, in the Senior Subordinated High Yield
Notes, and all such Obligations are entitled to the benefits of the
subordination created by such Subordinated Notes and, when issued, the Senior
Subordinated High Yield Notes. The Borrower acknowledges that the Administrative
Agent and each Lender is entering into this Agreement, and is extending its
Commitments, in reliance upon the subordination provisions of (or to be
contained in) the Subordinated Notes, the Senior Subordinated High Yield Notes
(when issued) and this Section.
SECTION 6.16. Solvency. The Transaction (including the incurrence of
the initial Credit Extension hereunder, the incurrence by the Borrower of the
Indebtedness represented by the Notes and the Subordinated Notes and the
application of the proceeds of the Credit Extensions and the Bridge Financing),
will not involve or result in any fraudulent transfer or fraudulent conveyance
under the provisions of Section 548 of the Bankruptcy Code (11 U.S.C. Section
101 et seg., as from time to time hereafter amended, and any successor or
similar statute) or any applicable state law respecting fraudulent transfers or
fraudulent conveyances. After giving effect to the Transaction, each of the
Borrower and the Subsidiary Guarantors is Solvent.
SECTION 6.17. Year 2000. Any reprogramming or other corrective
modifications required to permit the proper functioning in all material
respects, in and following the year 2000, of business critical software owned by
the Borrower and its Subsidiaries is reasonably expected to be completed by
September 30, 1999 except to the extent that the failure to do so would not be
reasonably expected to have a Material Adverse Effect. As of the date of the
initial Credit Extension, to the knowledge of the Borrower, the cost to the
Borrower and its Subsidiaries of such reprogramming to the extent not reflected
or reserved for on the December 31, 1997 combined balance sheet of the Business
would not be reasonably expected to have a Material Adverse Effect.
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SECTION 6.18. Recapitalization Agreement. As of the Closing Date, to
the best knowledge of the Borrower, the representations and warranties of the
Transferors set forth in the Recapitalization Agreement are true and correct.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the
Administrative Agent, the Issuer and each Lender that, until all Commitments
have terminated and all Obligations have been paid and performed in full, the
Borrower will perform the obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender, the Issuer
and the Administrative Agent copies of the following financial statements,
reports, notices and information:
(a) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of
the Borrower, a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter, together with the
related consolidated statement of earnings and cash flow for such
Fiscal Quarter and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Quarter, certified
by the chief financial Authorized Officer of the Borrower;
(b) as soon as available and in any event within 90 days after the
end of each Fiscal Year of the Borrower, a copy of the annual audit
report for such Fiscal Year for the Borrower and its Subsidiaries,
including therein a consolidated balance sheet for the Borrower and its
Subsidiaries as of the end of such Fiscal Year, together with the
related consolidated statement of earnings and cash flow of the
Borrower and its Subsidiaries for such Fiscal Year, in each case
certified (without any Impermissible Qualification) by Arthur Andersen
LLP or a "Big Five" firm of independent public accountants, together
with a certificate from such accountants to the effect that, in making
the audit necessary therefor no knowledge was obtained of any Default
or Event of Default insofar as the same relates to any financial
covenant set forth in Section 7.2.4, except as specified in such
certificate;
(c) together with the delivery of the financial information
required pursuant to clauses (a) and (b), a Compliance Certificate, in
substantially the form of Exhibit E, executed by the chief financial
Authorized Officer of the Borrower, showing (in reasonable detail and
with appropriate calculations and computations in all respects
reasonably satisfactory to the Administrative Agent) compliance with
the financial covenants set forth in Section 7.2.4;
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(d) as soon as possible and in any event within three Business
Days after obtaining knowledge of the occurrence of each Default, a
statement of the president, chief executive, or chief financial
Authorized Officer of the Borrower setting forth details of such
Default and the action which the Borrower has taken and proposes to
take with respect thereto;
(e) as soon as possible and in any event within five Business Days
after (x) the occurrence of any material adverse development with
respect to any litigation, action, proceeding, or labor controversy
described in Section 6.7 and the action which the Borrower has taken
and proposes to take with respect thereto or (y) the commencement of
any labor controversy, litigation, action, proceeding of the type
described in Section 6.7, notice thereof and of the action which the
Borrower has taken and proposes to take with respect thereto;
(f) promptly after the sending or filing thereof, copies of all
reports and registration statements which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission or any
national securities exchange;
(g) as soon as practicable after the chief financial officer or
the chief executive officer of the Borrower or a member of the
Borrower's Controlled Group becomes aware of (i) formal steps in
writing to terminate any Pension Plan or (ii) the occurrence of any
event with respect to a Pension Plan or a Multiemployer Plan which, in
the case of (i) or (ii), could reasonably be expected to result in a
contribution to such Pension Plan or Multiemployer Plan by (or a
liability to) the Borrower or a member of the Borrower's Controlled
Group in excess of $3,000,000, (iii) the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under section 302(f) of ERISA or Section 412(n) of the
Code, (iv) the taking of any action with respect to a Pension Plan
which could reasonably be expected to result in the requirement that
the Borrower furnish a bond in a material amount to the PBGC or such
Pension Plan or (v) any material increase in the contingent liability
of the Borrower with respect to any post-retirement Welfare Plan
benefit other than liability for continuation coverage described in
Part 6 of Subtitle B of Title 1 of ERISA, notice thereof and copies of
all documentation relating thereto;
(h) promptly upon receipt or delivery (as the case may be)
thereof, all material notices or reports required to be delivered under
the Recapitalization Agreement, including copies of documents delivered
pursuant to Section 1.4 of the Recapitalization Agreement relating to
purchase price adjustments;
(i) promptly when available and in any event within 90 days
following the last day of each Fiscal Year of the Borrower commencing
with the fiscal year ended December 31, 1999, financial projections for
the current Fiscal Year, prepared in reasonable detail by the chief
accounting, financial or executive Authorized Officer of the Borrower;
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(j) promptly following the delivery or receipt, as the case may
be, of any material written notice or communication pursuant to or in
connection with the Senior Subordinated Increasing Rate Note Purchase
Agreement or any of the Subordinated Notes (except for the delivery of
financial statements or financial reports thereunder), a copy of such
notice or communication;
(k) within 90 days after the Closing Date, a survey of asbestos
present in the facilities of the Borrower and its Subsidiaries together
with an operating and maintenance plan relating thereto; and
(l) such other information respecting the condition or operations,
financial or otherwise of the Borrower or any of its Subsidiaries as
any Lender or the Issuer through the Administrative Agent may from time
to time reasonably request (including as to the matters referred to in
Section 6.17 relating to Borrower and the consequences to the Borrower
of a failure of others' systems or equipment to have undergone
reprogramming required to permit proper functioning after the year
2000).
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will, and will
cause each of its Subsidiaries to, (a) comply in all material respects with all
applicable laws, rules, regulations and orders, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect, (b)
maintain and preserve its corporate existence and qualification as a foreign
corporation, except where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect and (c) pay, before the same become
delinquent, all material taxes, assessments and governmental charges imposed
upon it or upon its property except to the extent being contested in good faith
by appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
SECTION 7.1.3. Maintenance of Properties. The Borrower will, and will
cause each of its Subsidiaries to, maintain, preserve, protect and keep its
properties taken as a whole in good repair, working order and condition
(ordinary wear and tear excepted), and make necessary and proper repairs,
renewals and replacements so that its business carried on in connection
therewith may be properly conducted at all times unless the Borrower determines
in good faith that the continued maintenance of any of its properties is no
longer economically desirable.
SECTION 7.1.4. Insurance. The Borrower shall maintain, and shall cause
each of its Subsidiaries to maintain:
(a) to the extent usually carried by Persons of comparable size
engaged in the same or similar business and similarly situated,
physical damage insurance on all real and personal property on an
all-risk basis (including, loss in transit, flood and earthquake
insurance) and public liability insurance against claims for personal
injury, death or property damage suffered by others upon, in or about
any premises occupied by it or occurring as a result of its ownership,
maintenance or operation of any automobiles, trucks or other vehicles
or other facilities (including, but not limited to, any machinery
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used therein or thereupon) or as the result of the use of products
manufactured, constructed or sold by it or services rendered by it in
an amount and subject to such deductibles as is usually carried by
Persons of comparable size engaged in the same or a similar business
and similarly situated;
(b) such other types of insurance with respect to its business as
is usually carried by Persons of comparable size engaged in the same or
a similar business and similarly situated; and
(c) all worker's compensation or similar insurance an may be
required under the laws of any state or jurisdiction in which it may be
engaged in business.
Without limiting the foregoing, the Borrower further agrees as follows:
(i) each policy for property insurance shall show the Administrative Agent as
loss payee; (ii) each policy for liability insurance shall show the
Administrative Agent as an additional insured; (iii) each insurance policy shall
provide that at least 30 days' prior written notice of cancellation or of lapse
shall be given to the Administrative Agent by the insured; and (iv) the Borrower
shall, if so requested by the Administrative Agent, deliver to the
Administrative Agent a copy of each insurance policy.
All insurance shall be provided (i) by insurers authorized by Lloyds of
London to underwrite such risks, (ii) by insurers having an A.M. Best
policyholders rating of not less than A(except with respect to insurers
providing insurance of the type described in clause (c), in which case such
insurers shall have an A.M. Best policyholders rating of not less than B+) or
(iii) by such other insurers as the Administrative Agent may approve in writing;
provided that, if the rating of any of such insurers is downgraded, the Borrower
and each of its Subsidiaries, as the case may be, shall only be required to
obtain replacement insurance with an insurer satisfying the requirements of this
clause at the stated expiration of the insurance policy maintained with the
insurer whose rating was so downgraded.
SECTION 7.1.5. Books and Records. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect in
all material respects all of its business affairs and transactions and permit
the Administrative Agent, the Issuer and each Lender or any of their respective
representatives, at reasonable times and intervals, and upon reasonable notice,
to visit all of its offices, to discuss its financial matters with its officers
and independent public accountant (and the Borrower hereby authorizes such
independent public accountant to discuss the Borrower's financial matters with
the Issuer and each Lender or its representatives whether or not any
representative of the Borrower is present) and to examine, and photocopy
extracts from, any of its books or other corporate records, provided, that
representatives of the Borrower shall be allowed to be present at any such
discussion.
SECTION 7.1.6. Environmental Covenant. The Borrower will and will cause
each of its Subsidiaries to,
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(a) use and operate all of its facilities and properties in
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and
handle all Hazardous Materials in compliance with all applicable
Environmental Laws, in each case except where the failure to comply
with the terms of this clause would not reasonably be expected to have
a Material Adverse Effect;
(b) promptly notify the Administrative Agent and provide copies of
all written claims, complaints, notices or inquiries relating to the
condition of its facilities and properties or compliance with
Environmental Laws which relate to environmental matters which would
have, or would reasonably be expected to have, a Material Adverse
Effect, and promptly take reasonably steps to respond to any material
actions and proceedings relating to compliance with Environmental Laws,
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP have been set aside on its books; and
(c) provide such information and certifications which the
Administrative Agent may reasonably request from time to time to
evidence compliance with this Section 7.1.6.
SECTION 7.1.7. Future Subsidiaries. Upon any Person becoming, after the
Effective Date, a Subsidiary of the Borrower, or upon the Borrower or any
Subsidiary acquiring additional Capital Stock of any existing Subsidiary, the
Borrower shall notify the Administrative Agent of such acquisition, and
(a) the Borrower shall promptly cause such Subsidiary to execute
and deliver to the Administrative Agent, with counterparts for each
Lender, a Subsidiary Guaranty or a supplement to the Subsidiary
Guaranty and a Subsidiary Security Agreement or a supplement to the
Subsidiary Security Agreement (and, if such Subsidiary owns any real
property having a value as determined in good faith by the
Administrative Agent in excess of $750,000, a Mortgage), together with
Uniform Commercial Code financing statements (form UCC-1) executed and
delivered by the Subsidiary naming the Subsidiary as the debtor and the
Administrative Agent as the secured party, or other similar instruments
or documents, to be filed under the Uniform Commercial Code and any
other applicable recording statutes, in the case of real property, of
all jurisdictions as may be necessary or, in the reasonable opinion of
the Administrative Agent, desirable to perfect the security interest of
the Administrative Agent pursuant to the Subsidiary Security Agreement
or a Mortgage, as the case may be; and
(b) the Borrower shall promptly deliver, or cause to be delivered,
to the Administrative Agent under a Pledge Agreement (or a supplement
thereto updating the schedules to the Pledge Agreement), certificates
(if any) representing all of the issued and outstanding shares of
Capital Stock of such Subsidiary owned by the Borrower or any
Subsidiary of the Borrower, as the case may be, along with undated
stock powers for such
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certificates, executed in blank, or, if any securities subject thereto
are uncertificated securities, confirmation and evidence satisfactory
to the Administrative Agent that appropriate book entries have been
made in the relevant books or records of a financial intermediary or
the issuer of such securities, as the case may be, under applicable law
resulting in the perfection of the security interest granted in favor
of the Administrative Agent pursuant to the terms of a Pledge
Agreement;
together, in each case, with such opinions, in form and substance and from
counsel satisfactory to the Administrative Agent, as the Administrative Agent
may reasonably require; provided, that notwithstanding the foregoing, no
Non-U.S. Subsidiary shall be required to execute and deliver a Mortgage, a
Subsidiary Guaranty or a supplement to the Subsidiary Guaranty or a Security
Agreement or a supplement to the Security Agreement, or a Pledge Agreement or a
supplement to the Pledge Agreement, nor will the Borrower or any Subsidiary of
the Borrower be required to deliver in pledge pursuant to a Pledge Agreement in
excess of 65% of the total combined voting power of all classes of Capital Stock
of a Non-U.S. Subsidiary entitled to vote.
SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real
Property. (a) Prior to entering into any new lease of real property following
the Effective Date (including a renewal of any lease of real property entered
into following the Effective Date), the Borrower shall, and shall cause each of
its Subsidiaries to, use its (and their) reasonable commercial efforts (which
shall not require the expenditure of cash or the making of any material
concessions under the relevant lease) to deliver to the Administrative Agent a
Waiver executed by the lessor of any real property that is to be leased by the
Borrower or such Subsidiary for a term in excess of one year in any state which
by statute grants such lessor a "landlord's" (or similar) Lien which is superior
to the Administrative Agent's, to the extent the value of any personal property
of the Borrower or its Subsidiaries to be held at such leased property exceeds
(or it is anticipated that the value of such personal property will, at any
point in time during the term of such leasehold term, exceed) $500,000.
(b) In the event that the Borrower or any of its Subsidiaries shall
acquire any real property having a value as determined in good faith by the
Administrative Agent in excess of $750,000, the Borrower or the applicable
Subsidiary shall, promptly after such acquisition, execute a Mortgage and
provide the Administrative Agent with
(i) evidence of the completion (or satisfactory arrangements for
the completion) of all recordings and filings of such Mortgage as may
be necessary or, in the reasonable opinion of the Administrative Agent,
desirable to create a valid, perfected first priority Lien, subject to
Liens permitted by Section 7.2.3, against the properties purported to
be covered thereby;
(ii) mortgagee's title insurance policies in favor of the
Administrative Agent and the Lenders in amounts and in form and
substance and issued by insurers, reasonably satisfactory to the
Administrative Agent, with respect to the property purported to be
covered by such Mortgage, insuring that title to such
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<PAGE> 85
property is marketable and that the interests created by the Mortgage
constitute valid first Liens thereon free and clear of all defects and
encumbrances except as permitted by Section 7.2.3, and such policies
shall also include a revolving credit endorsement, if available, and
such other endorsements as the Administrative Agent shall request and
shall be accompanied by evidence of the payment in full of all premiums
thereon; and
(iii) such other approvals, opinions, or documents as the
Administrative Agent may reasonably request.
SECTION 7.1.9. Use of Proceeds, etc. The Borrower shall apply
(a) the proceeds of the Credit Extensions
(i) to pay Transaction expenses; provided, however, that
(x) none of the Revolving Loans may be used for such purpose, (y)
the aggregate Transaction expenses shall not exceed $19,000,000
(including amounts to be reimbursed by the Transferors pursuant to
the Recapitalization Agreement or otherwise) and (z) the aggregate
of the purchase price for the Recapitalization Transactions,
including the Equity Purchase, and Transaction expenses shall not
exceed $472,000,000;
(ii) for working capital and general corporate purposes of
the Borrower and its Subsidiaries including capital expenditures
and acquisitions; and
(iii) to repay the Indebtedness identified in Item 7.2.2(b)
("Indebtedness to be Paid") of the Disclosure Schedule, including
the Seller Note, and
(b) all the proceeds from the cash component of the Equity
Purchase (without duplication of the application of Credit Extension
proceeds pursuant to clause (a)) made available to it to pay the
redemption purchase price of the Common Stock pursuant to the
Recapitalization Agreement.
SECTION 7.1.10. Hedging Obligations. Within 120 days after the Closing
Date, the Borrower shall enter into interest rate swap, cap, collar or similar
arrangements designed to protect the Borrower against fluctuations in the LIBO
Rate reasonably satisfactory to the Administrative Agent in a notional amount
reasonably satisfactory to the Borrower and Administrative Agent for a minimum
period equal to the shorter of two years or the remaining term of the Term B
Loan.
SECTION 7.1.11. Shareholder Pledge Agreement. The Borrower covenants
and agrees that, in its capacity as a Pledged Share Issuer under (and as defined
in) the Shareholder Pledge Agreements, the Borrower agrees that it will
cooperate in all reasonable respects necessary to enable the Administrative
Agent to exercise its rights and remedies under the terms of the
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Shareholder Pledge Agreements and agrees to comply with all terms thereof
applicable to the Pledged Share Issuer (as defined therein).
SECTION 7.2. Negative Covenants. The Borrower agrees with the
Administrative Agent, the Issuer and each Lender that, until all Commitments
have terminated and all Obligations have been paid and performed in full, the
Borrower will perform the obligations set forth in this Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any business activity, except
business activities of the type in which the Borrower and its Subsidiaries are
engaged on the date hereof (after giving effect to the Transactions) and such
activities as may be incidental, similar or related thereto.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and other
Obligations;
(b) until the date of the initial Credit Extension, Indebtedness
identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the
Disclosure Schedule;
(c) Indebtedness existing as of the Effective Date which is
identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure
Schedule, and any refinancing or replacement thereof, but only in
amounts not in excess of the outstanding amounts on the date of such
refinancing (which shall not exceed the committed amount on the
Effective Date);
(d) Indebtedness incurred by the Borrower or any of its
Subsidiaries (i) in respect of Capitalized Lease Liabilities and
purchase money financing (but only to the extent otherwise permitted by
Section 7.2.7); provided, that the maximum aggregate outstanding
principal amount of all Indebtedness permitted under this clause (d)(i)
shall not at any time exceed $15,000,000 and (ii) from time to time for
general corporate purposes; provided, that the maximum aggregate
outstanding principal amount of all Indebtedness permitted under this
clause (d)(ii) shall not at any time exceed $5,000,000;
(e) Hedging Obligations of the Borrower or any of its
Subsidiaries;
(f) intercompany Indebtedness of any Subsidiary of the Borrower
owing to the Borrower or any other Subsidiary of the Borrower, which
Indebtedness
(i) shall be evidenced by one or more promissory notes which
have been duly executed and delivered to (and endorsed to the
order of) the Administrative Agent in pledge pursuant to a Pledge
Agreement; and
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<PAGE> 87
(ii) shall not be forgiven or otherwise discharged for any
consideration other than payment (Dollar for Dollar) in cash
unless the Administrative Agent otherwise consents;
(g) unsecured intercompany Indebtedness of the Borrower owing to
a Subsidiary of the Borrower that has previously executed and delivered
to the Administrative Agent the Intercompany Subordination Agreement,
which shall be evidenced by one or more promissory notes in form and
substance satisfactory to the Administrative Agent that have been duly
executed and delivered to (and endorsed to the order of) the
Administrative Agent in pledge pursuant to a Pledge Agreement;
(h) the unsecured Subordinated Notes of the Borrower owing to the
Subordinated Noteholders in an aggregate outstanding principal amount
not to exceed $110,000,000 (plus the amount attributable to additional
notes issued thereunder in respect of interest) evidenced by the
Subordinated Notes;
(i) Indebtedness of Subsidiary Guarantors pursuant to the
Subordinated Guaranty;
(j) Senior Subordinated High Yield Notes provided that the Excess
High Yield Net Debt Proceeds, if any, are used as provided in clause
(d) of Section 3.1.1.
(k) Indebtedness of a Person not in excess of $5,000,000
outstanding at the time such Person becomes a Subsidiary so long such
Indebtedness was not incurred in anticipation of such Person becoming a
Subsidiary; and
(l) guarantees by the Borrower of Indebtedness of Subsidiaries so
long as (i) such Indebtedness is otherwise permitted hereunder and (ii)
such guarantee is subordinated to the Obligations in the same manner
and to the same extent as such Indebtedness is subordinated;
provided, however, that no Indebtedness otherwise permitted by clause (d) or (f)
(as such clause relates to Loans made by the Borrower to its Subsidiaries) may
be incurred if, after giving effect to the incurrence thereof, any Default shall
have occurred and be continuing.
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens securing payment of the Obligations, granted pursuant
to any Loan Document;
(b) until the date of the initial Credit Extension, Liens
securing payment of Indebtedness of the type permitted and described in
clause (b) of Section 7.2.2;
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(c) (i) Liens, if any, granted prior to the Effective Date to
secure payment of Indebtedness of the type permitted and described in
clause (d)(i) of Section 7.2.2 and (ii) Liens granted prior to the
Effective Date set forth on Item 7.23 of the Disclosure Schedule;
(d) Liens granted to secure payment of Indebtedness of the type
permitted and described in clause (d)(i) of Section 7.2.2;
(e) Liens for taxes, assessments or other governmental charges or
levies, including Liens pursuant to Section 107(l) of CERCLA or other
similar law, not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books;
(f) Liens of carriers, warehousemen, mechanics, repairmen,
materialmen and landlords or other like liens incurred in the ordinary
course of business for sums not overdue for a period of more than 60
days or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(g) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance
of tenders, statutory obligations, insurance obligations, leases and
contracts (other than for borrowed money) entered into in the ordinary
course of business or to secure obligations on surety or appeal bonds;
(h) judgment Liens in existence less than 30 days after the entry
thereof or with respect to which execution has been stayed or the
payment of which is covered in full by a bond or (subject to a
customary deductible) by insurance maintained with responsible
insurance companies;
(i) Liens with respect to recorded minor imperfections of title
and easements, rights-of-way, restrictions, reservations, permits,
servitudes and other similar encumbrances on real property and fixtures
which do not materially interfere with the ordinary conduct of the
business of the Borrower and its Subsidiaries conducted at any material
property;
(j) leases or subleases granted by the Borrower or any of its
Subsidiaries to any other Person in the ordinary course of business;
(k) Liens in the nature of trustees' Liens granted pursuant to any
indenture governing any Indebtedness permitted by Section 7.2.2, in
each case in favor of the trustee under such indenture and securing
only obligations to pay compensation to such trustee, to reimburse its
expenses and to indemnify it under the terms thereof; and
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(l) Permitted Encumbrances (as defined in the Mortgage).
SECTION 7.2.4. Financial Condition. (a) Debt to EBITDA Ratio. The
Borrower will not permit the Debt to EBITDA Ratio as of the end of any Fiscal
Quarter to be greater than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Debt to
Fiscal Quarter End EBITDA Ratio
------------------ ------------
<S> <C>
March 31, 1999 6.25
June 30, 1999 6.25
September 30, 1999 6.25
December 31, 1999 6.25
March 31, 2000 5.25
June 30, 2000 5.25
September 30, 2000 5.25
December 31, 2000 5.25
March 31, 2001 4.75
June 30, 2001 4.75
September 30, 2001 4.75
December 31, 2001 4.75
March 31, 2002 4.25
June 30, 2002 4.25
September 30, 2002 4.25
December 31, 2002 4.25
March 31, 2003 3.75
June 30, 2003 3.75
September 30, 2003 3.75
December 31, 2003 3.75
March 31, 2004 3.25
June 30, 2004 3.25
September 30, 2004 3.25
December 31, 2004 3.25
Each Fiscal Quarter thereafter 3.00
</TABLE>
(b) Interest Coverage Ratio. The Borrower will not permit the Interest
Coverage Ratio as of the end of any Fiscal Quarter to be set forth below to be
less than the ratio set forth opposite such date:
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<TABLE>
<CAPTION>
Interest
Fiscal Quarter End Coverage Ratio
------------------ --------------
<S> <C>
March 31, 1999 1.60
June 30, 1999 1.60
September 30, 1999 1.60
December 31, 1999 1.60
March 31, 2000 1.80
June 30, 2000 1.80
September 30, 2000 1.80
December 31, 2000 1.80
March 31, 2001 2.25
June 30, 2001 2.25
September 30, 2001 2.25
December 31, 2001 2.25
March 31, 2002 2.50
June 30, 2002 2.50
September 30, 2002 2.50
December 31, 2002 2.50
Each Fiscal Quarter thereafter 3.00
</TABLE>
For purposes of calculating the cash Interest Expense component of the
ratio in this Section as of the last day of the first, second, third and fourth
Fiscal Quarter of 1999 (being the Fiscal Quarters ending March 31, 1999, June
30, 1999, September 30, 1999, and December 31, 1999), the amounts of cash
Interest Expense included in the ratio shall be determined by multiplying cash
Interest Expense for the period commencing on the Closing Date and ending as of
the last day of such Fiscal Quarter by a fraction, the numerator of which is 365
and the denominator of which is the number of calendar days from the Closing
Date through the last day of such Fiscal Quarter.
(c) Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed
Charge Coverage Ratio as of the end of any Fiscal Quarter set forth below to be
less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Fixed Charge
Fiscal Quarter End Coverage Ratio
------------------ --------------
<S> <C>
March 31, 1999 1.20
June 30, 1999 1.20
September 30, 1999 1.20
December 31, 1999 1.20
March 31, 2000 1.20
June 30, 2000 1.20
September 30, 2000 1.20
</TABLE>
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<TABLE>
<S> <C>
December 31, 2000 1.30
March 31, 2001 1.30
June 30, 2001 1.30
September 30, 2001 1.30
December 31, 2001 1.50
March 31, 2002 1.50
June 30, 2002 1.50
September 30, 2002 1.50
December 31, 2002 1.75
March 31, 2003 1.75
June 30, 2003 1.75
September 30, 2003 1.75
December 31, 2003 2.00
March 31, 2004 2.00
June 30, 2004 2.00
September 30, 2004 2.00
December 31, 2004 2.00
Each Fiscal Quarter thereafter 0.40
</TABLE>
For purposes of calculating the cash Interest Expense component of the
ratio in this Section as of the last day of the first, second, third and fourth
Fiscal Quarter of 1999 (being the Fiscal Quarters ending March 31, 1999, June
30, 1999, September 30, 1999, and December 31, 1999), the amounts of cash
Interest Expense included in the ratio shall be determined by multiplying cash
Interest Expense for the period commencing on the Closing Date and ending as of
the last day of such Fiscal Quarter by a fraction, the numerator of which is 365
and the denominator of which is the number of calendar days from and including
the Closing Date through the last day of such Fiscal Quarter.
SECTION 7.2.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments existing on the Effective Date and identified in
Item 7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as Indebtedness
pursuant to Section 7.2.2;
(d) [Intentionally omitted]
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(e) Investments by the Borrower in any of its Subsidiaries, or by
any such Subsidiary in any of its Subsidiaries, by way of contributions
to capital or purchase of Capital Stock;
(f) Investments made by the Borrower or any of its Subsidiaries,
solely with proceeds which either:
(i) have been contributed, directly or indirectly, through
cash capital contributions to the Borrower or such Subsidiary or
through the issuance for cash of additional equity securities for
the purpose of making an Investment identified in a notice to the
Administrative Agent on or prior to the date that such capital
contribution is made or issuance is consummated (but this clause
(i) shall not include the proceeds of such issuances solely to the
extent the Borrower is required to make a prepayment as a result
of an equity issuance pursuant to Section 3.1.1) or
(ii) are Net Disposition Proceeds which are being reinvested
by the Borrower or such Subsidiary of the Borrower in Qualified
Assets in accordance with the terms of clause (b) of Section
3.1.1;
(g) Investments to the extent the consideration received pursuant
to clause (b)(i) of Section 7.2.9 is not all cash; and
(h) Acquisition Investments not to exceed $25,000,000 for any
single Acquisition Investment or $50,000,000 for all Acquisition
Investments in the aggregate from and after the Closing Date;
(i) loans and advances to officers, directors or employees of the
Borrower and its Subsidiaries (x) in the ordinary course of business
for travel and entertainment expenses, (y) made after the Effective
Date for relocation expenses in the ordinary course of business and (z)
for other purposes in furtherance of the business of the Borrower and
its Subsidiaries, so long as the aggregate amount of Investments
permitted under this clause (i), together with the principal amount of
all Indebtedness outstanding under Section 7.2.2(j), shall not exceed
$250,000 at any time;
(j) Investments in the nature of pledges or deposits with respect
to leases or utilities provided to third parties in the ordinary course
of business;
(k) Investments representing evidences of Indebtedness,
securities or other property received from another Person in connection
with any bankruptcy proceeding or other reorganization of such other
Person or as a result of foreclosure, perfection or enforcement of any
Lien or exchange for evidences of Indebtedness, securities or other
property of such other Persons held by the Borrower and its
Subsidiaries; provided that any such securities or other property
received by the Borrower or any of its Subsidiaries
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is pledged to the Administrative Agent for the benefit of the Lenders
pursuant to the Security Agreements;
(l) extensions of trade credit in the ordinary course of
business;
(m) loans and advances, not exceeding $775,000 per annum in the
aggregate to the members (but only to members who are individuals) of
the Management Investor in an amount equal to any income taxes of the
individual members of the Management Investor resulting solely from
imputed income generated with respect to the Preferred Stock owned by
them or by the Management Investor and attributable to them;
provided, however, that
(n) any Investment which when made complies with the requirements
of the definition of the term "Cash Equivalent Investment" may continue
to be held notwithstanding that such Investment if made thereafter
would not comply with such requirements;
(o) no Investment otherwise permitted by clause (f)(ii), (g) or
(h) shall be permitted to be made if, immediately before or after
giving effect thereto, any Default shall have occurred and be
continuing.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after the
Effective Date:
(a) the Borrower will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any
class of Capital Stock (now or hereafter outstanding) of the Borrower
or on any warrants, options or other rights with respect to any shares
of any class of Capital Stock (now or hereafter outstanding) of the
Borrower (other than dividends or distributions payable in its common
stock or warrants to purchase its common stock or splits or
reclassifications of its stock into additional or other shares of its
common stock) or apply, or permit any of its Subsidiaries to apply, any
of its funds, property or assets to the purchase, redemption, sinking
fund or other acquisition of, or agree or permit any of its
Subsidiaries to purchase, redeem or otherwise acquire, any shares of
any class of Capital Stock (now or hereafter outstanding) of the
Borrower, or warrants, options or other rights with respect to any
shares of any class of Capital Stock (now or hereafter outstanding) of
the Borrower (collectively, "Restricted Payments");
(b) the Borrower will not, and will not permit any of its
Subsidiaries to (x) make any prepayment (directly or by redemption,
purchase or defeasance) of principal of (i) the Subordinated Notes
(other than by prepayment through, or with the proceeds of, the
issuance of Senior Subordinated High Yield Notes so long as the
Borrower complies with the obligations set forth in clause (d) of
Section 3.1.1 in connection with the issuance of such Senior
Subordinated High Yield Notes) or (ii) the Senior Subordinated
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High Yield Notes, (y) make any payment on or with respect to the
Subordinated Notes or the Senior Subordinated High Yield Notes in
violation of the subordination provisions contained therein or (z)
designate any indebtedness (other than the Obligations) as "Designated
Senior Indebtedness" or any similar term as defined in the Subordinated
Notes or the Senior Subordinated High Yield Notes; and
(c) the Borrower will not, and will not permit any Subsidiary to,
make any deposit for any of the foregoing purposes;
provided, however, that,
(d) notwithstanding the provisions of clause (a) above, the
Borrower shall be permitted:
(i) so long as (A) no Default shall have occurred and be
continuing on the date such Restricted Payment is declared or to
be made, nor would a Default result from the making of such
Restricted Payment, (B) after giving effect to the making of such
Restricted Payment the Borrower shall be in pro forma compliance
with the covenants set forth in Section 7.2.4 for the most recent
full Fiscal Quarter immediately preceding the date of the payment
of such Restricted Payment for which the relevant financial
information has been delivered pursuant to clause (a) or clause
(b) of Section 7.1.1, and (C) an Authorized Officer of the
Borrower shall have delivered a certificate to the Administrative
Agent in form and substance satisfactory to the Administrative
Agent (including a calculation of the compliance with the
covenants set forth in Section 7.2.4) certifying as to the
accuracy of clause (d)(i)(A) and (d)(i)(B) above, to purchase,
redeem, acquire or otherwise retire for value shares of Capital
Stock of the Borrower held by officers or employees of the
Borrower or any of its Subsidiaries, or options on any such shares
or related stock appreciation rights or similar securities owned
by officers or employees (or their estates or beneficiaries under
their estates), in all cases only upon death, disability,
retirement, termination of employment or pursuant to the terms of
such stock option plan or any other agreement under which such
shares of Capital Stock, options, related rights or similar
securities were issued (collectively referred to as a
"Redemption"), in an aggregate amount, in the case of this clause
(d)(i), not to exceed $2,000,000 in any Fiscal Year provided, that
to the extent the amount of any Redemptions permitted to be made
in any Fiscal Year pursuant to this clause exceeds the aggregate
amount of Redemptions actually made during such Fiscal Year, such
excess amount may be carried forward to the next Fiscal Year but
the aggregate Redemptions in any Fiscal Year may not exceed
$4,000,000 (any such amount to be certified by the Borrower to the
Administrative Agent in the Compliance Certificate delivered for
the last Fiscal Quarter of a Fiscal Year), and
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(ii) to pay amounts to New World Pasta LLC to enable it to
pay Transaction expenses otherwise payable by the Borrower so long
as the aggregate amount of Transaction expenses paid by the
Borrower and New World Pasta LLC does not exceed the amount
otherwise permitted to be paid by the Borrower under this
Agreement.
SECTION 7.2.7. Capital Expenditures, etc. (a) The Borrower will not,
and will not permit any of its Subsidiaries to, make or commit to make Capital
Expenditures in any Fiscal Year, which aggregate in excess of the amount set
forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
Maximum Capital
Fiscal Year Expenditures
----------- ---------------
<S> <C>
1999 $17,500,000
2000 $10,000,000
2001 $7,000,000
2002 $7,000,000
2003 $7,000,000
2004 $7,000,000
2005 $7,000,000
2006 $7,000,000
</TABLE>
provided, that to the extent the amount of Capital Expenditures permitted to be
made in any Fiscal Year pursuant to this clause exceeds the aggregate amount of
Capital Expenditures actually made during such Fiscal Year, such excess amount
may be carried forward to subsequent Fiscal Years but the aggregate Capital
Expenditures in any Fiscal Year may not exceed the amount set forth above for
such Fiscal Year plus the amount set forth above for the prior Fiscal Year (any
such amount to be certified by the Borrower to the Administrative Agent in the
Compliance Certificate delivered for the last Fiscal Quarter of a Fiscal Year).
For purposes of computing the amount of Capital Expenditures in any Fiscal Year,
(i) the amount of any cash Capital Expenditure made pursuant to a binding
agreement entered into in good faith and without an intent to avoid the
requirements of this Section shall be deemed to have been made in the Fiscal
Year in which the commitment was made and not in the Fiscal Year in which the
actual expenditure is actually made and (ii) the amount of any such commitment
shall be deemed to be a Capital Expenditure in the Fiscal Year in which the
commitment is entered into.
(b) The parties acknowledge and agree that the permitted Capital
Expenditure levels set forth in clause (a) above shall be exclusive of:
(i) Net Disposition Proceeds which have been reinvested by the
Borrower or a Subsidiary of the Borrower in Qualified Assets in
accordance with the terms of clause (b) of Section 3.1.1 and Casualty
Proceeds to the extent applied to rebuild or replace property in
accordance with the terms of clause (e) of Section 3.1.1 (including any
amount less than $500,000 referred to therein) and
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(ii) Acquisition Investments.
SECTION 7.2.8. Consolidation, Merger, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other corporation or other Person, or purchase
or otherwise acquire all or substantially all of the assets of any Person (or of
any division thereof) or make any other Acquisition Investment except
(a) any such Subsidiary may liquidate or dissolve voluntarily
into, and may merge with and into, the Borrower (so long as the
Borrower is the surviving corporation of such combination or merger) or
any other Subsidiary, and the assets or stock of any Subsidiary may be
purchased or otherwise acquired by the Borrower or any other
Subsidiary; provided, that notwithstanding the above, a Subsidiary may
only liquidate or dissolve into, or merge with and into, another
Subsidiary of the Borrower if, after giving effect to such combination
or merger, the Borrower continues to own (directly or indirectly), and
the Administrative Agent continues to have pledged to it pursuant to a
Pledge Agreement, a percentage of the issued and outstanding shares of
Capital Stock (on a fully diluted basis) of the Subsidiary surviving
such combination or merger that is equal to or in excess of the
percentage of the issued and outstanding shares of Capital Stock (on a
fully diluted basis) of the Subsidiary that does not survive such
combination or merger that was (immediately prior to the combination or
merger) owned by the Borrower or pledged to the Administrative Agent;
and
(b) so long as no Default has occurred and is continuing or would
occur after giving effect thereto, the Borrower or any of its
Subsidiaries may make Acquisition Investments to the extent permitted
by (h) of Section 7.2.5.
SECTION 7.2.9. Asset Dispositions, etc. The Borrower will not, and will
not permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants (other than the issuance of
warrants required by the Senior Subordinated Increasing Rate Note Purchase
Agreement or in connection with the issuance of the Senior Subordinated High
Yield Notes) or other rights with respect to, all or any part of its assets,
whether now owned or hereafter acquired (including accounts receivable and
Capital Stock of Subsidiaries) to any Person, unless:
(a) such sale, transfer, lease, contribution or conveyance of
such assets is (i) in the ordinary course of its business (and does not
constitute a sale, transfer, lease, contribution or other conveyance of
a plant or all or a substantial part of the Borrower's or such
Subsidiary's assets) or is of obsolete, surplus, uneconomic or worn out
property, (ii) permitted by Section 7.2.8 or clause (d) of Section
7.2.11, (iii) of licenses of intellectual property in the ordinary
course of business which (A) would not reasonably be expected to have a
Material Adverse Effect and (B) do not provide for the licensees to pay
royalty payments in the aggregate in excess of $5,000,000 in any Fiscal
Year, or (iv) between
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Subsidiary Guarantors or from a Subsidiary to the Borrower or from the
Borrower to a Subsidiary Guarantor; or
(b) (i) such sale, transfer, lease, contribution or conveyance of
such assets is for fair market value (as determined in good faith by
the Board of Directors of the Borrower), and (ii) the Net Disposition
Proceeds received from such assets, together with the Net Disposition
Proceeds (plus the principal amount of any notes taken as
consideration) of all other assets sold, transferred or leased,
contributed or conveyed pursuant to this clause (b) since the Effective
Date, does not exceed (individually or in the aggregate) $5,000,000 and
in any period of 12 consecutive months does not exceed $2,000,000.
SECTION 7.2.10. Modification of Certain Agreements.
(a) The Borrower will not, and will not permit any of its
Subsidiaries to, consent to any amendment, supplement, amendment and
restatement, waiver or other modification of any of the terms or
provisions contained in, or applicable to, the Recapitalization
Agreement or any schedules, exhibits or agreements related thereto, in
each case which would adversely affect the rights or remedies of the
Lenders, or the Borrower's or any Subsidiary's ability to perform
hereunder or under any Loan Document or which would increase the
purchase price with respect to the Transactions, or, in the case of the
Recapitalization Agreement, which would increase the Borrower's or any
of its Subsidiaries' obligations or liabilities, contingent or
otherwise (other than adjustments to the purchase price made pursuant
to the terms of the Recapitalization Agreement).
(b) The Borrower will not (i) consent to any amendment,
supplement, restatement, waiver or other modification of any of the
terms or provisions contained in, or applicable to, the Subordinated
Notes or the Senior Subordinated Increasing Rate Note Purchase
Agreement, or, when issued, the Senior Subordinated High Yield Notes or
any guarantees delivered in connection with the Subordinated Notes
(including the Subordinated Guaranty relating thereto) or, when issued,
the Senior Subordinated High Yield Notes (collectively, the "Restricted
Agreements"), which either relates to the subordination terms thereof
or which is adverse to the interests of the Lenders, or (ii) make any
payment to obtain any amendment, supplement, restatement, waiver or
other modification of any other terms or provisions contained in, or
applicable to, the Subordinated Notes or the Senior Subordinated
Increasing Rate Note Purchase Agreement, or, when issued, the Senior
Subordinated High Yield Notes other than consent solicitation fee
payments not intended as disguised redemption or purchase payments.
SECTION 7.2.11. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any transaction, arrangement or contract with any of its other
Affiliates (other than any Obligor) unless such transaction, arrangement or
contract is (i) otherwise not prohibited under this Agreement and (ii) upon
terms no less favorable to the Borrower or such Subsidiary than it would obtain
in a comparable arm's length transaction with a Person which is not an
Affiliate, provided that the
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foregoing shall not prevent (a) the payment of amounts (not in excess of
$200,000 per year) due under a management agreement with Miller Milling Company,
as in effect on the Closing Date, (b) the payment of up to $300,000 as
reimbursement for administrative and out-of-pocket expenses incurred by JLL or
Miller Milling Company on or prior to the Closing Date in connection with the
Transactions, (c) payments for the purposes contemplated under clause (m) of
Section 7.2.5 and (d) the sale to Miller Milling Company Limited Partnership of
certain real estate and related transactions set forth in Item 7.2.11 of the
Disclosure Schedule.
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc. The
Borrower will not, and will not permit any of its Subsidiaries to, enter into
any agreement prohibiting
(a) the (i) creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired, or (ii) ability of the Borrower or any other Obligor to amend
or otherwise modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments, directly
or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower,
provided, that the foregoing shall not prohibit (i) any restrictions existing
under the Loan Documents, (ii) in the case of clauses (a)(i) and (b), any
restrictions with respect to a Subsidiary imposed pursuant to an agreement which
has been entered into in connection with the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary pursuant to
a transaction otherwise permitted hereby, (iii) in the case of clause (a),
restrictions in respect of Indebtedness secured by Liens permitted by Section
7.2.3, but only to the extent such restrictions apply to the assets encumbered
thereby, (iv) in the case of clause (a)(i) and (b), restrictions under the
Senior Subordinated Increasing Rate Note Purchase Agreement, the indenture under
which the Exchange Notes are issued or in the Senior Subordinated Note
Indenture, (v) any restrictions existing under any agreement that amends,
refinances or replaces any agreement containing the restrictions referred to in
clause (i), (ii) or (iii) above or (vi) customary non-Assignment provisions in
contracts entered into in the ordinary course of business.
SECTION 7.2.13. Stock of Subsidiaries. The Borrower will not permit any
Subsidiary to issue any Capital Stock (whether for value or otherwise) to any
Person other than the Borrower or another wholly-owned Subsidiary of the
Borrower.
SECTION 7.2.14. Sale and Leaseback. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any agreement or arrangement with
any other Person providing for the leasing by the Borrower or any of its
Subsidiaries of real or personal property which has been or is to be sold or
transferred by the Borrower or any of its Subsidiaries to such other
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Person or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such property or rental obligations of the
Borrower or any of its Subsidiaries.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following events
or occurrences described in this Section 8.1 shall constitute an "Event of
Default".
SECTION 8.1.1. Non-Payment of Obligations. (a) The Borrower shall
default in the payment or prepayment of (i) any Reimbursement Obligation
(including pursuant to Sections 2.6 and 2.6.2) on the applicable Disbursement
Due Date or any deposit of cash for collateral purposes on the date required
pursuant to Section 2.6.4 or (ii) any principal of any Loan when due, or (b) any
Obligor (including the Borrower) shall default (and such default shall continue
unremedied for a period of three Business Days) in the payment when due of any
interest or commitment fee or of any other monetary Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate
(including the Closing Date Certificate) furnished by or on behalf of the
Borrower or any other Obligor to the Administrative Agent, the Issuer or any
Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to Article V)
is or shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower shall default in the due performance and observance of any of its
obligations under Section 7.1.1(d), Section 7.1.9 or Section 7.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any
Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by the Administrative Agent at the
direction of the Required Lenders.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur (i)
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness, other than Indebtedness
described in Section 8.1.1, of the Borrower or any of its Subsidiaries or any
other Obligor having a principal amount, individually or in the aggregate, in
excess of $1,000,000, or (ii) a default shall occur in the performance or
observance of any obligation or condition with respect to such Indebtedness
having a principal amount,
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individually or in the aggregate, in excess of $1,000,000 if the effect of such
default is to accelerate or to permit the holder thereof to accelerate the
maturity of any such Indebtedness.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of $1,000,000 (not covered by insurance from a responsible
insurance company that is not denying its liability with respect thereto) shall
be rendered against the Borrower or any of its Subsidiaries or any other Obligor
and remain unpaid and there shall be any period of 60 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan or Multiemployer Plan (as applicable):
(a) the termination of any Pension Plan if, as a result of such
termination, a Material Adverse Effect has occurred;
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA or
Section 412(n) of the Code in an amount in excess of $1,000,000; or
(c) a withdrawal by the Borrower or any member of the Controlled
Group from a Multiemployer Plan as a result of which a Material Adverse
Effect has occurred.
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of its
Subsidiaries or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in writing
its inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or
any of its Subsidiaries or any other Obligor or any property of any
thereof, or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any of its
Subsidiaries or any other Obligor or for a substantial part of the
property of any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 60 days, provided that
the Borrower, each Subsidiary and each other Obligor hereby expressly
authorizes the Administrative Agent, the Issuer and each Lender to
appear in any court conducting any relevant proceeding during such
60-day period to preserve, protect and defend their rights under the
Loan Documents;
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(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of the Borrower or any of its
Subsidiaries or any other Obligor, and, if any such case or proceeding
is not commenced by the Borrower or such Subsidiary or such other
Obligor, such case or proceeding shall be consented to or acquiesced in
by the Borrower or such Subsidiary or such other Obligor or shall
result in the entry of an order for relief or shall remain for 60 days
undismissed, provided that the Borrower, each Subsidiary and each other
Obligor hereby expressly authorizes the Administrative Agent, the
Issuer and each Lender to appear in any court conducting any such case
or proceeding during such 60-day period to preserve, protect and defend
their rights under the Loan Documents; or
(e) take any action (corporate or otherwise) authorizing, or in
furtherance of, any of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be in full force and effect or cease to be the
legally valid, binding and enforceable obligation of any Obligor party thereto;
the Borrower or any other Obligor shall, directly or indirectly, contest in any
manner the effectiveness, validity, binding nature or enforceability thereof; or
any Lien securing any Obligation shall, in whole or in part, cease to be a
perfected first priority Lien, subject only to those exceptions expressly
permitted by such Loan Document, except to the extent any event referred to
above: (a) results from the failure of the Administrative Agent to maintain
possession of certificates representing securities pledged under any Pledge
Agreement or to file continuation statements under the Uniform Commercial Code
of any applicable jurisdiction or (b) is covered by a lender's title insurance
policy issued by a reputable, creditworthy title insurance company and the
relevant insurer promptly after the occurrence thereof shall have acknowledged
in writing that the same is covered by such title insurance policy.
SECTION 8.1.11. Subordinated Notes and Senior Subordinated High Yield
Notes. The subordination provisions relating to the Subordinated Notes or to the
Senior Subordinated Increasing Rate Note Purchase Agreement or, when issued, the
Senior Subordinated High Yield Notes (the "Subordination Provisions") shall fail
to be enforceable by the Lenders (which have not effectively waived the benefits
thereof) in accordance with the terms thereof, or the principal or interest on
any Loan, any Reimbursement Obligation or other monetary Obligations (including
obligations to pay fees, expenses and indemnity payments) shall fail to
constitute "Designated Senior Indebtedness" or similar term (as defined in the
Subordinated Notes or, when issued, the Senior Subordinated High Yield Notes).
SECTION 8.1.12. Redemption. Any event (other than the issuance of
Senior Subordinated High Yield Notes and the application of the proceeds thereof
in accordance with Section 3.1.1 and the payment of the Subordinated Notes
through the issuance of Exchange Notes (as defined therein)) shall occur which,
under the terms of any agreement or indenture relating to the
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Subordinated Notes or the Senior Subordinated High Yield Notes shall require the
Borrower or any of its Subsidiaries to purchase, redeem or otherwise acquire or
offer to purchase, redeem or otherwise acquire all or any portion of the
principal amount thereof; or the Borrower or any of its Subsidiaries shall for
any other reason purchase, redeem or otherwise acquire or offer to purchase,
redeem or otherwise acquire, or make any other payments in respect of the
principal amount of the Subordinated Notes or the Senior Subordinated High Yield
Notes.
SECTION 8.2. Action if Bankruptcy, etc. If any Event of Default
described in clauses (a) through (d) of Section 8.1.9 shall occur with respect
to the Borrower, the Commitments (if not theretofore terminated) shall
automatically terminate and the outstanding principal amount of all outstanding
Loans and all other Obligations shall automatically be and become immediately
due and payable, without notice or demand.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in clauses (a) through (d) of Section
8.1.9 with respect to the Borrower) shall occur for any reason, whether
voluntary or involuntary, and be continuing, the Administrative Agent, upon the
direction of the Required Lenders, shall by notice to the Borrower declare all
or any portion of the outstanding principal amount of the Loans and other
Obligations to be due and payable and/or declare the Commitments (if not
theretofore terminated) to be terminated, whereupon the full unpaid amount of
such Loans and other Obligations which shall be so declared due and payable
shall be and become immediately due and payable, without further notice, demand
or presentment and/or the Commitments shall terminate.
ARTICLE IX
THE AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints Scotiabank as its
Administrative Agent and authorizes the Administrative Agent, subject to the
Borrower's consent, to appoint from time to time on behalf of all Lenders one or
more Co-Agents under and for purposes of each Loan Document. Each Lender
authorizes the Administrative Agent to act on behalf of such Lender under this
Agreement, the Notes and each other Loan Document and, in the absence of other
written instructions from the Required Lenders received from time to time by the
Administrative Agent (with respect to which the Administrative Agent agrees that
it will comply, except as otherwise provided in this Section or as otherwise
advised by counsel), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Administrative Agent by the terms
hereof and thereof, together with such powers as may be reasonably incidental
thereto. Each Lender hereby indemnifies (which indemnity shall survive any
termination of this Agreement) the Administrative Agent and the Syndication
Agent, ratably in accordance with their respective Term Loans outstanding and
Commitments (or, if no Term Loans or Commitments are at the time outstanding and
in effect, then ratably in accordance with the principal amount of Term Loans
held by such Lender, and their respective Commitments as in effect in each case
on the date of the termination of this Agreement), from and against any
and
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all liabilities, obligations, losses, damages, claims, costs or expenses of any
kind or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, the Administrative Agent or the Syndication Agent in any way
relating to or arising out of this Agreement, the Notes and any other Loan
Document, including reasonable attorneys' fees, and as to which the
Administrative Agent or the Syndication Agent are not reimbursed by the Borrower
or any other Obligor (and without limiting the obligation of the Borrower or any
other Obligor to do so); provided, however, that no Lender shall be liable for
the payment of any portion of such liabilities, obligations, losses, damages,
claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted from the Administrative
Agent's or Syndication Agent's gross negligence or willful misconduct. The
Administrative Agent and Syndication Agent shall not be required to take any
action hereunder, under the Notes or under any other Loan Document, or to
prosecute or defend any suit in respect of this Agreement, the Notes or any
other Loan Document, unless it is indemnified hereunder to its satisfaction. If
any indemnity in favor of the Administrative Agent or the Syndication Agent
shall be or become, in the Administrative Agent's determination, inadequate, the
Administrative Agent and Syndication Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given. The Syndication Agent shall
not have any duties hereunder. The Syndication Agent shall not have any
liability to any Person arising out of its acting as, or being designated as,
Syndication Agent.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York time, on the day prior to a Borrowing that such Lender will
not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent and,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have made such amount
available to the Administrative Agent, such Lender severally agrees and the
Borrower agrees to repay the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
the Administrative Agent made such amount available to the Borrower to the date
such amount is repaid to the Administrative Agent, at the interest rate
applicable at the time to Loans comprising such Borrowing.
SECTION 9.3. Exculpation. Neither the Administrative Agent or any
Co-Agent nor any of their respective directors, officers, employees or agents
shall be liable to any Lender for any action taken or omitted to be taken by it
under this Agreement or any other Loan Document, or in connection herewith or
therewith, except for its own willful misconduct or gross negligence, nor
responsible for any recitals or warranties herein or therein, nor for the
effectiveness, enforceability, validity or due execution of this Agreement or
any other Loan Document, nor for the creation, perfection or priority of any
Liens purported to be created by any of the Loan Documents, or the validity,
genuineness, enforceability, existence, value or sufficiency of any collateral
security, nor to make any inquiry respecting the performance by the Borrower of
its obligations hereunder or under any other Loan Document. Any such inquiry
which may be made by any Agent shall not obligate it to make any further inquiry
or to take any action. The
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Administrative Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which the Administrative Agent believes to be genuine and to have been presented
by a proper Person.
SECTION 9.4. Successor. Any Co-Agent may resign as such upon one
Business Day's notice to the Borrower and the Administrative Agent. The
Syndication Agent may resign at any time upon one Business Day's notice to the
Borrower and the Administrative Agent. The Administrative Agent may resign as
such at any time upon at least 30 days' prior notice to the Borrower and all
Lenders. If the Administrative Agent at any time shall resign, the Required
Lenders may, with the prior consent of the Borrower (which consent shall not be
unreasonably withheld), appoint another Lender as a successor Administrative
Agent which shall thereupon become the Administrative Agent hereunder. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any state thereof) or a
U.S. branch or agency of a commercial banking institution, and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall be entitled to receive from the
retiring Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations under this Agreement. After any
retiring Administrative Agent's resignation hereunder as the Administrative
Agent, the provisions of
(a) this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Administrative
Agent under this Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to inure to its
benefit.
SECTION 9.5. Credit Extensions by each Agent. Each Agent shall have the
same rights and powers with respect to (x) the Credit Extensions made by it or
any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as
any other Lender and may exercise the same as if it were not an Agent. Each
Agent and its respective Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary or
Affiliate of the Borrower as if such Agent were not an Agent hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of each Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Lender
has deemed appropriate, made its own credit decision to extend its Commitments.
Each Lender also acknowledges that it will, independently of each
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Agent and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan
Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
received for its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement.
SECTION 9.8. The Co-Agents. Notwithstanding anything else to the
contrary contained in this Agreement or any other Loan Document, none of the
Co-Agents, in such capacity, shall have any rights, duties or responsibilities
under this Agreement or any other Loan Document, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against any of such Co-Agent in such capacity.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however, no
such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders shall be effective
unless consented to by each Lender;
(b) modify this Section 10.1, or clause (a) of Section 10.10,
change the definition of "Required Lenders, increase any Commitment
Amount or the Percentage of any Lender, reduce any fees described in
Article III, release any Subsidiary Guarantor (except in connection
with any sale of the Capital Stock of such Subsidiary Guarantor in a
transaction permitted by the Loan Documents) from its obligations under
the Subsidiary Guaranty or all or substantially all of collateral
security (except in each case as otherwise specifically provided in a
Loan Document), change the application of proceeds from the sale of
collateral pursuant to the Loan Documents or extend any Commitment
Termination Date shall be made without the consent of each Lender
adversely affected thereby;
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(c) extend the due date for, or reduce the amount of, any
scheduled repayment or any prepayment of principal of or interest on or
fees payable in respect of any Loan (or reduce the principal amount of
or rate of interest on or fees payable in respect of any Loan) or any
Reimbursement Obligation (which shall in each case include the
conversion of all or any part of the Obligations into equity of any
Obligor) shall be made without the consent of the holder of the Note
evidencing such Loan, or, in the case of a Reimbursement Obligation,
the Issuer owed, and those Lenders participating in, such Reimbursement
Obligation;
(d) affect adversely the interests, rights or obligations of the
Administrative Agent (in its capacity as Administrative Agent), the
Issuer (in its capacity as Issuer), or the Swing Line Lender (in its
capacity as Swing Line Lender) unless consented to by the
Administrative Agent, the Issuer or the Swing Line Lender, as the case
may be; or
(e) have the effect (either immediately or at some later time) of
enabling the Borrower to satisfy a condition precedent to the making of
a Revolving Loan or the issuance of a Letter of Credit without the
consent of Lenders holding at least 51% of the aggregate outstanding
principal amount of the Revolving Loans or, if no Revolving Loans are
outstanding, at least 51% of the Revolving Loan Commitments.
No failure or delay on the part of the Administrative Agent, any Lender, the
Issuer or the holder of any Note in exercising any power or right under this
Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Borrower in any case shall entitle it to any
notice or demand in similar or other circumstances. No waiver or approval by the
Administrative Agent, the Issuer, any Lender or the holder of any Note under
this Agreement or any other Loan Document shall, except as may be otherwise
stated in such waiver or approval, be applicable to subsequent transactions. No
waiver or approval hereunder shall require any similar or dissimilar waiver or
approval thereafter to be granted hereunder.
SECTION 10.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth on Schedule III hereto or set forth in
the Lender Assignment Agreement or at such other address or facsimile number as
may be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid or if properly addressed and
sent by pre-paid courier service, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when transmitted
(telephonic confirmation in the case of facsimile).
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay
on demand all reasonable expenses of the Administrative Agent (including the
reasonable fees and out-of-pocket expenses of one firm of counsel to the
Administrative Agent and of local or special
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expert counsel, if any, who may be retained by counsel to the Administrative
Agent) and the Syndication Agent (excluding fees and expenses of counsel) in
connection with
(a) the syndication of the Loans, the negotiation, preparation,
execution and delivery of this Agreement and of each other Loan
Document, including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to this Agreement
or any other Loan Document as may from time to time hereafter be
required, whether or not the transactions contemplated hereby are
consummated;
(b) the filing, recording, refiling or rerecording of each
Mortgage, each Pledge Agreement and each Security Agreement and/or any
Uniform Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to any thereof and any and
all other documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms hereof or of
such Mortgage, Pledge Agreement or Security Agreement; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Administrative Agent, the
Syndication Agent, the Issuer and the Lenders harmless from all liability for,
any stamp or other similar taxes which may be payable in connection with the
execution or delivery of this Agreement, the Credit Extensions made hereunder,
or the issuance of the Notes and Letters of Credit or any other Loan Documents.
The Borrower also agrees to reimburse the Administrative Agent and each Lender
upon demand for all reasonable out-of-pocket expenses (including attorneys' fees
and legal expenses) incurred by the Administrative Agent, the Issuer or such
Lender in connection with (x) the negotiation of any restructuring or
"work-out", whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Administrative Agent,
the Syndication Agent, the Issuer and each Lender and each of their respective
Affiliates, and each of their respective partners, officers, directors,
investment advisors, employees and agents, and each other Person controlling any
of the foregoing within the meaning of either Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (collectively,
the "Indemnified Parties"), free and harmless from and against any and all
actions, causes of action, suits, losses, costs, liabilities and damages, and
expenses actually incurred in connection therewith (irrespective of whether any
such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
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(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit
Extension;
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties (including any
action brought by or on behalf of the Borrower as the result of any
determination by the Required Lenders pursuant to Article V not to make
any Credit Extension);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not the Administrative Agent, the Syndication Agent,
the Issuer or such Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the Borrower's or any of its Subsidiaries' compliance with or liability
under Environmental Law or the Release by the Borrower or any of its
Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material present on or under such property in a manner
giving rise to liability at or prior to the time the Borrower or such
Subsidiary owned or operated such property (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by,
or within the control of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party which are determined by a court of competent
jurisdiction in a final proceeding to have resulted from the relevant
Indemnified Party's gross negligence or willful misconduct. The Borrower and its
permitted successors and assigns hereby waive, release and agree not to make any
claim, or bring any cost recovery action against, the Administrative Agent, the
Syndication Agent, the Issuer or any Lender or other Indemnified Party under
CERCLA or any state equivalent, or any similar law now existing or hereafter
enacted, except to the extent arising out of the gross negligence or willful
misconduct of such Indemnified Party. It is expressly understood and agreed that
to the extent that any of such Persons is strictly liable under any
Environmental Laws, the Borrower's obligation to such Persons under this
indemnity shall likewise be without regard to fault on the part of the Borrower
with respect to the violation or condition which results in liability of such
Person. If and to the extent that the foregoing undertaking may be unenforceable
for any reason, the Borrower hereby agrees to make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
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SECTION 10.5. Survival. The obligations of the Borrower and the
Administrative Agent, if any, under Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4,
and the obligations of the Lenders under Sections 4.8 and 9.1, shall in each
case survive any termination of this Agreement, the payment in full of all
Obligations, the termination or expiration of all Letters of Credit and the
termination of all Commitments. The representations and warranties made by the
Borrower and each other Obligor in this Agreement and in each other Loan
Document shall survive the execution and delivery of this Agreement and each
such other Loan Document.
SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be executed by the Borrower, the Issuer and the Administrative Agent
and be deemed to be an original and all of which shall constitute together but
one and the same agreement. This Agreement shall become effective when
counterparts hereof executed on behalf of the Borrower, the Issuer and each
Lender (or notice thereof satisfactory to the Administrative Agent) shall have
been received by the Administrative Agent and notice thereof shall have been
given by the Administrative Agent, the Issuer and the Borrower and each Lender.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the
Notes and the other Loan Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 10.11.
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SECTION 10.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, and sell participations in, its Loans
and Commitments to one or more other Persons, on a non pro rata basis, in
accordance with this Section 10.11.
SECTION 10.11.1. Assignments. Any Lender,
(a) with the written consent of the Administrative Agent (which
consent shall not be unreasonably withheld or delayed) and the Borrower
(which consent shall not be unreasonably delayed or withheld and (i) if
it relates to an assignment of Revolving Loans or Revolving Loan
Commitments to an Approved Fund or an Affiliate of a Lender, shall be
given so long as the Assignee is creditworthy in the reasonable
determination of the Borrower and (ii) shall not be required if a
Default or an Event of Default shall have occurred and be continuing)
may at any time assign and delegate to one or more commercial banks or
other financial institutions or funds or other investment vehicles that
invest in bank loans, and
(b) with notice to the Borrower and the Administrative Agent, but
without the consent of either the Borrower or the Administrative Agent,
may assign and delegate to any other Lender or, solely in the case of
Term Loans, any Approved Fund or any Affiliate of a Lender
(each Person described in either of the foregoing clauses as being the
Person to whom such assignment and delegation is to be made, being
hereinafter referred to as an "Assignee Lender"), all or any fraction
of such Lender's total Loans, participations in Letters of Credit and
Letter of Credit Outstandings with respect thereto and Commitments
(which assignment and delegation shall be, as among Revolving Loan
Commitments, Revolving Loans, participations in Letters of Credit and
Swing Line Loans and Term-A Loans, of a constant, and not a varying,
percentage) in a minimum aggregate amount of $1,000,000 (if such
assignment and delegation is to a then existing Lender or an Approved
Fund or any Affiliate of a Lender) and (ii) $5,000,000 (if such
assignment and delegation is to a Person not then a Lender, an Approved
Fund or an Affiliate of a Lender) or the then remaining amount of a
Lender's Loans and Commitments; provided, however, that any such
Assignee Lender will comply, if applicable, with the provisions
contained in Section 4.6 and the Borrower, each other Obligor and the
Administrative Agent shall be entitled to continue to deal solely and
directly with such Lender in connection with the interests so assigned
and delegated to an Assignee Lender until
(c) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Borrower
and the Administrative Agent by such Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to the
Borrower and the Administrative Agent a Lender Assignment Agreement,
and, if required as
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hereinabove provided, such Lender Assignment Agreement shall have been
accepted by the Administrative Agent and the Borrower; and
(e) the processing fees described below shall have been paid.
From and after the date that the Administrative Agent receives and, if
applicable the Administrative Agent and the Borrower accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within ten Business Days after its receipt of notice that the
Administrative Agent has received an executed Lender Assignment Agreement (and
if required, the Borrower has consented to the assignment contained therein),
the Borrower shall, if requested by the Assignee Lender or the Administrative
Agent, execute and deliver to the Administrative Agent (for delivery to the
relevant Assignee Lender) new Notes evidencing such Assignee Lender's assigned
Loans and Commitments and, if the assignor Lender has retained Loans and
Commitments hereunder, replacement Notes in the principal amount of the Loans
and Commitments retained by the assignor Lender hereunder (such Notes to be in
exchange for, but not in payment of, those Notes then held by such assignor
Lender). Each such Note shall be dated the date of the predecessor Notes. The
assignor Lender shall mark the predecessor Notes "exchanged" and deliver them to
the Borrower. Accrued interest on that part of the predecessor Notes evidenced
by the new Notes, and accrued fees, shall be paid as provided in the Lender
Assignment Agreement. Accrued interest on that part of the predecessor Notes
evidenced by the replacement Notes shall be paid to the assignor Lender. Accrued
interest and accrued fees shall be paid at the same time or times provided in
the predecessor Notes and in this Agreement. Such assignor Lender or such
Assignee Lender must also pay a processing fee to the Administrative Agent upon
delivery of any Lender Assignment Agreement in the amount of $3,500, unless such
assignment and delegation is by a Lender to its Affiliate or if such assignment
and delegation is by a Lender to the Federal Reserve Bank, as provided below.
Any attempted assignment and delegation not made in accordance with this Section
10.11.1 shall be null and void. Notwithstanding any other term of this Section
10.11.1, the agreement of the Swing Line Lender to provide the Swing Line Loan
Commitment shall not impair or otherwise restrict in any manner the ability of
the Swing Line Lender to make any assignment of its Loans or Commitments, it
being understood and agreed that the Swing Line Lender may terminate its Swing
Line Loan Commitment, to the extent such Swing Line Commitment would exceed its
Revolving Loan Commitment after giving effect to such assignment, in connection
with the making of any assignment. Nothing contained in this Section 10.11.1
shall prevent or prohibit (i) any Lender from creating a security interest in or
pledging all or any portion of its rights under and interest in this Agreement
and the Notes held by it in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System or U.S.
Treasury Regulation 31 C.F.R. Section 203.14, and such Federal Reserve Bank may
enforce such
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pledge or security interest in any manner permitted under applicable law, and
(ii) any Lender that is a fund or other investment vehicle that invests in bank
loans may, without the consent of the Administrative Agent or the Borrower,
pledge all or any part of its rights under and interest in this Agreement, the
other Loan Documents and the Notes to any trustee or to any other representative
of holders of obligations owed or securities issued by such fund or other
investment vehicle as security for such obligations or securities; provided that
any transfer to any Person upon the enforcement of such pledge or security
interest may only be made subject to this Section 10.11.1.
SECTION 10.11.2. Participations. Any Lender may at any time sell to one
or more commercial banks or other Persons (each of such commercial banks and
other Persons being herein called a "Participant") participating interests in
any of the Loans, Commitments, or other interests of such Lender hereunder;
provided, however, that
(a) no participation contemplated in this Section shall relieve
such Lender from its Commitments or its other obligations hereunder or
under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Administrative
Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and each of the other Loan Documents;
(d) no Participant shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other
Loan Document, except that such Lender may agree with any Participant
that such Lender will not, without such Participant's consent, agree to
(i) any reduction in the interest rate or amount of fees that such
Participant is otherwise entitled to, (ii) a decrease in the principal
amount, or an extension of the final Stated Maturity Date, of any Loan
or Reimbursement Obligation in which such Participant has purchased a
participating interest or (iii) a release of all or substantially all
of the collateral security under the Loan Documents or all or
substantially all of the Subsidiary Guarantors under the Subsidiary
Guaranty, in each case except as otherwise specifically provided in a
Loan Document; and
(e) Any amount payable under Sections 4.3, 4.4, 4.5, 4.6, 10.3 and
10.4 shall be determined as if no participating interest had been sold.
SECTION 10.12. Other Transactions. Nothing contained herein shall
preclude the Administrative Agent, the Syndication Agent, the Issuer or any
other Lender from engaging in any transaction, in addition to those contemplated
by this Agreement or any other Loan Document, with the Borrower or any of its
Affiliates in which the Borrower or such Affiliate is not restricted hereby from
engaging with any other Person.
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SECTION 10.13. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY AGENT, THE
LENDERS OR THE BORROWER MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE
OF NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK. THE BORROWER AND EACH LENDER HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK, NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MY HAVE OR HEREAFTER MAY
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION 10.14. Waiver of Jury Trial. EACH AGENT, THE ISSUER, THE
LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY AGENT, THE ISSUER, THE LENDERS OR
THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE AGENTS, THE ISSUER, THE LENDERS ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 10.15. Confidentiality. The Lenders shall hold all non-public
information obtained pursuant to or in connection with this Agreement or
obtained by such Lender based on a review of the books and records of the
Borrower or any of its Subsidiaries in accordance with their customary
procedures for handling confidential information of this nature, but each Lender
may make disclosure to the National Association of Insurance Commissioners, any
of its
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regulators or examiners, its and its Affiliates' directors, officers, employees
and agent, outside auditors, counsel and other professional advisors in
connection with this Agreement or as reasonably required by any potential bona
fide transferee, participant (including, with the consent of the Borrower, by
virtue of a total return swap) or assignee, or in connection with the exercise
of remedies under a Loan Document, or as requested by any governmental or
administrative agency or representative thereof or pursuant to any litigation or
legal process; provided, however, that
(a) prior to any such disclosure pursuant to this Section 10.15,
each Lender shall require any such bona fide transferee, participant
and assignee receiving a disclosure of non-public information to agree:
(i) to be bound by this Section 10.15; and
(ii) to require such Person to require any other Person to
whom such Person discloses such non-public information to be
similarly bound by this Section 10.15; and
(b) except as may be required by an order of a court of competent
jurisdiction and to the extent set forth therein, no Lender shall be
obligated or required to return any materials furnished by the Borrower
or any Subsidiary.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
NEW WORLD PASTA COMPANY
By: /s/ James Bohenick
------------------------------------------
Name: James Bohenick
Title: Chief Financial Officer
Address: 100 Crystal A Drive
Hershey, P.A. 17033
Telephone No.: 717 534-6720
Telecopy No.: 717 534-5504
Attention: Mr. James Bohenick
THE BANK OF NOVA SCOTIA,
as Lead Arranger, Administrative Agent
and Letter of Credit Issuer
By:/s/ Robert Gaviglio
------------------------------------------
Name: Robert Gaviglio
Title: Senior Relationship Manager
Address: One Liberty Plaza
New York, New York 10006
Telephone No.: 212 225-5054
Telecopy No.: 212 225-5172
Attention: Mr. Robert Gaviglio
Telephone No.: 212 225-5010
Telecopy No.: 212 225-5090
Attention: Mr. Phil Adsetts
[CREDIT AGREEMENT]
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LENDERS
THE BANK OF NOVA SCOTIA
By: /s/ Robert Gaviglio
------------------------------------------
Name: Robert Gaviglio
Title: Senior Relationship Manager
MORGAN STANLEY SENIOR FUNDING, INC.
By: /s/ Henry F. D'Alessandro
------------------------------------------
Name: Henry F. D'Alessandro
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Walter C. Parelli
------------------------------------------
Name: Walter C. Parelli
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ David Bouhl
------------------------------------------
Name: David Bouhl
Title: Head of Corporate Banking
Chicago
By: /s/ Katherine L. Abbott
------------------------------------------
Name: Katherine L. Abbott
Title: First Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Kevin S. Murray
------------------------------------------
Name: Kevin S. Murray
Title: First Vice President
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GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Murray Stegelmann
------------------------------------------
Name: Murray Stegelmann
Title: Authorized Signatory
HARRIS TRUST AND SAVINGS BANK
By: /s/ Karen L. Knudsen
------------------------------------------
Name: Karen L. Knudsen
Title: Vice President
KEY CORPORATE CAPITAL INC.
By: /s/ Michael D. Carroll
------------------------------------------
Name: Michael D. Carroll
Title: Vice President
NATIONSBANK, NA
By: /s/ Joseph R. Siman, Jr.
------------------------------------------
Name: Joseph R. Siman, Jr.
Title: Managing Director
WELLS FARGO BANK, N.A.
By: /s/ David A. Neumann
------------------------------------------
Name: David A. Neumann
Title: Vice President
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ALLSTATE LIFE INSURANCE
COMPANY
By: /s/ Charles D. Mires
------------------------------------------
Name: Charles D. Mires
Title: Authorized Signatories
By: /s/ Ronald A. Mendel
------------------------------------------
Name: Ronald A. Mendel
Title: Authorized Signatories
its Authorized Signatories
OSPREY INVESTMENTS PORTFOLIO
By: /s/ Steven Kaufman
------------------------------------------
Name: Steven Kaufman
Title: Vice President
KZH CypressTree - 1 LLC
By: /s/ Dennis Kidea
------------------------------------------
Name: Dennis Kidea
Title: Authorized Agent
CypressTree Investment Fund, LLC
By: CypressTree Investment
Management Company, Inc.
its Managing Member
By: /s/ Timothy M. Barns
------------------------------------------
Name: Timothy M. Barns
Title: Managing Director
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North American Senior Floating Rate Fund
By: CypressTree Investment
Management Company, Inc.
as Portfolio Manager
By: /s/ Timothy M. Barns
------------------------------------------
Name: Timothy M. Barns
Title: Managing Director
TORONTO DOMINION (NEW YORK), INC.
By: /s/ Jorge A. Garcia
------------------------------------------
Name: Jorge A. Garcia
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Mark Pelletier
------------------------------------------
Name: Mark Pelletier
Title: Vice President
FOOTHILL INCOME TRUST, L.P.
By: FIT-GP, LLC
its Managing General Partner
By: /s/ Jeff Nikora
------------------------------------------
Name: Jeff Nikora
Title: Managing Member
FRANKLIN FLOATING RATE TRUST
By: /s/ Chauncey Lufkin
------------------------------------------
Name: Chauncey Lufkin
Title: Vice President
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<PAGE> 120
KZH WATERSIDE LLC
By: /s/ Virginia Conway
------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
FLOATING RATE PORTFOLIO
By: INVESCO SENIOR SECURED
MANAGEMENT, INC.
By: /s/ Anne M. McCarthy
------------------------------------------
Name: Ann M. McCarthy
Title: Authorized Signatory
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ John B. Wheeler
------------------------------------------
Name: John B. Wheeler
Title: Managing Director
THE MAINSTAY FUNDS, ON BEHALF OF ITS HIGH
YIELD CORPORATE BOND FUND SERIES
By: MacKay-Shields Financial Corporation
its Investment Advisor
By: /s/ Jeffry B. Platt
------------------------------------------
Name: Jeffry B. Platt
Title: Director
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<PAGE> 121
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ George D. Pelose
------------------------------------------
Name: George D. Pelose
Title: Authorized Signatory
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ James R. Dingler
------------------------------------------
Name: James R. Dingler
Title: Director
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar,
its General Partner
By: Oak Hill Securities MGP, Inc.
its General Partner
By: /s/ Scott D. Krase
------------------------------------------
Name: Scott D. Krase
Title: Vice President
OCTAGON LOAN TRUST
By: OCTAGON CREDIT INVESTORS,
as Manager
By: /s/ Richard W. Stewart
------------------------------------------
Name: Richard W. Stewart
Title: Managing Director
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<PAGE> 122
PILGRIM PRIME RATE TRUST
By: PILGRIM INVESTMENTS, INC. as
its Investment Manager
By: /s/ Michel Prince
------------------------------------------
Name: Michael Prince, CFA
Title: Vice President
PPM AMERICA, INC., as attorney in fact, on
behalf of Jackson National Life Insurance
Company
By: /s/ Michael DiRe
------------------------------------------
Name: Michael DiRe
Title: Managing Director
KZH STERLING LLC
By: /s/ Virginia Conway
------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH SOLEIL - 2 LLC
By: /s/ Virginia Conway
------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
CRESCENT/MACH I PARTNERS, L.P.
By: /s/ Justin L. Driscoll
------------------------------------------
Name: Justin L. Driscoll
Title: Senior Vice President
115
<PAGE> 123
TRANSAMERICA LIFE INSURANCE AND ANNUITY
COMPANY
By: /s/ John M. Casparian
------------------------------------------
Name: John M. Casparian
Title: Investment Officer
TRAVELERS CORPORATE LOAN FUND INC.
By: /s/ Teresa M. Torrey
------------------------------------------
Name: Teresa M. Torrey
Title: Second Vice President
THE TRAVELERS INSURANCE COMPANY
By: /s/ Teresa M. Torrey
------------------------------------------
Name: Teresa M. Torrey
Title: Second Vice President
116
<PAGE> 1
EXHIBIT 10.3
BORROWER SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Security Agreement"), dated as
of January 28, 1999, is made by NEW WORLD PASTA COMPANY, a Delaware corporation
(the "Grantor"), in favor of THE BANK OF NOVA SCOTIA, as lead arranger and
administrative agent (together with any successor(s) thereto in such capacity,
the "Administrative Agent") for each of the Lender Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January
28, 1999 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Credit Agreement"), among New World Pasta Company, the
various financial institutions as are, or may from time to time become, parties
thereto (the "Lenders"), Morgan Stanley Senior Funding, Inc., as Syndication
Agent, the Co-Agents named therein and the Administrative Agent, the Lenders and
the Issuer have extended Commitments to make Credit Extensions to the Grantor;
WHEREAS, as a condition precedent to the making of each Credit
Extension (including the initial Credit Extension) under the Credit Agreement,
the Grantor is required to execute and deliver this Security Agreement; and
WHEREAS, the Grantor has duly authorized the execution,
delivery and performance of this Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in order to induce
the Lenders and the Issuer to make each Credit Extension (including the initial
Credit Extension) to the Grantor pursuant to the Credit Agreement, the Grantor
agrees with the Administrative Agent, for the benefit of each Lender Party, as
follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Collateral Account" is defined in Section 4.1.2(c).
"Copyright Collateral" means:
(a) all United States copyrights (including without
limitation copyrights for mask works) owned by the Grantor in the Grantor's name
as such may be changed from time to time, whether statutory or common law,
registered or unregistered, including without limitation, all of the Grantor's
right, title and interest in and to all common law copyrights and copyrights
registered in the United States Copyright Office and also including, without
limitation, the copyrights referred to in Item A of Schedule IV attached hereto,
and all applications for registration and renewals thereof (all of the foregoing
items in this clause (a) being collectively called a "Copyright");
(b) all United States written Copyright licenses and
other agreements providing the Grantor with the right to use any of the items of
the type referred to in clause (a) (other than software licenses from third
parties), including each Copyright license referred to in Item B of Schedule IV
attached hereto, if any, subject, in each case, to the terms of such license
agreements; and
(c) all proceeds of, and rights of the Grantor
associated with the foregoing (including license royalties and proceeds of
infringement suits), the right to sue third parties for past, present or future
infringements of any registered Copyright described in clause (a), including any
registered Copyright application referred to in Item A of Schedule IV attached
hereto, and for breach or enforcement of any Copyright license, including any
Copyright license referred to in Item B of
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Schedule IV attached hereto, subject, in each case, to the terms of such license
agreements.
"Credit Agreement" is defined in the first recital.
"Deposit Accounts" means any and all demand, time, savings,
passbook or other accounts with a bank or other financial institution, including
general deposit and cash concentration accounts, in which any cash, payments or
receipts of or for the benefit of the Grantor are or are to be deposited, and
all deposits therein and investments thereof, whether now or at any time
hereafter existing.
"Equipment" is defined in clause (a) of Section 2.1.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the
Copyright Collateral, the Patent Collateral, the Trademark Collateral and the
Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1.
"Lender Party" means, as the context may require, each Lender,
the Issuer, each Co-Agent and the Administrative Agent and each of its
respective successors, permitted transferees and assigns.
"Lenders" is defined in the first recital.
"Patent Collateral" means:
(a) all United States letters patent and applications
for letters patent owned by the Grantor in the Grantor's name as such may be
changed from time to time, including each patent and patent application referred
to in Item A of Schedule II attached hereto (all of the foregoing items in this
clause (a) being collectively called a "Patent");
(b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of the
items described in clause (a);
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(c) all United States written Patent licenses and
other agreements of the Grantor providing the Grantor with the right to use any
of the items of the type referred to in clauses (a) and (b), including each
Patent license referred to in Item B of Schedule II attached hereto subject, in
each case, to the terms of such license agreements; and
(d) all proceeds of, and rights of the Grantor
associated with the foregoing (including license royalties and proceeds of
infringement suits), the right to sue third parties for past, present or future
infringements of any registered Patent described in clause (a), including any
registered Patent referred to in Item A of Schedule II attached hereto, and for
breach or enforcement of any Patent license, including any Patent license
referred to in Item B of Schedule II attached hereto, subject, in each case, to
the terms of such license agreements.
"Rate Protection Agreement" means a Hedging Obligation entered
into between the Borrower or any of its Subsidiaries and a Lender or an
Affiliate of a Lender.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all United States trademarks, trade names, trade dress,
service marks, logos, other source of business identifiers, and designs owned by
the Grantor in the Grantor's name as such may be changed from time to time (all
of the foregoing items in this clause (a) being collectively called a
"Trademark"), now existing in the United States or hereafter adopted or acquired
in the United States, and all registrations and renewals thereof and all
applications in connection therewith, including registrations, renewals and
applications in the United States Patent and Trademark Office, including those
referred to in Item A of Schedule III attached hereto, provided, however, that
Trademark Collateral shall not include "intent to use" applications for
trademark or service mark registrations filed in the United States Patent and
Trademark Office pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. Section
1051, unless and until an Amendment to Allege Use or a Statement of Use under
Section 1(c) or 1(d) of said Act has been filed;
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(b) all United States written Trademark licenses and
other agreements of the Grantor providing the Grantor with the right to use any
items of the type described in clause (a), including each Trademark license
referred to in Item B of Schedule III attached hereto, subject, in each case, to
the terms of such license agreements;
(c) all of the goodwill of the business connected
with the use of, and symbolized by, the items described in clause (a); and
(d) all proceeds of, and rights of the Grantor
associated with the foregoing (including license royalties and proceeds of
infringement suits), the right to sue third parties for past, present or future
infringement or dilution of any Trademark or Trademark registration referred to
in Item A of Schedule III attached hereto, or for any injury to the goodwill
associated with the use of any such Trademark and for breach or enforcement of
any Trademark license, including any Trademark license referred to in Item B of
Schedule III attached hereto, subject, in each case, to the terms of such
license agreements.
"Trade Secrets Collateral" means all United States common law
and statutory trade secrets and all other confidential or proprietary
information and know-how owned by the Grantor in the Grantor's name as such may
be changed from time to time (to the extent such confidential, proprietary or
useful information or know-how is protected by the Grantor against disclosure
and is not readily ascertainable) (all of the foregoing being collectively
called a "Trade Secret"), whether or not such Trade Secret has been reduced to a
writing or other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all United States
written Trade Secret licenses or other agreements of the Grantor, including each
Trade Secret license referred to in Schedule V attached hereto, subject, in each
case, to the terms of such license agreements; and including the right to sue
and to enjoin and to collect damages for the actual misappropriation of any
Trade Secret and for the breach or enforcement of any such Trade Secret license,
subject, in each case, to the terms of such license agreements.
"U.C.C." means the Uniform Commercial Code, as in effect in
the State of New York.
SECTION 1.2 Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
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SECTION 1.3 U.C.C. Definitions. Unless otherwise defined
herein or the context otherwise requires, terms for which meanings are provided
in the U.C.C. are used in this Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1 Grant of Security. The Grantor hereby pledges to
the Administrative Agent for its benefit and the ratable benefit of each of the
Lender Parties, and hereby grants to the Administrative Agent for its benefit
and the ratable benefit of each of the Lender Parties a security interest in,
all of the Grantor's right, title and interest in and to all of the following,
whether now or hereafter existing or acquired by the Grantor (the "Collateral"):
(a) all equipment in all of its forms of the Grantor,
wherever located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor
(any and all of the foregoing being the "Equipment");
(b) all inventory in all of its forms of the Grantor,
wherever located, including
(i) all raw materials and work in process
therefor, finished goods thereof, and materials used or consumed in
the manufacture or production thereof,
(ii) all goods in which the Grantor has an
interest in mass or a joint or other interest or right of any kind
(including goods in which the Grantor has an interest or right as
consignee), and
(iii) all goods which are returned to or
repossessed by the Grantor,
and all accessions thereto, products thereof and documents therefor (any and all
such inventory, materials, goods, accessions, products and documents being the
"Inventory");
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(c) all accounts, contracts, contract rights, chattel paper,
documents, and general intangibles, rental agreements, or any part thereof
including, but not limited to Grantor's right to receive, either directly or
indirectly, from any person, any rents or other payments due and payable under
such agreements) of the Grantor, whether or not arising out of or in connection
with the sale or lease of goods or the rendering of services, and all rights of
the Grantor now or hereafter existing in and to all security agreements,
guaranties, leases and other contracts securing or otherwise relating to any
such accounts, contracts, contract rights, chattel paper, documents,
instruments, and general intangibles (any and all such accounts, contracts,
contract rights, chattel paper, documents, instruments, and general intangibles
being the "Receivables", and any and all such security agreements, guaranties,
leases and other contracts being the "Related Contracts");
(d) all Intellectual Property Collateral of the
Grantor and all Investment Property;
(e) all books and records relating to, used or useful
in connection with, evidencing, embodying, incorporating or referring to, any of
the foregoing in this Section 2.1;
(f) all of the Grantor's other personal property and
rights of every kind and description and interests therein (including all
Deposit Accounts); and
(g) all products, rents, issues, profits, returns,
income and proceeds of and from any and all of the foregoing Collateral
(including proceeds which constitute property of the types described in clauses
(a), (b), (c), (d), (e) and (f)), proceeds deposited from time to time in the
Collateral Account and in any lock boxes of the Grantor, and, to the extent not
otherwise included, all payments under insurance (whether or not the
Administrative Agent is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral).
Notwithstanding anything herein to the contrary, the
Collateral shall exclude (i) the Grantor's rights under contracts and agreements
which by their terms prohibit the granting of a security interest therein or
assignment thereof (except for accounts and general intangibles for money due or
to become due thereunder), and (ii) Equipment which is the subject of a
capitalized lease or purchase money financing permitted under the Credit
Agreement under which a Lien has been granted in accordance with Section 7.2.3.,
but only so long as such Lien remains in effect.
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SECTION 2.2 Security for Obligations. This Security Agreement
secures the payment of all Obligations now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which the Grantor is
or may become a party, whether for principal, interest, costs, fees, expenses or
otherwise.
SECTION 2.3 Continuing Security Interest; Transfer of Notes.
This Security Agreement shall create a security interest in the Collateral and
shall in accordance with applicable law
(a) remain in full force and effect until the payment
in full of all Obligations and the termination of all Commitments,
(b) be binding upon the Grantor, its successors,
transferees and assigns, and
(c) inure, together with the rights and remedies of
the Administrative Agent hereunder, to the benefit of the Administrative Agent
and each other Lender Party.
Without limiting the generality of the foregoing clause (c),
any Lender may assign or otherwise transfer (in whole or in part) any Note or
Loan held by it to any other Person or entity in accordance with the Credit
Agreement, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Security Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to the
provisions of Section 10.11 of the Credit Agreement. Upon (i) the sale, transfer
or other disposition of Collateral in accordance with the Credit Agreement or
(ii) the payment in full of all Obligations, the termination or expiration of
all Letters of Credit and the termination of all Commitments, the security
interest granted herein shall automatically terminate with respect to (x) such
Collateral (in the case of clause (i)) or (y) all Collateral (in the case of
clause (ii)). Upon any such termination, the Administrative Agent will, at the
Grantor's sole expense, deliver any Collateral (or portion thereof) to the
extent held by the Administrative Agent hereunder and to the extent the
termination relates to such Collateral, and at the Grantor's sole expense
execute and deliver to the Grantor such documents and instruments and take such
other action as the Grantor shall reasonably request to evidence or more fully
effect termination of the security interest hereunder relating to such portion
or all of the Collateral, as the case may be.
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SECTION 2.4 Grantor Remains Liable. Anything herein to the
contrary notwithstanding
(a) the Grantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein, as if this Security Agreement had not been executed,
(b) the exercise by the Administrative Agent of any
of its rights hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the Collateral,
and
(c) neither the Administrative Agent nor any other
Lender Party shall have any obligation or liability under any such contracts or
agreements included in the Collateral by reason of this Security Agreement, nor
shall the Administrative Agent or any other Lender Party be obligated to perform
any of the obligations or duties of the Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. The Grantor
represents and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. Location of Collateral, etc. All of the
Equipment and Inventory (other than Inventory in transit) of the Grantor are
located at the places specified in Item A of Schedule I hereto, and at such
other locations as are notified to the Administrative Agent pursuant to clause
(a) of Section 4.1.2. The place(s) of business and chief executive office of the
Grantor and the office(s) where the Grantor keeps its records concerning the
Receivables, and all originals of all chattel paper which evidence Receivables,
are located at the addresses as set forth in Item C of Schedule I hereto, and at
such other locations as are notified to the Administrative Agent pursuant to
clause (a) of Section 4.1.2. As of the date hereof, the Grantor has no trade
name, except as set forth in Item D of Schedule I hereto. During the four months
preceding the date hereof, the Grantor has not been known by any legal name
different from the one set forth on the signature page hereto, nor has the
Grantor been the subject of any merger or other corporate reorganization, in
each case, except as contemplated by the Transactions and as set forth in Item E
of Schedule I.
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SECTION 3.1.2. Intentionally Omitted.
SECTION 3.1.3. Negotiable Documents, Instruments and Chattel
Paper. The Grantor has delivered to the Administrative Agent possession of all
originals of all negotiable documents, instruments and chattel paper (other than
those payable within 30 days of the date of issuance) currently owned or held by
the Grantor (duly endorsed in blank, if requested by the Administrative Agent)
having a face amount in excess of [$500,000] individually or to the extent such
securities have a face amount exceeding $750,000 in the aggregate (including all
other negotiable documents, instruments and chattel paper then held or owned by
other Obligors).
SECTION 3.1.4. Intellectual Property Collateral. With respect
to any material Intellectual Property Collateral the loss, impairment or
infringement of which could reasonably be expected to have a Material Adverse
Effect:
(a) each Patent, Trademark or Copyright is subsisting
and has not been adjudged invalid or unenforceable, in whole or in part;
(b) the Grantor has made such filings and
recordations to protect its interest in such Intellectual Property Collateral,
as are commercially reasonable and will, if requested by the Administrative
Agent to the extent practicable, effect recordations of its interest in such
Patent Collateral and Trademark Collateral in the United States Patent and
Trademark Office and its claims to the such Copyright Collateral in the United
States Copyright Office;
(c) it is the exclusive owner of the entire and
unencumbered right, title and interest in and to or has the legal right to use
such Patents, Trademarks and Copyrights, and no claim has been made that the use
of such Patents, Trademarks and Copyrights does or may violate the asserted
rights of any third party; and
(d) except as permitted by Section 4.1.4 hereof and
the Loan Documents, the Grantor has performed and will continue to perform all
acts and has paid and will continue to pay all required fees and taxes to
maintain all registered Patents, Trademarks and Copyrights in full force and
effect in the United States, as applicable.
SECTION 3.2 Validity, etc. (a)This Security Agreement is
effective to create, as collateral security for the Obligations of the Grantor,
valid and enforceable Liens on the Collateral in favor of the Administrative
Agent, for the benefit of the Lender Parties, except as enforceability may be
affected by bankruptcy,
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insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditor's rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(b) Upon the completion of the Filings (with respect
to Collateral existing on the Effective Date) and Subsequent Filings (to the
extent necessary with respect to Collateral acquired following the Effective
Date for which the Filings are not effective to perfect the Lien on such
after-acquired Collateral), and the delivery to and continuing possession by the
Administrative Agent of all instruments, investment property, chattel paper and
documents a security interest in which is (or, in the case of investment
property, may be) perfected by possession (which, in the case of such Subsequent
Filings and (to the extent required under Section 3.1.3) such instruments,
chattel paper and negotiable documents, subject to Section 3.1.1 and Section
3.1.3, shall have occurred prior to any Credit Extensions after the initial
Credit Extensions), the Liens created pursuant to this Security Agreement will
constitute valid Liens on and (to the extent provided herein) perfected security
interests in the Collateral in favor of the Administrative Agent for the benefit
of the Lender Parties, and will be prior to all other Liens of all other Persons
other than Permitted Liens permitted pursuant to Section 7.2.3. of the Credit
Agreement, and enforceable as such as against all other Persons, except (i) to
the extent that the recording of an assignment or other transfer of title to the
Administrative Agent, or the recording of other applicable documents in the
United States Patent and Trademark Office or United States Copyright Office may
be necessary for perfection or enforceability, and (ii) as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law) or by an implied covenant of good faith and fair dealing.
Notwithstanding the foregoing, the representation set forth above shall be
deemed true and correct for all purposes so long as the Grantor has complied
with its covenants set forth under Section 4.1.1, clause(a) of Section 4.1.2
clause(e) of Section 4.1.4, and Section 4.1.7 of this Security Agreement in all
material respects, including the delivery to the Administrative Agent of
executed financing statements for Subsequent Filings, whether or not the
Administrative Agent has caused such financing statements to be filed in the
applicable filing offices. As used in this Section, the following terms shall
have the following meanings:
"Filings": the filing or recording of the Financing Statements
relating to the Collateral existing on the Effective Date, in the places
specified in Item A.1 of Schedule I hereto.
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"Financing Statements": the financing statements delivered to
the Administrative Agent by the Grantor on the date hereof for filing in the
jurisdictions listed in Item A.1 of Schedule I hereto.
"Permitted Liens": Liens permitted pursuant to the Loan
Documents, including those permitted to exist pursuant to Section 7.2.3 of the
Credit Agreement.
"Subsequent Filings": any filings after the date hereof in any
jurisdiction as may be necessary under any requirement of law to perfect a Lien
on the Collateral in favor of the Administrative Agent.
ARTICLE IV
COVENANTS
SECTION 4.1 Certain Covenants. The Grantor covenants and
agrees that, so long as any Credit Extensions shall remain unpaid or any Lender
shall have any outstanding Commitment, the Grantor will, unless the Required
Lenders shall otherwise consent in writing, perform the obligations set forth in
this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor
hereby agrees that it shall keep all the Equipment and Inventory (other than
Equipment and Inventory sold or otherwise disposed of in accordance with the
Credit Agreement and Inventory in transit) at the places therefor specified in
Section 3.1.1 or at such other places in a jurisdiction where all
representations and warranties set forth in Article III shall be true and
correct, and all action required pursuant to the first sentence of Section 4.1.7
shall have been taken with respect to the Equipment and Inventory.
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SECTION 4.1.2. As to Receivables, Etc.
(a) The Grantor shall give the Administrative Agent a
supplement to Schedule I and Schedule VI hereto on each date a Compliance
Certificate is required to be delivered to the Administrative Agent under the
Credit Agreement, which shall set forth any changes as of such date to the
information set forth in Section 3.1.1, Section 4.1.2(b), Schedule I or Schedule
VI, as applicable. The Grantor shall be entitled to deliver such a supplement at
other times in addition to the times set forth in the preceding sentence. The
Grantor shall keep its place(s) of business and chief executive office and the
office(s) where it keeps its records concerning the Receivables located at the
addresses set forth in Item C of Schedule I hereto, or at such other locations
in a jurisdiction where all actions required by the first sentence of Section
4.1.7 shall have been taken with respect to the Receivables, and shall not
change its name after the Effective Date except upon 30 days' prior written
notice to the Administrative Agent.
(b) The Grantor shall list each of its Deposit
Accounts in Schedule VI hereto, as such Schedule is supplemented by notice to
the Administrative Agent pursuant to clause (a) of Section 4.1.2. Subject to,
and without limiting the effect of, clause (c) of this Section 4.1.2 the Grantor
shall, following and at the direction of the Administrative Agent, after an
Event of Default has occurred and so long as an Event of Default shall be
continuing, maintain each of its Deposit Accounts pursuant to a deposit account
agreement which is in all respects satisfactory to the Administrative Agent and
which provides, among other things, that (i) until the deposit account bank
shall have received written notice from the Administrative Agent pursuant to
this clause, the deposit account bank will make all payments from the Deposit
Account as specified by the Grantor, and, after any such notice, the deposit
account bank will make all payments from the Deposit Account to the
Administrative Agent for credit to the Collateral Account, (ii) the deposit
account bank (if other than the Administrative Agent or a Lender) waives all set
off rights (other than setoff rights for reasonable and customary account
service charges and fees and amounts based on items that are dishonored by the
payor thereof and returned to the deposit account bank), and (iii) such deposit
account agreement may not be amended without the written consent of the
Administrative Agent. The Administrative Agent will not give the notice referred
to in the preceding clause (b)(i) unless it has given, or is contemporaneously
giving, notice pursuant to clause (c) of this Section. In the event that a
deposit account bank refuses to enter into a deposit account agreement in
accordance with the above listed terms within 30 days of the Grantor's request,
the Administrative Agent shall have the right to direct the
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Grantor to transfer the assets in that deposit account to a bank which will
enter into a deposit account agreement in accordance with the above listed
terms.
(c) Following the occurrence and during the
continuance of a Default described Section 8.1.9 of the Credit Agreement or an
Event of Default, the Administrative Agent may give written notice to the
Grantor that all proceeds of Collateral received by the Grantor shall thereafter
be delivered in kind to the Administrative Agent for deposit to a deposit
account (the "Collateral Account") of the Grantor maintained with the
Administrative Agent, and after receipt of such notice and until such delivery
the Grantor shall not commingle any such proceeds, and shall hold separate and
apart from all other property, all such proceeds in express trust for the
benefit of the Administrative Agent until delivery thereof is made to the
Administrative Agent or until such Default or Event of Default has been cured or
waived. No funds, other than proceeds of Collateral, will be deposited in the
Collateral Account.
(d) Until the Default or the Event of Default
referred to in Section 4.1.2(c) has been cured or waived, the Administrative
Agent shall have the right to apply any amount in the Collateral Account to the
payment of any Obligations which are due and payable or payable upon demand.
The Administrative Agent may at any time transfer to the Grantor's general
demand deposit account at the Administrative Agent any or all of the collected
funds after an Event of Default has occurred and so long as an Event of Default
shall be continuing, in the Collateral Account; provided, however, that any such
transfer shall not be deemed to be a waiver or modification of any of the
Administrative Agent's rights under this clause.
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SECTION 4.1.3. As to Collateral.
(a) If there shall have occurred and be continuing a
Default of the nature set forth in Section 8.1.9 of the Credit Agreement or any
other Event of Default, the Administrative Agent, may notify any parties
obligated on any of the Collateral to make payment to the Administrative Agent
of any amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all or
any part thereof, or compromise or extend or renew for any period (whether or
not longer than the original period) any indebtedness thereunder or evidenced
thereby. Upon request of the Administrative Agent (which request may not be made
unless there shall have occurred and be continuing a Default of the nature set
forth in Section 8.1.9 of the Credit Agreement or any other Event of Default),
the Grantor will, at its own expense, notify any parties obligated on any of the
Collateral to make payment to the Administrative Agent of any amounts due or to
become due thereunder.
(b) The Administrative Agent is authorized to
endorse, in the name of the Grantor, any item, howsoever received by the
Administrative Agent, representing any payment on or other proceeds of any of
the Collateral for application pursuant to Section 6.1.
SECTION 4.1.4. As to Intellectual Property Collateral. The
Grantor covenants and agrees to comply with the following provisions as such
provisions relate to any Intellectual Property Collateral to the extent material
to the operations or business of the Grantor:
(a) As to any Patent Collateral that the Grantor may
acquire following the Effective Date, the Grantor shall not, unless the Grantor
shall reasonably and in good faith determine (in which case, Grantor will, in
conjunction with the notices provided under Section 4.1.4(e), give notice of
such determination to the Administrative Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, do any act, or omit
to do any act, whereby any of the Patent Collateral may lapse or become
abandoned or dedicated to the public or unenforceable.
(b) The Grantor shall not, and the Grantor shall not
permit any of its licensees to, unless the Grantor shall reasonably and in good
faith determine it could not reasonably be expected to have a Material Adverse
Effect,
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(i) fail to continue to use any of the
Trademarks in order to maintain all of the Trademarks in full force
free from any claim of abandonment for non-use,
(ii) fail to maintain substantially as in the
past the quality of products and services offered under all of the
Trademark Collateral,
(iii) fail to employ all of the Trademarks
registered with the United States Patent and Trademark Office with an
appropriate notice of such registration; and
(iv) do or permit any act or knowingly omit to
do any act whereby any of the Trademark Collateral may lapse or become
invalid or unenforceable.
(c) The Grantor shall not, unless the Grantor shall
either reasonably and in good faith determine that any of the Copyright
Collateral or Trade Secret Collateral, respectively, do or permit any act or
knowingly omit to do any act whereby any of the Copyright Collateral or any of
the Trade Secrets Collateral may lapse or become invalid or unenforceable or
placed in the public domain except upon expiration of the end of an unrenewable
term of a registration thereof.
(d) The Grantor shall notify the Administrative Agent
promptly if it knows, or has reason to know, that any application or
registration relating to any material Patent, Trademark or Copyright may become
abandoned or dedicated to the public or placed in the public domain or invalid
or unenforceable, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding the Grantor's ownership of any of such material
Patent, Trademark or Copyright, its right to register the same or to keep and
maintain and enforce the same, in each case, which could reasonably be expected
to have a Material Adverse Effect.
(e) The Grantor shall notify the Administrative Agent
with each delivery of a Compliance Certificate, of the prior filing by the
Grantor of any application for the registration of any Patent, Trademark or
Copyright with the United States Patent and Trademark Office or the United
States Copyright Office, and upon request of the Administrative Agent, execute
and deliver any and all agreements, instruments, documents and papers as the
Administrative Agent may
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reasonably request (including a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement in the forms of Exhibit A, Exhibit
B and Exhibit C hereto, as applicable) to evidence the Administrative Agent's
security interest in such Patent, Trademark or Copyright and the goodwill and
general intangibles of the Grantor relating thereto or represented thereby.
(f) The Grantor shall take all commercially
reasonable steps, including in any proceeding before the United States Patent
and Trademark Office or the United States Copyright Office to maintain and
pursue any application (and to obtain the relevant registration) filed with
respect to, and to maintain any registration of, any material Patent, Trademark
or Copyright, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the extent
that dedication, abandonment or invalidation is permitted under the foregoing
clauses (a), (b) and (c)).
SECTION 4.1.5. Intentionally Omitted.
SECTION 4.1.6. Intentionally Omitted.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees
that, from time to time at its own expense, the Grantor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or that the Administrative Agent may reasonably request,
in order to perfect, preserve and protect any security interest granted or
purported to be granted hereby in Collateral located in the United States or to
enable the Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, the Grantor will
(a) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices
(including, without limitation, any assignment of claim form under or pursuant
to the federal assignment of claims statute, 31 U.S.C. Section 3726, any
successor or amended version thereof or any regulation promulgated under or
pursuant to any version thereof with respect to any Collateral the value of
which exceeds $500,000, as the Administrative Agent may reasonably request, in
order to perfect and preserve the security interests and other rights granted or
purported to be granted to the Administrative Agent hereby; and
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(b) furnish to the Administrative Agent, from time to
time at the Administrative Agent's reasonable request, statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Administrative Agent may reasonably
request, all in reasonable detail.
With respect to the foregoing and the grant of the security
interest hereunder, the Grantor hereby authorizes the Administrative Agent to
file one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of the
Grantor where permitted by law. A carbon, photographic or other reproduction of
this Security Agreement or any financing statement covering the Collateral or
any part thereof shall be sufficient as a financing statement where permitted by
law.
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1 Administrative Agent Appointed Attorney-in-Fact.
The Grantor hereby irrevocably appoints the Administrative Agent the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor or otherwise, from time to time in the Administrative
Agent's discretion following the occurrence and during the continuance of an
Event of Default and notice to the Grantor, to take any action and to execute
any instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Security Agreement, including, without
limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquaintance and receipts for moneys due and to
become due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper, in connection with clause (a)
above;
(c) to file any claims or take any action or
institute any proceedings which the Administrative Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of the Administrative Agent with respect to any of the Collateral;
and
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(d) to perform the affirmative obligations of the
Grantor hereunder (including all obligations of the Grantor pursuant to Section
4.1.7).
The Grantor hereby acknowledges, consents and agrees that the
power of attorney granted pursuant to this Section is irrevocable and coupled
with an interest; provided, that the foregoing power of attorney shall terminate
upon the release of the Administrative Agent's Liens on all Collateral pursuant
to Section 2.3.
SECTION 5.2 Administrative Agent May Perform. If the Grantor
fails to perform any agreement contained herein within 30 days after written
notice from the Administrative Agent, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Grantor pursuant to Section 6.2.
SECTION 5.3 Administrative Agent Has No Duty. In addition to,
and not in limitation of, Section 2.4, the powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Lender Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.
SECTION 5.4 Reasonable Care. The Administrative Agent is
required to exercise reasonable care in the custody and preservation of any of
the Collateral in its possession; provided, however, the Administrative Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral, if it takes such action for that purpose
as the Grantor reasonably requests in writing at times other than upon the
occurrence and during the continuance of any Event of Default, but failure of
the Administrative Agent to comply with any such request at any time shall not
in itself be deemed a failure to exercise reasonable care.
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ARTICLE VI
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall
have occurred and be continuing:
(a) The Administrative Agent may exercise in respect
of the Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor
hereby agrees that it will, at its expense and upon request of the
Administrative Agent forthwith, assemble all or part of the Collateral
as directed by the Administrative Agent and make it available to the
Administrative Agent at a place to be designated by the Administrative
Agent which is reasonably convenient to both parties; and
(ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially reason
able. The Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' prior notice to the Grantor of the
time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The
Administrative Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) All cash proceeds received by the Administrative
Agent in respect of any sale of, collection from or other realization upon all
or any part of the Collateral may, in the discretion of the Administrative
Agent, be held by the Administrative Agent as collateral for, and/or then or at
any time thereafter applied (after payment of any amounts payable to the
Administrative Agent pursuant to
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Section 6.2) in whole or in part by the Administrative Agent for the benefit of
the Lender Parties against, all or any part of the Obligations as follows: (i)
first, to the reasonable out-of-pocket costs and expenses of the Administrative
Agent in connection with the retaking, holding, preparing for sale, selling or
other disposition of the Collateral, including, without limitation, all court
costs and the reasonable fees and expenses of its agents and legal counsel; (ii)
second, to the payment in full of the Obligations or in the event that such
proceeds are insufficient to pay in full the Obligations, equally and ratably in
accordance with each Lender's respective amounts owing to it under or pursuant
to the Credit Agreement or any other Loan Document, or under or pursuant to any
Rate Protection Agreement (as to each Lender, applied first to fees and expense
reimbursements then due to such Lender, then to interest due to such Lender,
then to pay or prepay principal of the Loans or owing to, or to reduce the
"credit exposure" of, such Lender under such Rate Protection Agreement, as the
case may be, then to pay (or cash collateralize) the remaining obligations);
(iii) third, without duplication of any amounts paid pursuant to clause (ii)
above, to the Indemnified Parties to the extent of any amounts owing pursuant to
Section 10.4 of the Credit Agreement; and (iv) fourth, to the Grantor, or its
successors and assigns, or whomever may be lawfully entitled to receive the
same, of any surplus then remaining. For purposes of this Agreement, the "credit
exposure" at any time of any Lender under a Rate Protection Agreement to which
such Lender is a party shall be determined at such time in accordance with the
customary methods of calculating credit exposure under similar arrangements by
the counterparty to such arrangements, taking into account potential interest
rate movements, mitigating factors such as other interest rate swaps, caps,
collars and hedges, and the respective termination provisions and notional
principal amount and term of such Rate Protection Agreement. The Grantor shall
remain liable to the Lenders for any deficiency. If the Administrative Agent has
funds available to apply to a portion of, but not all of, one of the amounts
described in clauses (i) through (iv) above, then the Administrative Agent shall
apply such funds to the applicable parties in proportion to the amounts to which
such parties would have been entitled if the entire amount described in any such
clause had been available.
SECTION 6.2 Indemnity and Expenses.
(a) The Grantor agrees to indemnify the
Administrative Agent from and against any and all claims, losses and liabilities
arising out of or resulting from this Security Agreement (including, without
limitation, enforcement of this Security Agreement), except claims, losses or
liabilities resulting from the Administrative Agent's gross negligence or
willful misconduct.
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(b) The Grantor will upon demand pay to the
Administrative Agent the amount of any and all reasonable expenses, including
the reasonable fees and disbursements of its counsel (but not more than one firm
and all local or special expert counsel, if any, who may be retained by counsel
to the Administrative Agent) and of any experts and agents, which the
Administrative Agent may incur in connection with
(i) the administration of this Security
Agreement,
(ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization
upon, any of the Collateral,
(iii) the exercise or enforcement of any of the
rights of the Administrative Agent or the Lender Parties hereunder, or
(iv) the failure by the Grantor to perform or
observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 Loan Document. This Security Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof.
SECTION 7.2 Amendments; etc. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by the Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent (on behalf of the Lenders or the Required
Lenders, as the case may be) and the Grantor (other than with respect to consent
or waiver), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
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SECTION 7.3 Addresses for Notices. All notices and other
communications provided to the Grantor under this Security Agreement shall be in
writing or by facsimile and addressed, delivered or transmitted to the Grantor
at its address or facsimile number as set forth in the Credit Agreement, or at
such other address or facsimile number as may be designated by the Grantor in a
notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when transmitted.
SECTION 7.4 Section Captions. Section captions used in this
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
SECTION 7.5 Severability. Wherever possible each provision of
this Security Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.
SECTION 7.6 Governing Law, Entire Agreement, etc. THIS
SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL 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. THIS SECURITY AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 7.7 Counterparts. This Security Agreement may be
executed by the parties hereto in any number of counterparts, each of which
shall be deemed an original and all of which shall constitute together but one
and the same agreement.
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IN WITNESS WHEREOF, the Grantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
NEW WORLD PASTA COMPANY
By: /s/ James Bohenick
---------------------------------
Name: James Bohenick
Title: Chief Financial Officer
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By: /s/ Robert Gaviglio
--------------------------------------
Name: Robert Gaviglio
Title: Senior Relationship Manager
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EXHIBIT 10.4
BORROWER PLEDGE AGREEMENT
This BORROWER PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of
January 28, 1999, is made by NEW WORLD PASTA COMPANY, a Delaware corporation
(the "Pledgor"), in favor of THE BANK OF NOVA SCOTIA, as lead arranger and
administrative agent (together with any successor(s) thereto in such capacity,
the "Administrative Agent") for each of the Lender Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January 28, 1999
(as amended, supplemented, amended and restated and otherwise modified from time
to time, the "Credit Agreement"), among the Pledgor, the various financial
institutions as are, or may from time to time become, parties thereto (the
"Lenders"), the Co-Agents named therein, Morgan Stanley Senior Funding, Inc., as
Syndication Agent, and the Administrative Agent, the Lenders have extended
Commitments to make Credit Extensions to, and for the benefit of, the Pledgor;
WHEREAS, as a condition precedent to the making of each Credit
Extension (including the initial Credit Extension) under the Credit Agreement,
the Pledgor is required to execute and deliver this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Lenders and the Issuer
to make each Credit Extension (including the initial Credit Extension) to the
Pledgor pursuant to the Credit Agreement, the Pledgor agrees, for the benefit of
each Lender Party, as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender Party" means, as the context may require, any Lender, the
Issuer, each Co-Agent and the Administrative Agent and each of their respective
successors, transferees and assigns.
"Lenders" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of
Attachment 1 hereto (as it may be amended from time to time by a Supplement) as
the issuer of the Pledged Note identified opposite the name of such Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
(which is a Subsidiary of a Pledgor) in form satisfactory to the Administrative
Agent or substantially the form of Exhibit A hereto which are delivered by the
Pledgor to
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the Administrative Agent as Pledged Property hereunder, as such promissory
notes, in accordance with Section 4.5, are amended, modified or supplemented
from time to time and together with any promissory note of any Pledged Note
Issuer taken in extension or renewal thereof or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or promissory notes, all other securities,
all assignments of any amounts due or to become due, all other instruments
which are now being delivered by the Pledgor to the Administrative Agent or may
from time to time hereafter be delivered by the Pledgor to the Administrative
Agent for the purpose of pledge under this Pledge Agreement or any other Loan
Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of
Attachment 1 hereto (as it may be amended from time to time by a Supplement) as
the issuer of the Pledged Shares identified opposite the name of such Person.
"Pledged Shares" means all shares of capital stock and equity interests
of any Pledged Share Issuer which are delivered by the Pledgor to the
Administrative Agent as Pledged Property hereunder.
"Pledgor" is defined in the preamble.
"Securities Act" is defined in Section 6.2.
"Supplement" means a Supplement to this Borrower Pledge Agreement in
the form attached hereto as Attachment II.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Pledge Agreement, including its preamble and recitals, with
such meanings.
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ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Administrative Agent, for its benefit and the ratable benefit of each of the
Lender Parties, and hereby grants to the Administrative Agent, for its benefit
and the ratable benefit of the Lender Parties, a continuing security interest
in, all of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer
identified in Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding capital stock and equity
interests of each Pledged Share Issuer identified in Item B of
Attachment 1 hereto (as it may be amended from time to time by a
Supplement);
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter
delivered to the Administrative Agent in connection with this Pledge
Agreement;
(f) all Dividends, Distributions, interest and other payments
and rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures
the payment in full of all Obligations now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which the Pledgor
is or may become a party, whether for principal, interest costs, fees, expenses,
or otherwise.
SECTION 2.3. Delivery of Pledged Property. All certificates or
instruments, if any, representing or evidencing any Collateral, including all
Pledged Shares and all Pledged Notes, shall be delivered to and held by or on
behalf of (and in the case of the Pledged Notes, endorsed to the order of) the
Administrative Agent pursuant hereto, for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
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SECTION 2.4. Continuing Security Interest; Transfer of Note. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall
(a) remain in full force and effect until payment in full of
all Obligations, the termination or expiration of all Letters of Credit
and the termination of all Commitments,
(b) be binding upon the Pledgor and its successors,
transferees and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative
Agent and each other Lender Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Credit Extension held by it to any
other Person or entity in accordance with the Credit Agreement, and such other
Person or entity shall thereupon become vested with all the rights and benefits
in respect thereof granted to such Lender under any Loan Document (including
this Pledge Agreement) or otherwise, subject, however, to any contrary
provisions in such assignment or transfer, and to the provisions of Section
10.11 and Article IX of the Credit Agreement. Upon (i) the sale, transfer or
other disposition of Collateral in accordance with the Credit Agreement or (ii)
the payment in full of all Obligations, the termination or expiration (or cash
collateralization) of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall automatically terminate
with respect to (x) such Collateral (in the case of clause (i)) or (y) all
Collateral (in the case of clause (ii)). Upon any such termination, the
Administrative Agent will, at the Pledgor's sole expense, deliver to the
Pledgor, without any representations, warranties or recourse of any kind
whatsoever, all certificates and instruments representing or evidencing all
Pledged Shares and all Pledged Notes as delivered to it by the Pledgor, together
with all other Collateral held by the Administrative Agent hereunder, and at the
Pledgor's sole expense execute and deliver to the Pledgor such documents and
instruments, and take such other action, as the Pledgor shall reasonably request
to evidence or more fully effect such termination.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor
represents and warrants unto each Lender Party, as at the date of each pledge
and delivery hereunder (including each pledge and delivery of Pledged Shares) by
the Pledgor to the Administrative Agent of any Collateral, as set forth in this
Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all Liens
except any Lien granted pursuant hereto in favor of the Administrative Agent and
Liens permitted pursuant to Section 7.2.3. of the Credit Agreement.
SECTION 3.1.2. Valid Security Interest. The execution and delivery of
this Pledge Agreement, together with the delivery of such Collateral to the
Administrative Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Obligations, enforceable in accordance with its terms against all creditors of
the Pledgor and any persons purporting to purchase such Collateral from the
Pledgor, except as enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing. Possession by the
Administrative Agent of the Collateral is the only action necessary to perfect
or protect such security interest in the Collateral subject to Section 9-306 of
the U.C.C. The Administrative Agent has sole and exclusive "control" (as defined
in Section 8-106 of the U.C.C.).
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
issued by the Borrower or any Subsidiary constituting Collateral, all of such
Pledged Shares are duly authorized and validly issued, fully paid, and
non-assessable, and constitute all of the issued and outstanding shares of
capital stock of each Pledged Share Issuer owned by the Pledgor and required to
be delivered in pledge under the terms of the Credit Agreement. The Pledgor has
no Subsidiary other than the Pledged Share Issuers.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note
issued by the Borrower or any Subsidiary, all of such Pledged Notes have been
duly
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authorized, executed, endorsed, issued and delivered, and are the legal, valid
and binding obligation of the issuers thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant
to this Pledge Agreement or for the execution, delivery, and
performance of this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Administrative Agent of the voting
or other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with a
disposition of such Pledged Shares by laws affecting the offering and
sale of securities generally, the remedies in respect of the Collateral
pursuant to this Pledge Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Administrative Agent hereunder). The Pledgor
agrees that at any time, and from time to time, at the expense of the Pledgor,
the Pledgor will promptly execute and deliver all further instruments, and take
all further action, that may be necessary or desirable, or that the
Administrative Agent may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. In the event after the date hereof the Borrower
acquires any equity or debt securities of any Subsidiary, it shall promptly (and
in any event within three Business Days after such acquisition) deliver to the
Administrative Agent (a) a Supplement providing the information required to be
set forth therein and (b) stock powers, Uniform Commercial Code financing
statements, notes and share or membership interest certificates (as appropriate)
in order to perfect the security interests intended to be created hereby.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral) delivered
by the Pledgor pursuant to this Pledge Agreement will be accompanied by duly
executed
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<PAGE> 8
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Administrative Agent. The Pledgor will, from time to time upon
the request of the Administrative Agent, promptly deliver to the Administrative
Agent such stock powers, instruments, and similar documents, satisfactory in
form and substance to the Administrative Agent, with respect to the Collateral
as the Administrative Agent may reasonably request and will, from time to time
upon the request of the Administrative Agent after the occurrence of any Event
of Default, promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the
Administrative Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Administrative Agent pursuant hereto all Pledged Shares and all
other shares of capital stock constituting Collateral, all Dividends and
Distributions with respect thereto, all Pledged Notes, all interest, principal
and other proceeds received by the Administrative Agent with respect to the
Pledged Notes, and all other Collateral and other securities, instruments,
proceeds, and rights from time to time received by or distributable to the
Pledgor in respect of any Collateral and will not permit any Pledged Share
Issuer to issue any capital stock which shall not have been immediately duly
pledged hereunder on a first priority perfected basis. The Pledgor will not
amend the operating agreement for any Pledged Share Issuer that is a limited
liability company to permit that the membership interests of such Pledged Share
Issuer are governed by Article of the U.C.C. unless on or prior to the effective
date of such amendment the Administrative Agent shall have been given sole
"control" of such membership interests (as defined in Article 8 of the U.C.C.).
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any (i) Default of the nature referred to in Section
8.1.9 of the Credit Agreement shall have occurred and be continuing or
(ii) any other Event of Default shall have occurred and be continuing,
and the giving of notice from the Administrative Agent of its intent to
exercise its remedies (in the case of this clause (a)(ii)), the Pledgor
will deliver promptly upon receipt thereof (properly endorsed where
required hereby or requested by the Administrative Agent) to the
Administrative Agent all Dividends, Distributions, all interest, all
principal, all other cash payments, and all proceeds of the Collateral,
all of which shall be held by the Administrative Agent as additional
Collateral for use in accordance with Section 6.4; and
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(b) after any Event of Default shall have occurred and be
continuing and the Administrative Agent has notified the Pledgor of
the Administrative Agent's intention to exercise its voting power
under this Section 4.4(b)
(i) the Administrative Agent may exercise (to the
exclusion of the Pledgor) the voting power and all other
incidental rights of ownership with respect to any Pledged
Shares or other shares of capital stock constituting
Collateral and the Pledgor hereby grants the Administrative
Agent an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other
Collateral; and
(ii) promptly to deliver to the Administrative Agent
such additional proxies and other documents as may be
necessary to allow the Administrative Agent to exercise such
voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Administrative Agent, shall, until
delivery to the Administrative Agent, be held by the Pledgor separate and apart
from its other property in trust for the Administrative Agent. The
Administrative Agent agrees that unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given the notice
referred to in Section 4.4(b), the Pledgor shall have the exclusive voting power
with respect to any shares of capital stock (including any of the Pledged
Shares) constituting Collateral and the Administrative Agent shall, upon the
written request of the Pledgor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by the Pledgor which are
necessary to allow the Pledgor to exercise voting power with respect to any such
share of capital stock (including any of the Pledged Shares) constituting
Collateral; provided, however, that no vote shall be cast, or consent, waiver,
or ratification given, or action taken by the Pledgor that would violate or
consent to an action which could violate any provision of the Credit Agreement
or any other Loan Document (including this Pledge Agreement).
ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. The
Pledgor hereby irrevocably appoints the Administrative Agent the Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor or
otherwise, from
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time to time in the Administrative Agent's discretion, upon the occurrence and
during the continuance of an Event of Default and subject to delivery of notice
to the Pledgor to take any action and to execute any instrument which the
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Pledge Agreement, including without limitation:
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above; and
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Administrative Agent with respect to any of
the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Administrative Agent Has No Duty. The powers conferred on
the Administrative Agent hereunder are solely to protect its interest (on behalf
of the Lender Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Administrative Agent has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
SECTION 5.3. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, the Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any of the Collateral, if it takes such action for that purpose as the Pledgor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of any Event of
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Default, but failure of the Administrative Agent to comply with any such request
at any time shall not in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the U.C.C. (whether or not the U.C.C.
applies to the affected Collateral) and also may, without notice except
as specified below, sell the collateral or any part thereof in one or
more parcels at public or private sale, at any of the Administrative
Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Administrative Agent may
deem commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at least ten days' prior
notice to the Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute
reasonable notification. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Administrative Agent may adjourn any public or
private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(b) The Administrative Agent may
(i) transfer all or any part of the Collateral into
the name of the Administrative Agent or its nominee, with or
without disclosing that such Collateral is subject to the lien
and security interest thereunder,
(ii) notify the parties obligated on any of the
Collateral to make payment to the Administrative Agent of any
amount due or to become due thereunder,
(iii) enforce collection of any of the Collateral by
suit or otherwise, and surrender, release or exchange all or
any part thereof,
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or compromise or extend or renew for any period (whether or
not longer than the original period) any obligations of any
nature of any party with respect thereto,
(iv) endorse any checks, drafts, or other writings in
the Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral,
and
(vi) execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral.
SECTION 6.2. Securities Laws. If the Administrative Agent shall
determine to exercise its right to sell all or any of the Collateral pursuant to
Section 6.1, the Pledgor agrees that, upon request of the Administrative Agent,
the Pledgor will, at its own expense:
(a) execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents, and
do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of the Administrative Agent, advisable to
register such Collateral under the provisions of the Securities Act of
1933, as from time to time amended (the "Securities Act"), and to use
its best efforts to cause the registration statement relating thereto
to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all
amendments and supplements thereto and to the related prospectus which,
in the opinion of the Administrative Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission
applicable thereto;
(b) use its best efforts to qualify the Collateral under the
state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by
the Administrative Agent;
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will
satisfy the provisions of Section 11(a) of the Securities Act; and
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<PAGE> 13
(d) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Administrative Agent or the Lender Parties
by reason of the failure by the Pledgor to perform any of the covenants
contained in this Section and, consequently, agrees that, if the Pledgor shall
fail to perform any of such covenants, it shall pay, as liquidated damages and
not as a penalty, an amount equal to the value (as determined by the
Administrative Agent) of the Collateral on the date the Administrative Agent
shall demand compliance with this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Administrative Agent is hereby authorized to
comply with any limitation or restriction in connection with such sale as it may
be advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Administrative Agent be liable nor account able
to the Pledgor for any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Administrative Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Administrative Agent, be held by the Administrative Agent as additional
collateral security for, or then or at any time thereafter be applied (after
payment of any amounts payable to the Administrative Agent pursuant to Section
10.3 of the Credit Agreement and Section 6.5) in whole or in part by the
Administrative Agent against, all or any part of the Obligations as follows: (i)
first, to the reasonable out-of-pocket costs and expenses of the Administrative
Agent in connection with the retaking, holding, preparing for sale, selling or
other disposition of the Collateral, including, without limitation, all
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court costs and the reasonable fees and expenses of its agents and legal
counsel; (ii) second, to the payment in full of the Obligations or in the event
that such proceeds are insufficient to pay in full the Obligations, equally and
ratably in accordance with each Lender's respective amounts owing to it under or
pursuant to the Credit Agreement or any other Loan Document, or under or
pursuant to any Rate Protection Agreement (as to each Lender, applied first to
fees and expense reimbursements then due to such Lender, then to interest due to
such Lender, then to pay or prepay principal of the Loans owing to, or to reduce
the "credit exposure" of, such Lender under such Rate Protection Agreement, as
the case may be, then to pay (or cash collateralize) the remaining Obligations;
(iii) third, without duplication of any amounts paid pursuant to clause (ii)
above, to the Indemnified Parties to the extent of any amounts owing pursuant to
Section 10.4 of the Credit Agreement; and (iv) fourth, to the Pledgor, or its
successors and assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining. For purposes of this Agreement, the "credit
exposure" at any time of any Lender under a Rate Protection Agreement to which
such Lender is a party shall be determined at such time in accordance with the
customary methods of calculating credit exposure under similar arrangements by
the counterparty to such arrangements, taking into account potential interest
rate movements and the respective termination provisions and notional principal
amount and term of such Rate Protection Agreement. The Pledgor shall remain
liable to the Lenders for any deficiency. If the Administrative Agent has funds
available to apply to a portion of, but not all of, one of the amounts described
in clauses (i) through (iv) above, then the Administrative Agent shall apply
such funds to the applicable parties in proportion to the amounts to which such
parties would have been entitled if the entire amount described in any such
clause had been available.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Administrative Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Administrative Agent's gross negligence or
willful misconduct. Upon demand, the Pledgor will pay to the Administrative
Agent the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and of any experts and agents, which the
Administrative Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit
Agreement and each other Loan Document;
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(b) the custody, preservation, use, or operation of, or the
sale of, collection from, or other realization upon, any of the
Collateral;
(c) the exercise or enforcement of any of the rights of the
Administrative Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of
the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Administrative Agent (on behalf of the Lenders or the Required
Lenders, as the case may be), and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it is
given.
SECTION 7.3. Protection of Collateral The Administrative Agent may from
time to time, at its option, perform any act which the Pledgor agrees hereunder
to perform and which the Pledgor shall fail to perform within 30 days after
being requested in writing so to perform and during the continuance of an Event
of Default the Administrative Agent may from time to time take any other action
which the Administrative Agent reasonably deems necessary for the maintenance,
preservation or protection of any of the Collateral or of its security interest
therein.
SECTION 7.4. Addresses for Notices All notices and other communications
provided to the Pledgor under this Pledge Agreement shall be in writing or by
facsimile and addressed, delivered or transmitted to the Pledgor at its address
or facsimile number as set forth in the Credit Agreement or at such other
address or facsimile number as may be designated by the Pledgor in a notice to
the other parties. Any notice, if mailed and properly addressed with postage
prepaid or if properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any notice, if transmitted by facsimile, shall be
deemed given when transmitted.
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SECTION 7.5. Section Captions Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. Severability Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
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. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH
RESPECT THERETO.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
NEW WORLD PASTA COMPANY
By /s/ James A. Bohenick
Name: James A. Bohenick
Title: Vice President, Finance,
and Chief Financial Officer
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By /s/ Robert Gaviglio
Name: Robert Gaviglio
Title: Senior Relationships
Manager
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EXHIBIT 10.5
SUBSIDIARY GUARANTY
This GUARANTY (this "Guaranty"), dated as of January 28, 1999, is made
by each Subsidiary (as defined in the Credit Agreement referred to below)
signatory hereto on the date hereof and each other Subsidiary that may, from
time to time become, pursuant to the terms of the Credit Agreement and by
execution of a Supplement substantially in the form attached hereto as Annex I,
a party hereto (individually, a "Guarantor" and collectively, the "Guarantors"),
in favor of THE BANK OF NOVA SCOTIA, as lead arranger and administrative agent
(together with any successor(s) thereto in such capacity, the "Administrative
Agent") for each of the Lender Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January 28, 1999
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "Credit Agreement"), among New World Pasta Company, a Delaware
corporation (the "Borrower"), the various financial institutions as are, or may
from time to time become, parties thereto (the "Lenders"), the Co-Agents named
therein, Morgan Stanley Senior Funding, Inc., as Syndication Agent, and The Bank
of Nova Scotia, as Lead Arranger and as Administrative Agent for the Lenders,
the Lenders have extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, as a condition precedent to the making of each Credit
Extension (including the initial Credit Extension) under the Credit Agreement,
each Guarantor is required to execute and deliver this Guaranty;
WHEREAS, each Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of each Guarantor to execute this
Guaranty inasmuch as such Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrower by
the Lenders and the Issuer pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to induce the Lenders to make each
Credit Extension (including the initial Credit Extension) to the Borrower
pursuant to
<PAGE> 2
the Credit Agreement, each Guarantor jointly and severally agrees, for the
benefit of each Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Guarantors" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Lender Party" means, as the context may require, each Lender, the
Issuer, each Co-Agent and the Administrative Agent and each of their respective
successors and permitted transferees and assigns.
"Lenders" is defined in the first recital.
"Supplement" means a Supplement to this Subsidiary Guaranty Agreement
in the form attached hereto as Annex 1.
SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
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ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1 Guaranty. Each Guarantor hereby jointly and severally,
absolutely, unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether
at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all Obligations of the Borrower and each other
Obligor now or hereafter existing under the Credit Agreement, the Notes
any Letter of Credit and each other Loan Document to which the Borrower
or such other Obligor is or may become a party (or, in the case of
Letters of Credit, is or may become the account party), whether for
principal, interest, Reimbursement Obligations, fees, expenses or
otherwise (including all such amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11
U.S.C. Section 502(b) and Section 506(b)), and
(b) indemnifies and holds harmless each Lender Party and each
holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender Party
or such holder, as the case may be, in enforcing any rights under this
Guaranty;
provided, however, that each Guarantor shall be liable under this Guaranty only
for the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to such Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and each Guarantor specifically agrees that it shall not
be necessary or required that any Lender Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against the Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of such Guarantor hereunder. Each Guarantor
acknowledges and agrees that each obligation hereunder shall be a joint and
several obligation of such Guarantor.
SECTION 2.2 Acceleration of Guaranty. Each Guarantor agrees that, in
the event of the dissolution or insolvency of the Borrower, any other Obligor or
any Guarantor, or the inability or failure of the Borrower, any other Obligor or
any
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Guarantor to pay debts as they become due, or an assignment by the Borrower, any
other Obligor or any Guarantor for the benefit of creditors, or the commencement
of any case or proceeding in respect of the Borrower, any other Obligor or any
Guarantor under any bankruptcy, insolvency or similar laws, and if such event
shall occur at a time when any of the Obligations of the Borrower and each other
Obligor may not then be due and payable, each Guarantor jointly and severally
agrees that it will pay to the Lenders forthwith the full amount which would be
payable hereunder by such Guarantor if all such Obligations were then due and
payable.
SECTION 2.3 Guaranty Absolute, etc. This Guaranty shall in all respects
be a continuing, absolute, unconditional and irrevocable guaranty of payment,
and shall remain in full force and effect until all Obligations of the Borrower
and each other Obligor have been paid in full, all Letters of Credit have been
terminated or expired, all obligations of each Guarantor hereunder shall have
been paid in full and all Commitments shall have terminated. The liability of
each Guarantor under this Guaranty shall be joint and several, and shall be
absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the
Credit Agreement, any Note or any other Loan Document;
(b) the failure of any Lender Party or any holder of any Note
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or any
other Person (including any other guarantor (including any
Guarantor)) under the provisions of the Credit Agreement, any
Note, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor (including any Guarantor) of, or collateral
securing, any Obligations of the Borrower or any other
Obligor;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of the Borrower or
any other Obligor, or any other extension, compromise or renewal of any
Obligation of the Borrower or any other Obligor;
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(d) any reduction, limitation, impairment or termination of
any Obligations of the Borrower or any other Obligor for any reason,
including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and each Guarantor hereby
waives any right to or claim of) any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity,
illegality, nongenuineness, irregularity, compromise, unenforceability
of, or any other event or occurrence affecting, any Obligations of the
Borrower, any other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Credit Agreement, any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Lender Party or any holder of any Note securing
any of the Obligations of the Borrower or any other Obligor; or
(g) any other circumstance which might otherwise constitute a
defense other than subject to Section 2.4 the defense of payment in
full of the Obligations of the Borrower available to, or a legal or
equitable discharge of, the Borrower, any other Obligor, any surety or
any guarantor.
SECTION 2.4 Reinstatement, etc. Each Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations is
rescinded or must otherwise be restored by any Lender Party or any holder of any
Note, upon the insolvency, bankruptcy or reorganization of the Borrower, any
other Obligor or otherwise, all as though such payment had not been made.
SECTION 2.5 Waiver, etc. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of the Borrower or any other Obligor and this Guaranty and any
requirement that the Administrative Agent, any other Lender Party or any holder
of any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against
the Borrower, any other Obligor or any other person (including any other
guarantor) or entity or any collateral securing the Obligations of the Borrower
or any other Obligor, as the case may be.
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<PAGE> 6
SECTION 2.6 Postponement of Subrogation. Each Guarantor agrees that it
will not exercise any rights which it may acquire by way of subrogation under
this Guaranty, by any payment made hereunder or otherwise, until the prior
payment, in full and in cash, of all Obligations of the Borrower and each other
Obligor. Any amount paid to such Guarantor on account of any subrogation rights
prior to the payment in full of all Obligations of the Borrower and each other
Obligor shall be held in trust for the benefit of the Lender Parties and each
holder of a Note and shall immediately be paid to the Lender Parties and each
holder of a Note and credited and applied against the Obligations of a Borrower
and each other Obligor, whether matured or unmatured, in accordance with the
terms of the Credit Agreement; provided, however, that if
(a) such Guarantor has made payment to the Lender Parties and
each holder of a Note of all or any part of the Obligations of the
Borrower or any other Obligor, and
(b) all Obligations of the Borrower and each other Obligor
have been paid in full and all Commitments have been permanently
terminated,
each Lender Party and each holder of a Note agrees that, at such Guarantor's
request, the Lender Parties and the holders of the Notes, will execute and
deliver to such Guarantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
such Guarantor of an interest in the Obligations of the Borrower and each other
Obligor resulting from such payment by such Guarantor. In furtherance of the
foregoing, for so long as any Obligations or Commitments remain outstanding,
each Guarantor shall refrain from taking any action or commencing any proceeding
against the Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in the respect of payments made under this Guaranty to any Lender Party or any
holder of a Note.
SECTION 2.7 Successors, Transferees and Assigns; Transfers of Notes,
etc. This Guaranty shall:
(a) be binding upon each Guarantor, and each Guarantor's
successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the
Administrative Agent and each other Lender Party.
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Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions of Section 10.11 and Article IX of
the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. Each Guarantor hereby
represents and warrants to each Lender Party that the representations and
warranties contained in Article VI of the Credit Agreement, insofar as the
representations and warranties contained therein relate to such Guarantor and
its properties, are true and correct in all material respects, each such
representation and warranty set forth in such Article (insofar as applicable as
aforesaid) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
being hereby incorporated into this Guaranty by reference as though specifically
set forth in this Section.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1 Covenants. Each Guarantor covenants and agrees that, so
long as any portion of the Obligations shall remain unpaid, any Letters of
Credit shall be outstanding or any Lender shall have any outstanding Commitment,
such Guarantor will, unless the Required Lenders shall otherwise consent in
writing, perform, comply with and be bound by all of the agreements, covenants
and obligations contained in Article VII of the Credit Agreement which are
applicable to such Guarantor or its properties, each such agreement, covenant
and obligation contained in such Article and all other terms of the Credit
Agreement to which reference is made herein, together with all related
definitions and ancillary provisions, being hereby incorporated into this
Guaranty by reference as though specifically set forth in this Section.
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<PAGE> 8
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1 Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.
SECTION 5.2 Binding on Successors, Transferees and Assigns; Assignment.
In addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon each Guarantor and its successors, transferees and assigns and
shall inure to the benefit of and be enforceable by each Lender Party and each
holder of a Note and their respective successors and permitted transferees and
assigns (to the full extent provided pursuant to Section 2.7); provided,
however, that no Guarantor may assign any of its obligations hereunder without
the prior written consent of all Lenders; provided further that upon the
transfer, sale or other disposition of all of the Capital Stock of any Guarantor
in accordance with the terms of the Credit Agreement (other than to the Borrower
or another Guarantor), such Guarantor will automatically be released from its
obligations hereunder. At the sole expense of the Borrower, the Administrative
Agent will deliver any documents reasonably requested by the Borrower to
evidence such release.
SECTION 5.3 Amendments, etc. No amendment to or waiver of any provision
of this Guaranty, nor consent to any departure by any Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Administrative Agent (on behalf of the Lenders or the Required Lenders, as the
case may be) and the Guarantors (other than with respect to a consent or waiver)
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 5.4 Addresses for Notices to Each Guarantor. All notices and
other communications provided to each Guarantor under this Guaranty shall be in
writing or by facsimile and addressed, delivered or transmitted to such
Guarantor at its address or facsimile number set forth opposite its name on
Schedule I hereto or at such other address or facsimile number as may be
designated by such Guarantor in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid or if properly addressed and
sent by pre-paid courier service, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when transmitted.
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<PAGE> 9
SECTION 5.5 No Waiver; Remedies. In addition to, and not in limitation
of, Section 2.3 and Section 2.5, no failure on the part of any Lender Party or
any holder of a Note to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise 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.
SECTION 5.6 Section Captions. Section captions used in this Guaranty
are for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION 5.7 Setoff. In addition to, and not in limitation of, any
rights of any Lender Party or any holder of a Note under applicable law, each
Lender Party and each such holder shall, upon the occurrence of any Event of
Default described in any of clauses (a) through (d) of Section 8.1.9 of the
Credit Agreement or, with the consent of the Required Lenders, any Event of
Default, have the right to appropriate and apply to the payment of the
obligations of each Guarantor owing to it hereunder, whether or not then due,
and each Guarantor hereby grants to each Lender Party and each such holder a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of such Guarantor then or thereafter maintained with such
Lender Party or such holder and any and all property of every kind or
description of or in the name of such Guarantor now or hereafter, for any reason
or purpose whatsoever, in the possession or control of, or in transit to, such
Lender Party, such holder or any agent or bailee for such Lender Party or such
holder; provided, however, that any such appropriation and application shall be
subject to the provisions of Section 4.8 of the Credit Agreement.
SECTION 5.8 Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Guaranty.
SECTION 5.9 Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
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<PAGE> 10
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
SECTION 5.10 Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE LENDER PARTIES OR ANY GUARANTOR MAY BE BROUGHT AND
MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; EACH
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY AND OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH GUARANTOR HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY
SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 5.11 Waiver of Jury Trial. EACH GUARANTOR AND THE
ADMINISTRATIVE AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTY, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE LENDER PARTIES OR ANY GUARANTOR. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
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SECTION 5.12 Additional Guarantors Certain Subsidiaries of the Borrower
may after the date hereof be required to enter into this Guaranty as Guarantor.
Upon execution and delivery, after the date hereof, by the Administrative Agent
and such Subsidiary, of an instrument in the form of Annex I, such Subsidiary
shall become a Guarantor hereunder with the same force and effect as if
originally named as a Guarantor hereunder. The execution and delivery of such
instrument shall not require the consent of any other Guarantor or Lender
hereunder.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officers thereunto duly authorized as of the day
and year first above written.
WINCHESTER PASTA L.L.C
By: /s/ James A. Bohenick
-------------------------
Name: James A. Bohenick
Title: Vice President, Finance,
and Chief Financial
Officer
PASTA GROUP, L.L.C.
By: /s/ James A. Bohenick
-------------------------
Name: James A. Bohenick
Title: Vice President, Finance,
and Chief Financial
Officer
THE BANK OF NOVA SCOTIA
as Administrative Agent
By /s/ Robert Gaviglio
-------------------------
Name: Robert Gaviglio
Title: Senior Relationship
Manager
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<PAGE> 1
EXHIBIT 10.6
SUBSIDIARY SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Security Agreement"), dated as
of January 28, 1999, is made by each Subsidiary (as defined in the Credit
Agreement referred to below) a signatory hereto on the date hereof and each
other Subsidiary that may, from time to time hereto (individually, a "Grantor"
and collectively, the "Grantors"), in favor of THE BANK OF NOVA SCOTIA, as lead
arranger and administrative agent (together with any successor(s) thereto in
such capacity, the "Administrative Agent") for each of the Lender Parties (as
defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January
28, 1999 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Credit Agreement"), among New World Pasta Company, the
various financial institutions as are, or may from time to time become, parties
thereto (the "Lenders"), Morgan Stanley Senior Funding, Inc., as Syndication
Agent, the Co-Agents named therein and the Administrative Agent, the Lenders and
the Issuer have extended Commitments to make Credit Extensions to the Borrower;
and
WHEREAS, as a condition precedent to the making of each Credit
Extension (including the initial Credit Extension) under the Credit Agreement,
each Grantor is required to execute and deliver this Security Agreement;
WHEREAS, each Grantor has duly authorized the execution,
delivery and performance of this Security Agreement; and
WHEREAS, it is in the best interests of each Grantor to
execute this Security Agreement inasmuch as each Grantor will derive substantial
direct and indirect benefits from the Credit Extensions made from time to time
to the Borrower by the Lenders and the Issuer pursuant to the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in order to induce
the Lenders and the Issuer to make each Credit Extension (including the initial
Credit Extension) to each Grantor pursuant to the Credit Agreement, each Grantor
jointly
<PAGE> 2
and severally, agrees with the Administrative Agent, for the benefit of each
Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or
not underscored) when used in this Security Agreement, including its preamble
and recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Collateral Account" is defined in Section 4.1.2(c).
"Copyright Collateral" means:
(a) all United States copyrights (including without limitation
copyrights for mask works) owned by each Grantor in each Grantor's name as such
may be changed from time to time, whether statutory or common law, registered or
unregistered, including without limitation, all of each Grantor's right, title
and interest in and to all common law copyrights and copyrights registered in
the United States Copyright Office and also including, without limitation, the
copyrights referred to in Item A of Schedule IV attached hereto, and all
applications for registration and renewals thereof (all of the foregoing items
in this clause (a) being collectively called a "Copyright");
(b) all United States written Copyright licenses and other
agreements providing each Grantor with the right to use any of the items of the
type referred to in clause (a) (other than software licenses from third
parties), including each Copyright license referred to in Item B of Schedule IV
attached hereto, if any, subject, in each case, to the terms of such license
agreements; and
(c) all proceeds of, and rights of each Grantor associated
with the foregoing (including license royalties and proceeds of infringement
suits), the right to sue third parties for past, present or future infringements
of any registered Copyright described in clause (a), including any registered
Copyright application referred to in Item A of Schedule IV attached hereto, and
for breach or enforcement of any
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Copyright license, including any Copyright license referred to in Item B of
Schedule IV attached hereto, subject, in each case, to the terms of such license
agreements.
"Credit Agreement" is defined in the first recital.
"Deposit Accounts" means any and all demand, time, savings,
passbook or other accounts with a bank or other financial institution, including
general deposit and cash concentration accounts, in which any cash, payments or
receipts of or for the benefit of each Grantor are or are to be deposited, and
all deposits therein and investments thereof, whether now or at any time
hereafter existing.
"Equipment" is defined in clause (a) of Section 2.1.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the
Copyright Collateral, the Patent Collateral, the Trademark Collateral and the
Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1.
"Lender Party" means, as the context may require, each Lender,
the Issuer, each Co-Agent and the Administrative Agent and each of its
respective successors, permitted transferees and assigns.
"Lenders" is defined in the first recital.
"Patent Collateral" means:
(a) all United States letters patent and applications for
letters patent owned by each Grantor in each Grantor's name as such may be
changed from time to time, including each patent and patent application referred
to in Item A of Schedule II attached hereto (all of the foregoing items in this
clause (a) being collectively called a "Patent");
(b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of the
items described in clause (a);
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(c) all United States written Patent licenses and other
agreements of each Grantor providing each Grantor with the right to use any of
the items of the type referred to in clauses (a) and (b), including each Patent
license referred to in Item B of Schedule II attached hereto subject, in each
case, to the terms of such license agreements; and
(d) all proceeds of, and rights of each Grantor associated
with the foregoing (including license royalties and proceeds of infringement
suits), the right to sue third parties for past, present or future infringements
of any registered Patent described in clause (a), including any registered
Patent referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any Patent license, including any Patent license referred to in
Item B of Schedule II attached hereto, subject, in each case, to the terms of
such license agreements.
"Rate Protection Agreement" means a Hedging Obligation entered
into between the Borrower or any of its Subsidiaries and a Lender or an
Affiliate of a Lender.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all United States trademarks, trade names, trade dress,
service marks, logos, other source of business identifiers, and designs owned by
each Grantor in each Grantor's name as such may be changed from time to time
(all of the foregoing items in this clause (a) being collectively called a
"Trademark"), now existing in the United States or hereafter adopted or acquired
in the United States, and all registrations and renewals thereof and all
applications in connection there with, including registrations, renewals and
applications in the United States Patent and Trademark Office, including those
referred to in Item A of Schedule III attached hereto, provided, however, that
Trademark Collateral shall not include "intent to use" applications for
trademark or service mark registrations filed in the United States Patent and
Trademark Office pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. Section
1051, unless and until an Amendment to Allege Use or a Statement of Use under
Section 1(c) or 1(d) of said Act has been filed;
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<PAGE> 5
(b) all United States written Trademark licenses and other
agreements of each Grantor providing each Grantor with the right to use any
items of the type described in clause (a), including each Trademark license
referred to in Item B of Schedule III attached hereto, subject, in each case, to
the terms of such license agreements;
(c) all of the goodwill of the business connected with the use
of, and symbolized by, the items described in clause (a); and
(d) all proceeds of, and rights of each Grantor associated
with the foregoing (including license royalties and proceeds of infringement
suits), the right to sue third parties for past, present or future infringement
or dilution of any Trade mark or Trademark registration referred to in Item A of
Schedule III attached hereto, or for any injury to the goodwill associated with
the use of any such Trademark and for breach or enforcement of any Trademark
license, including any Trademark license referred to in Item B of Schedule III
attached hereto, subject, in each case, to the terms of such license agreements.
"Trade Secrets Collateral" means all United States common law
and statutory trade secrets and all other confidential or proprietary
information and know-how owned by each Grantor in each Grantor's name as such
may be changed from time to time (to the extent such confidential, proprietary
or useful information or know-how is protected by each Grantor against
disclosure and is not readily ascertainable) (all of the foregoing being
collectively called a "Trade Secret"), whether or not such Trade Secret has been
reduced to a writing or other tangible form, including all documents and things
embodying, incorporating or referring in any way to such Trade Secret, all
United States written Trade Secret licenses or other agreements of each Grantor,
including each Trade Secret license referred to in Schedule V attached hereto,
subject, in each case, to the terms of such license agreements; and including
the right to sue and to enjoin and to collect damages for the actual
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade Secret license, subject, in each case, to the terms of such license
agreements.
"U.C.C." means the Uniform Commercial Code, as in effect in
the State of New York.
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<PAGE> 6
SECTION 1.2. Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined
herein or the context otherwise requires, terms for which meanings are provided
in the U.C.C. are used in this Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. Each Grantor to the extent it
has any interest whatsoever, hereby assigns and pledges to the Administrative
Agent for its benefit and the ratable benefit of each of the Lender Parties, and
hereby grants to the Administrative Agent for its benefit and the ratable
benefit of each of the Lender Parties a security interest in, all of each
Grantor's right, title and interest in and to all of the following, whether now
or hereafter existing or acquired by each Grantor (the "Collateral"):
(a) all equipment in all of its forms of such Grantor,
wherever located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor
(any and all of the foregoing being the "Equipment");
(b) all inventory in all of its forms of such Grantor,
wherever located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or production
thereof,
(ii) all goods in which such Grantor has an interest in mass
or a joint or other interest or right of any kind (including goods in which each
Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by such
Grantor,
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<PAGE> 7
and all accessions thereto, products thereof and documents
therefor (any and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, and general intangibles, rental agreement, or any part thereof
including, but not limited to such Grantor's right to receive, either directly
or indirectly, from any person, any rents or other payments due and payable
under such agreements) of such Grantor, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of services, and all
rights of such Grantor now or hereafter existing in and to all security
agreements, guaranties, leases and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and general
intangibles being the "Receivables", and any and all such security agreements,
guaranties, leases and other contracts being the "Related Contracts");
(d) all Intellectual Property Collateral of such Grantor and
all Investment Property;
(e) all books and records relating to, used or useful in
connection with, evidencing, embodying, incorporating or referring to, any of
the foregoing in this Section 2.1;
(f) all of such Grantor's other personal property and rights
of every kind and description and interests therein (including all Deposit
Accounts); and
(g) all products, rents, issues, profits, returns, income and
proceeds of and from any and all of the foregoing Collateral (including proceeds
which constitute property of the types described in clauses (a), (b), (c), (d),
(e) and (f)), proceeds deposited from time to time in the Collateral Account and
in any lock boxes of such Grantor, and, to the extent not otherwise included,
all payments under insurance (whether or not the Administrative Agent is the
loss payee thereof), or any indemnity, warranty or guaranty, payable by reason
of loss or damage to or other wise with respect to any of the foregoing
Collateral).
Notwithstanding anything herein to the contrary, the
Collateral shall exclude (i) each Grantor's rights under contracts and
agreements which by their terms
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<PAGE> 8
prohibit the granting of a security interest therein or assignment thereof
(except for accounts and general intangibles for money due or to become due
thereunder), and (ii) Equipment which is the subject of a capitalized lease or
purchase money financing permitted under the Credit Agreement under which a Lien
has been granted in accordance with Section 7.2.3., but only so long as such
Lien remains in effect.
SECTION 2.2. Security for Obligations. This Security Agreement
secures the payment of all Obligations now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which each Grantor
is or may become a party, whether for principal, interest, costs, fees, expenses
or other wise.
SECTION 2.3. Continuing Security Interest; Transfer of Notes.
This Security Agreement shall create a security interest in the Collateral and
shall in accordance with applicable law
(a) remain in full force and effect until the payment in full
of all Obligations and the termination of all Commitments,
(b) be binding upon each Grantor, its successors, transferees
and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative Agent and
each other Lender Party.
Without limiting the generality of the foregoing clause (c),
any Lender may assign or otherwise transfer (in whole or in part) any Note or
Loan held by it to any other Person or entity in accordance with the Credit
Agreement, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Security Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to the
provisions of Section 10.11 of the Credit Agreement. Upon (i) the sale, transfer
or other disposition of Collateral in accordance with the Credit Agreement or
(ii) the payment in full of all Obligations, the termination or expiration of
all Letters of Credit and the termination of all Commitments, the security
interest granted herein shall automatically terminate with respect to (x) such
Collateral (in the case of clause (i)) or (y) all Collateral (in the case of
clause (ii)). Upon any such termination, the Administrative Agent will, at such
Grantor's sole expense, deliver any Collateral (or portion thereof) to the
extent held by the Administrative Agent hereunder and to the extent the
termination relates to
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such Collateral, and at such Grantor's sole expense execute and deliver to each
Grantor such documents and instruments and take such other action as such
Grantor shall reasonably request to evidence or more fully effect termination of
the security interest hereunder relating to such portion or all of the
Collateral, as the case may be.
SECTION 2.4. Grantor Remains Liable. Anything herein to the
contrary notwithstanding
(a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein, as if
this Security Agreement had not been executed,
(b) the exercise by the Administrative Agent of any of its
rights hereunder shall not release any Grantor from any of its duties or
obligations under any such contracts or agreements included in the Collateral,
and
(c) neither the Administrative Agent nor any other Lender
Party shall have any obligation or liability under any such contracts or
agreements included in the Collateral by reason of this Security Agreement, nor
shall the Administrative Agent or any other Lender Party be obligated to perform
any of the obligations or duties of any Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. Each Grantor
represents and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. Location of Collateral, etc. All of the
Equipment and Inventory (other than Inventory in transit) of such Grantor are
located at the places specified in Item A of Schedule I hereto, and at such
other locations as are notified to the Administrative Agent pursuant to clause
(a) of Section 4.1.2. The place(s) of business and chief executive office of
such Grantor and the office(s) where such Grantor keeps its records concerning
the Receivables, and all originals of all chattel paper which evidence
Receivables, are located at the addresses as set forth in Item C of Schedule I
hereto, and at such other locations as are notified to the Administrative Agent
pursuant to clause (a) of Section 4.1.2. As of the date hereof, such Grantor has
no trade name, except as set forth in Item D of Schedule I hereto.
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During the four months preceding the date hereof, such Grantor has not been
known by any legal name different from the one set forth on the signature page
hereto, nor has such Grantor been the subject of any merger or other corporate
reorganization, in each case, except as contemplated by the Transactions and as
set forth in Item E of Schedule I.
SECTION 3.1.2. Intentionally Omitted.
SECTION 3.1.3. Negotiable Documents, Instruments and Chattel
Paper. Such Grantor has delivered to the Administrative Agent possession of all
originals of all negotiable documents, instruments and chattel paper (other than
those payable within 30 days of the date of issuance) currently owned or held by
such Grantor (duly endorsed in blank, if requested by the Administrative Agent)
having a face amount in excess of $500,000 individually or to the extent such
securities have a face amount exceeding $750,000 in the aggregate (including all
other negotiable documents, instruments and chattel paper then held or owned by
other Obligors).
SECTION 3.1.4. Intellectual Property Collateral. With respect
to any material Intellectual Property Collateral the loss, impairment or
infringement of which could reasonably be expected to have a Material Adverse
Effect:
(a) each Patent, Trademark or Copyright is subsisting and has
not been adjudged invalid or unenforceable, in whole or in part;
(b) such Grantor has made such filings and recordations to
protect its interest in such Intellectual Property Collateral, as are
commercially reasonable and will, if requested by the Administrative Agent to
the extent practicable, effect recordations of its interest in such Patent
Collateral and Trademark Collateral in the United States Patent and Trademark
Office and its claims to the such Copyright Collateral in the United States
Copyright Office;
(c) such Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to or has the legal right to use
such Patents, Trademarks and Copyrights, and no claim has been made that the use
of such Patents, Trademarks and Copyrights does or may violate the asserted
rights of any third party; and
(d) except as permitted by Section 4.1.4 hereof and the Loan
Documents, such Grantor has performed and will continue to perform all acts and
has paid and will continue to pay all required fees and taxes to maintain all
registered
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Patents, Trademarks and Copyrights in full force and effect in the United
States, as applicable.
SECTION 3.1.5. Validity, etc. (a) This Security Agreement is
effective to create, as collateral security for the Obligations of each Grantor,
valid and enforceable Liens on the Collateral in favor of the Administrative
Agent, for the benefit of the Lender Parties, except as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditor's rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(b) Upon the completion of the Filings (with respect to
Collateral existing on the Effective Date) and Subsequent Filings (to the extent
necessary with respect to Collateral acquired following the Effective Date for
which the Filings are not effective to perfect the Lien on such after-acquired
Collateral), and the delivery to and continuing possession by the Administrative
Agent of all instruments, investment property, chattel paper and documents a
security interest in which is (or, in the case of investment property, may be)
perfected by possession (which, in the case of such Subsequent Filings and (to
the extent required under Section 3.1.3) such instruments, chattel paper and
negotiable documents, subject to Section 3.1.1 and Section 3.1.3, shall have
occurred prior to any Credit Extensions after the initial Credit Extensions),
the Liens created pursuant to this Security Agreement will constitute valid
Liens on and (to the extent provided herein) perfected security interests in the
Collateral in favor of the Administrative Agent for the benefit of the Lender
Parties, and will be prior to all other Liens of all other Persons other than
Permitted Liens permitted pursuant to Section 7.2.3. of the Credit Agreement,
and enforceable as such as against all other Persons, except (i) to the extent
that the recording of an assignment or other transfer of title to the
Administrative Agent, or the recording of other applicable documents in the
United States Patent and Trademark Office or United States Copyright Office may
be necessary for perfection or enforceability, and (ii) as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law) or by an implied covenant of good faith and fair dealing.
Notwithstanding the foregoing, the representation set forth above shall be
deemed true and correct for all purposes so long as each Grantor has complied
with its covenants set forth under Section 4.1.1, clause(a) of Section 4.1.2
clause(e) of Section 4.1.4, and Section 4.1.7 of this Security Agreement in all
material respects, including the delivery to the Administrative Agent of
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executed financing statements for Subsequent Filings, whether or not the
Administrative Agent has caused such financing statements to be filed in the
applicable filing offices. As used in this Section, the following terms shall
have the following meanings:
"Filings": the filing or recording of the Financing Statements
relating to the Collateral existing on the Effective Date, in the places
specified in Item A.1 of Schedule I hereto.
"Financing Statements": the financing statements delivered to
the Administrative Agent by each Grantor on the date hereof for filing in the
jurisdictions listed in Item A.1 of Schedule I hereto.
"Permitted Liens": Liens permitted pursuant to the Loan
Documents, including those permitted to exist pursuant to Section 7.2.3 of the
Credit Agreement.
"Subsequent Filings": any filings after the date hereof in any
jurisdiction as may be necessary under any requirement of law to perfect a Lien
on the Collateral in favor of the Administrative Agent.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. Each Grantor covenants and
agrees insofar as the covenants contained herein are applicable to such Grantor
and its properties, that, so long as any Credit Extensions shall remain unpaid
or any Lender shall have any outstanding Commitment, each Grantor will, unless
the Required Lenders shall otherwise consent in writing, perform the obligations
set forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. Such Grantor
hereby agrees that it shall keep all the Equipment and Inventory (other than
Equipment and Inventory sold or otherwise disposed of in accordance with the
Credit Agreement and Inventory in transit) at the places therefor specified in
Section 3.1.1 or at such other places in a jurisdiction where all
representations and warranties set forth in Article III shall be true and
correct, and all action required pursuant to the first sentence of Section 4.1.7
shall have been taken with respect to the Equipment and Inventory.
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SECTION 4.1.2. As to Receivables, Etc..
(a) Such Grantor shall give the Administrative Agent a
supplement to Schedule I and Schedule VI hereto on each date a Compliance
Certificate is required to be delivered to the Administrative Agent under the
Credit Agreement, which shall set forth any changes as of such date to the
information set forth in Section 3.1.1, Section 4.1.2(b), Schedule I or Schedule
VI, as applicable. Such Grantor shall be entitled to deliver such a supplement
at other times in addition to the times set forth in the preceding sentence.
Such Grantor shall keep its place(s) of business and chief executive office and
the office(s) where it keeps its records concerning the Receivables located at
the addresses set forth in Item C of Schedule I hereto, or at such other
locations in a jurisdiction where all actions required by the first sentence of
Section 4.1.7 shall have been taken with respect to the Receivables, and shall
not change its name after the Effective Date except upon 30 days' prior written
notice to the Administrative Agent.
(b) Such Grantor shall list each of its Deposit Accounts in
Schedule VI hereto, as such Schedule is supplemented by notice to the
Administrative Agent pursuant to clause (a) of Section 4.1.2. Subject to, and
without limiting the effect of, clause (c) of this Section 4.1.2 each Grantor
shall, following and at the direction of the Administrative Agent, after an
Event of Default has occurred and only so long as an Event of Default shall be
continuing, maintain each of its Deposit Accounts pursuant to a deposit account
agreement which is in all respects satisfactory to the Administrative Agent and
which provides, among other things, that (i) until the deposit account bank
shall have received written notice from the Administrative Agent pursuant to
this clause, the deposit account bank will make all payments from the Deposit
Account as specified by such Grantor, and, after any such notice, the deposit
account bank will make all payments from the Deposit Account to the
Administrative Agent for credit to the Collateral Account, (ii) the deposit
account bank (if other than the Administrative Agent or a Lender) waives all set
off rights (other than setoff rights for reasonable and customary account
service charges and fees and amounts based on items that are dishonored by the
payor thereof and returned to the deposit account bank), and (iii) such deposit
account agreement may not be amended without the written consent of the
Administrative Agent. The Administrative Agent will not give the notice referred
to in the preceding clause (b)(i) unless it has given, or is contemporaneously
giving, notice pursuant to clause (c) of this Section. In the event that a
deposit account bank refuses to enter into a deposit account agreement in
accordance with the above listed terms within 30 days of the requesting
Grantor's request, the Administrative Agent shall have the right to
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direct such Grantor to transfer the assets in that deposit account to a bank
which will enter into a deposit account agreement in accordance with the above
listed terms.
(c) Following the occurrence and during the continuance of a
Default described Section 8.1.9 of the Credit Agreement or an Event of Default,
the Administrative Agent may give written notice to such Grantor that all
proceeds of Collateral received by such Grantor shall thereafter be delivered in
kind to the Administrative Agent for deposit to a deposit account (the
"Collateral Account") of such Grantor maintained with the Administrative Agent,
and after receipt of such notice and until such delivery such Grantor shall not
commingle any such proceeds, and shall hold separate and apart from all other
property, all such proceeds in express trust for the benefit of the
Administrative Agent until delivery thereof is made to the Administrative Agent
or until such Default or Event of Default has been cured or waived. No funds,
other than proceeds of Collateral, will be deposited in the Collateral Account.
(d) Until the Default or the Event of Default referred to in
Section 4.1.2(c) has been cured or waived, the Administrative Agent shall have
the right to apply any amount in the Collateral Account to the payment of any
Obligations which are due and payable or payable upon demand. The Administrative
Agent may at any time transfer to such Grantor's general demand deposit account
at the Administrative Agent any or all of the collected funds after an Event of
Default has occurred and so long as an Event of Default shall be continuing, in
the Collateral Account; provided, however, that any such transfer shall not be
deemed to be a waiver or modification of any of the Administrative Agent's
rights under this clause.
SECTION 4.1.3. As to Collateral.
(a) If there shall have occurred and be continuing a Default
of the nature set forth in Section 8.1.9 of the Credit Agreement or any other
Event of Default, the Administrative Agent may notify any parties obligated on
any of the Collateral to make payment to the Administrative Agent of any amounts
due or to become due thereunder and enforce collection of any of the Collateral
by suit or otherwise and surrender, release, or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not longer
than the original period) any indebtedness thereunder or evidenced thereby. Upon
request of the Administrative Agent (which request may not be made unless there
shall have occurred and be continuing a Default of the nature set forth in
Section 8.1.9 of the Credit Agreement or any other Event of Default), such
Grantor will, at its own expense, notify any
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parties obligated on any of the Collateral to make payment to the Administrative
Agent of any amounts due or to become due thereunder.
(b) The Administrative Agent is authorized to endorse, in the
name of such Grantor, any item, howsoever received by the Administrative Agent,
representing any payment on or other proceeds of any of the Collateral for
application pursuant to Section 6.1.
SECTION 4.1.4. As to Intellectual Property Collateral. Each
Grantor covenants and agrees to comply with the following provisions as such
provisions relate to any Intellectual Property Collateral to the extent material
to the operations or business of each Grantor:
(a) As to any Patent Collateral that such Grantor may acquire
following the Effective Date, such Grantor shall not, unless such Grantor shall
reasonably and in good faith determine (in which case, Grantor will, in
conjunction with the notices provided under Section 4.1.4(e), give notice of
such determination to the Administrative Agent) that any of the Patent
Collateral is of negligible economic value to such Grantor, do any act, or omit
to do any act, whereby any of the Patent Collateral may lapse or become
abandoned or dedicated to the public or unenforceable.
(b) Such Grantor shall not, and such Grantor shall not permit
any of its licensees to, unless such Grantor shall reasonably and in good faith
determine it could not reasonably be expected to have a Material Adverse Effect,
(i) fail to continue to use any of the Trademarks in order to
maintain all of the Trademarks in full force free from any claim of abandonment
for non-use,
(ii) fail to maintain substantially as in the past the quality
of products and services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademarks registered with the
United States Patent and Trademark Office with an appropriate notice of such
registration; and
(iv) do or permit any act or knowingly omit to do any act
whereby any of the Trademark Collateral may lapse or become invalid or
unenforceable.
(c) Such Grantor shall not, unless such Grantor shall either
reasonably and in good faith determine that any of the Copyright Collateral or
Trade
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Secret Collateral, respectively, do or permit any act or knowingly omit to do
any act whereby any of the Copyright Collateral or any of the Trade Secrets
Collateral may lapse or become invalid or unenforceable or placed in the public
domain except upon expiration of the end of an unrenewable term of a
registration thereof.
(d) Such Grantor shall notify the Administrative Agent
promptly if it knows, or has reason to know, that any application or
registration relating to any material Patent, Trademark or Copyright may become
abandoned or dedicated to the public or placed in the public domain or invalid
or unenforceable, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding such Grantor's ownership of any of such material
Patent, Trademark or Copyright, its right to register the same or to keep and
maintain and enforce the same, in each case, which could reasonably be expected
to have a Material Adverse Effect.
(e) Such Grantor shall notify the Administrative Agent with
each delivery of a Compliance Certificate, of the prior filing by such Grantor
of any application for the registration of any Patent, Trademark or Copyright
with the United States Patent and Trademark Office or the United States
Copyright Office, and upon request of the Administrative Agent, execute and
deliver any and all agreements, instruments, documents and papers as the
Administrative Agent may reasonably request (including a Patent Security
Agreement, a Trademark Security Agreement and a Copyright Security Agreement in
the forms of Exhibit A, Exhibit B and Exhibit C hereto, as applicable) to
evidence the Administrative Agent's security interest in such Patent, Trademark
or Copyright and the goodwill and general intangibles of each Grantor relating
thereto or represented thereby.
(f) Such Grantor shall take all commercially reasonable steps,
including in any proceeding before the United States Patent and Trademark Office
or the United States Copyright Office to maintain and pursue any application
(and to obtain the relevant registration) filed with respect to, and to maintain
any registration of, any material Patent, Trademark or Copyright, including the
filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and
the payment of fees and taxes (except to the extent that dedication, abandonment
or invalidation is permitted under the foregoing clauses (a), (b) and (c)).
SECTION 4.1.5. Intentionally Omitted.
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SECTION 4.1.6. Intentionally Omitted.
SECTION 4.1.7. Further Assurances, etc. Such Grantor agrees
that, from time to time at its own expense, such Grantor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or that the Administrative Agent may reasonably request,
in order to perfect, preserve and protect any security interest granted or
purported to be granted hereby in Collateral located in the United States or to
enable the Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, such Grantor will
(a) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices
(including, without limitation, any assignment of claim form under or pursuant
to the federal assignment of claims statute, 31 U.S.C. Section 3726, any
successor or amended version thereof or any regulation promulgated under or
pursuant to any version thereof with respect to any Collateral the value of
which exceeds $500,000, as the Administrative Agent may reasonably request, in
order to perfect and preserve the security interests and other rights granted or
purported to be granted to the Administrative Agent hereby; and
(b) furnish to the Administrative Agent, from time to time at
the Administrative Agent's reasonable request, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security
interest hereunder, such Grantor hereby authorizes the Administrative Agent to
file one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of such
Grantor where permitted by law. A carbon, photographic or other reproduction of
this Security Agreement or any financing statement covering the Collateral or
any part thereof shall be sufficient as a financing statement where permitted by
law.
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ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact.
Each Grantor hereby irrevocably appoints the Administrative Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time in the
Administrative Agent's discretion following the occurrence and during the
continuance of an Event of Default and notice to such Grantor, to take any
action and to execute any instrument which the Administrative Agent may deem
necessary or advisable to accomplish the purposes of this Security Agreement,
including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquaintance and receipts for moneys due and to become due
under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a) above;
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the rights of
the Administrative Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of such Grantor
hereunder (including all obligations of such Grantor pursuant to Section 4.1.7).
Such Grantor hereby acknowledges, consents and agrees that the
power of attorney granted pursuant to this Section is irrevocable and coupled
with an interest; provided, that the foregoing power of attorney shall terminate
upon the release of the Administrative Agent's Liens on all Collateral pursuant
to Section 2.3.
SECTION 5.2. Administrative Agent May Perform. If any Grantor
fails to perform any agreement contained herein within 30 days after written
notice from the Administrative Agent, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by such
Grantor pursuant to Section 6.2.
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SECTION 5.3. Administrative Agent Has No Duty. In addition to,
and not in limitation of, Section 2.4, the powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Lender Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Administrative Agent is
required to exercise reasonable care in the custody and preservation of any of
the Collateral in its possession; provided, however, the Administrative Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral, if it takes such action for that purpose
as each Grantor reasonably requests in writing at times other than upon the
occurrence and during the continuance of any Event of Default, but failure of
the Administrative Agent to comply with any such request at any time shall not
in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall
have occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require each Grantor to, and each Grantor hereby agrees
that it will, at its expense and upon request of the Administrative Agent
forthwith, assemble all or part of the Collateral as directed by the
Administrative Agent and make it available to the Administrative Agent at a
place to be designated by the Administrative Agent which is reasonably
convenient to both parties; and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Administrative Agent's offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the Administrative Agent
may deem commercially reason-
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able. Each Grantor agrees that, to the extent notice of sale shall be required
by law, at least ten days' prior notice to each Grantor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Administrative Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(b) All cash proceeds received by the Administrative Agent in
respect of any sale of, collection from or other realization upon all or any
part of the Collateral may, in the discretion of the Administrative Agent, be
held by the Administrative Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Administrative
Agent pursuant to Section 6.2) in whole or in part by the Administrative Agent
for the benefit of the Lender Parties against, all or any part of the
Obligations as follows: (i) first, to the reason able out-of-pocket costs and
expenses of the Administrative Agent in connection with the retaking, holding,
preparing for sale, selling or other disposition of the Collateral, including,
without limitation, all court costs and the reasonable fees and expenses of its
agents and legal counsel; (ii) second, to the payment in full of the Obligations
or in the event that such proceeds are insufficient to pay in full the
Obligations, equally and ratably in accordance with each Lender's respective
amounts owing to it under or pursuant to the Credit Agreement or any other Loan
Document, or under or pursuant to any Rate Protection Agreement (as to each
Lender, applied first to fees and expense reimbursements then due to such
Lender, then to interest due to such Lender, then to pay or prepay principal of
the Loans or owing to, or to reduce the "credit exposure" of, such Lender under
such Rate Protection Agreement, as the case may be, then to pay (or cash
collateralize) the remaining obligations); (iii) third, without duplication of
any amounts paid pursuant to clause (ii) above, to the Indemnified Parties to
the extent of any amounts owing pursuant to Section 10.4 of the Credit
Agreement; and (iv) fourth, to each Grantor, or its successors and assigns, or
whomever may be lawfully entitled to receive the same, of any surplus then
remaining. For purposes of this Agreement, the "credit exposure" at any time of
any Lender under a Rate Protection Agreement to which such Lender is a party
shall be determined at such time in accordance with the customary methods of
calculating credit exposure under similar arrangements by the counterparty to
such arrangements, taking into account potential interest rate movements,
mitigating factors such as other interest rate swaps, caps, collars and hedges,
and the respective termination provisions and notional principal amount and term
of such Rate Protection Agreement. The Grantor shall remain liable to the
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Lenders for any deficiency. If the Administrative Agent has funds available to
apply to a portion of, but not all of, one of the amounts described in clauses
(i) through (iv) above, then the Administrative Agent shall apply such funds to
the applicable parties in proportion to the amounts to which such parties would
have been entitled if the entire amount described in any such clause had been
available.
SECTION 6.2. Indemnity and Expenses.
(a) Each Grantor jointly and severally agrees to indemnify the
Administrative Agent from and against any and all claims, losses and liabilities
arising out of or resulting from this Security Agreement (including, without
limitation, enforcement of this Security Agreement), except claims, losses or
liabilities resulting from the Administrative Agent's gross negligence or
willful misconduct.
(b) Each Grantor will upon demand pay to the Administrative
Agent the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel (but not more than one firm and all local
or special expert counsel, if any, who may be retained by counsel to the
Administrative Agent) and of any experts and agents, which the Administrative
Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the
Administrative Agent or the Lender Parties hereunder, or
(iv) the failure by such Grantor to perform or observe any of
the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof.
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SECTION 7.2. Amendments; etc. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent (on behalf of the Lenders or the Required
Lenders, as the case may be) and each Grantor (other than with respect to
consent or waiver), and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other
communications provided to each Grantor under this Security Agreement shall be
in writing or by facsimile and addressed, delivered or transmitted to each
Grantor at its address or facsimile number as set forth in the Subsidiary
Guaranty, or at such other address or facsimile number as may be designated by
such Grantor in a notice to the other parties. Any notice, if mailed and
properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when transmitted.
SECTION 7.4. Section Captions. Section captions used in this
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of
this Security Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.
SECTION 7.6. Governing Law, Entire Agreement, etc. THIS
SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL 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. THIS SECURITY AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SU-
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PERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.7 Counterparts. This Security Agreement may be
executed by the parties hereto in any number of counterparts, each of which
shall be deemed an original and all of which shall constitute together but one
and the same agreement.
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IN WITNESS WHEREOF, each Grantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
WINCHESTER PASTA, LLC
By: /s/ James Bohenick
Name: James Bohenick
Title: Vice President, Finance
and Chief Financial Officer
PASTA GROUP, LLC
By: /s/ James Bohenick
Name: James Bohenick
Title: Vice President, Finance
and Chief Financial Officer
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By: /s/ Robert Gaviglio
Name: Robert Gaviglio
Title: Senior Relationship Manager
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EXHIBIT 10.7
EXECUTION COPY
TRANSITIONAL SERVICES AGREEMENT
This TRANSITIONAL SERVICES AGREEMENT (this "Agreement") is
made as of January 28, 1999, by and between HERSHEY FOODS CORPORATION, a
Delaware corporation ("HFC"), and NEW WORLD PASTA COMPANY, a Delaware
corporation ("NWPC");
W I T N E S S E T H:
WHEREAS, pursuant to that certain Recapitalization Agreement,
dated as of December 15, 1998, by and among HFC, NWPC, Hershey CRE, Inc., New
World Pasta, LLC and Joseph Littlejohn and Levy Fund III, L.P. (the
"Recapitalization Agreement"), the parties agreed to recapitalize NWPC following
the contribution of the Assets to NWPC and the assumption of the Assumed
Liabilities by NWPC (each term as defined in the Recapitalization Agreement);
and
WHEREAS, in connection therewith, NWPC and HFC each desire
that HFC provide NWPC with certain transition services as set forth herein; and
WHEREAS, in connection therewith, NWPC and HFC each desire
that NWPC provide HFC with certain transition services as set forth herein; and
WHEREAS, capitalized terms used herein and not otherwise
defined herein have the meanings given to such terms in the Recapitalization
Agreement;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, HFC and NWPC agree as follows:
1. Transition Services. During the term of this Agreement as
set forth in Section 5 below (the "Transition Period"), HFC shall provide, or
cause its Affiliates to provide, to NWPC from the date of this Agreement and for
the period of time described on Annex A attached hereto with respect to each of
the services, the services set forth on such Annex A, in the manner and at a
relative level of service consistent in all material respects with that provided
by HFC or its Affiliates to or for the benefit of the Business immediately prior
to the date hereof. Such services shall be provided at the costs set forth in
Annex A. In addition, NWPC shall also pay the prorated equitable portion
reasonably determined by HFC of any amounts that are required to be paid to any
licensors of software that is used in connection with the provision of any
service hereunder that HFC identifies as being payable following the date hereof
and that are not reflected in the payments to be made to HFC pursuant to Annex A
or that any such licensor requires HFC to pay following the date hereof, and any
amounts that are required to be paid to any such licensors to obtain the consent
of such licensor to provide any of the services hereunder. Subject to the
immediately preceding sentence, HFC shall use reasonable efforts to obtain any
consents that may be required from any such licensor in order to provide any of
the services hereunder. During the term of this Agreement,
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NWPC shall provide to HFC the transition services regarding crisped rice on the
terms and conditions as set forth in Item 9 of Annex A.
2. Billing and Payment. NWPC shall promptly pay (a) in advance
the facilities rental amounts set forth in Section 1 of Annex A on a monthly
basis and (b) all bills and invoices that it receives from HFC or its Affiliates
for the other services provided under or pursuant to this Agreement. The amounts
referenced in clause (a) above shall be paid prior to the commencement of the
particular month. The charges referenced in clause (b) above will be billed by
HFC to NWPC at the end of each calendar month during the Transition Period. HFC
shall promptly pay all bills and invoices that it receives from NWPC or its
Affiliates for the services provided under or pursuant to Item 9 of Annex A. All
such invoices shall be paid not later than ten (10) days following receipt by
NWPC of HFC's invoice or HFC of NWPC's invoice, as applicable. All payments will
be made by wire transfer or by check in accordance with the instructions
provided by the receiving party (in writing to the other party).
3. General Intent. Each Party shall use its reasonable
commercial efforts to provide the transition services it is to provide that are
set forth on Annex A attached hereto and such other transition assistance as the
parties may otherwise agree for the periods specified on Annex A (with respect
to such additional services, at a cost and for such period as is mutually
agreed). NWPC agrees to use its reasonable commercial efforts to end its need to
use such assistance as soon as reasonably possible and (unless the parties
otherwise agree) in all events to end such need with respect to each service
specified in Annex A attached hereto not later than six (6) months from the date
hereof, or such shorter period as may be specified in Annex A attached hereto
for the provision of each such service.
4. Validity of Documents. The parties hereto shall be entitled
to rely upon the genuineness, validity or truthfulness of any document,
instrument or other writing presented in connection with this Agreement unless
such document, instrument or other writing appears on its face to be fraudulent,
false or forged.
5. Term of Agreement. The term of this Agreement shall
commence on the date hereof and shall continue (unless sooner terminated
pursuant to the terms hereof) for a period of six (6) months, or such shorter
period as may be provided in Annex A attached hereto with respect to particular
services described in Annex A attached hereto.
6. Partial Termination. The provision of one or more of the
services provided by HFC and/or its Affiliates hereunder or by NWPC and/or its
Affiliates hereunder may be terminated earlier than the period specified in
Annex A attached hereto and certain services specifically identified on such
schedule as being subject to extension may be extended by NWPC, in any such
case, on not less than twenty (20) days' prior written notice to the party
providing such services. As soon as reasonably practicable following receipt of
any such notice, HFC shall advise NWPC as to whether termination or extension of
such service will require the termination or partial termination or extension or
partial extension of, or otherwise affect the provision of, certain other
services specified in Annex A attached hereto. If such is the case, NWPC may
withdraw its termination or extension notice. Otherwise, such termination or
extension shall be final as of such twentieth day or other later date specified
in the applicable notices.
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7. Inventions. Any inventions, discoveries, improvements, or
developments ("Inventions"), whether or not patentable, relating to the services
to be provided hereunder which are conceived or reduced to practice by HFC's
personnel during the Transition Period, shall be the sole and exclusive property
of HFC; provided, however, that HFC shall grant NWPC a nonexclusive, perpetual,
irrevocable, worldwide, royalty-free right and license to make, have made, use,
have used and sell products in connection with the Business which embody or
otherwise use such Inventions.
8. Assignment. Except as set forth below, this Agreement and
any rights and obligations hereunder shall not be assignable or transferable by
NWPC or HFC (including by operation of law in connection with a merger or sale
of stock, or sale of substantially all the assets, of NWPC without the prior
written consent of the other party and any purported assignment without such
consent shall be void and without effect; provided, however, that without the
consent of HFC, NWPC may assign its rights hereunder (i) to one or more
wholly-owned subsidiaries of NWPC and (ii) but not its obligations hereunder, as
collateral under a security interest in favor of the Lenders under the
Commitment Letters or any other financing source of NWPC, upon written notice of
such assignment to HFC.
9. Confidentiality. Each party shall cause each of its
Affiliates and each of their officers, directors and employees to hold all
information relating to the business of the other party disclosed to it by
reason of this Agreement confidential and will not disclose any of such
information to any party unless legally compelled to disclose such information;
provided, however, that to the extent that any of them may become so legally
compelled they may only disclose such information if they shall first have used
reasonable efforts, and, if practicable, shall have afforded the other party the
opportunity, to obtain an appropriate protective order or other satisfactory
assurance of confidential treatment for the information required to be so
disclosed.
10. Limitation of Liability. HFC shall not be liable to NWPC
or any third party (including specifically employees of NWPC) and NWPC shall not
be liable to HFC or any third party (including specifically employees of HFC)
for any special, punitive, consequential, incidental or exemplary damages
(including lost or anticipated revenues or profits relating to the same) arising
from any claim relating to this Agreement or any of the services provided
hereunder, whether such claim is based on warranty, contract, tort (including
negligence or strict liability) or otherwise, even if an authorized
representative of HFC or NWPC, as applicable, is advised of the possibility or
likelihood of the same. In addition, HFC shall not be liable to NWPC or any
third party (including specifically employees of NWPC) and NWPC shall not be
liable to HFC or any third party (including specifically employees of HFC) for
any direct damages arising from any claim relating to this Agreement or any of
the services provided hereunder or required to be provided hereunder, except to
the extent that such direct damages are caused by the willful misconduct or
gross negligence of HFC or its Affiliates or NWPC or its Affiliates, as
applicable.
11. Notices. All notices, reports and receipts shall be in
writing and shall be deemed duly given on (i) the date of personal or courier
delivery; (ii) the date of transmission by telecopy or other electronic
transmission service, provided a confirmation copy is also sent no later than
the next business day by postage paid, return receipt requested first-class
mail; or (iii) three (3) business days after the date of deposit in the United
States mails, by postage paid, return receipt requested first-class mail,
addressed as follows:
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(i) if to NWPC,
New World Pasta Company
c/o Hershey Foods Corporation
100 Crystal A Drive
Hershey, Pennsylvania 17033
Telecopy No.: (717) 534-7643
Attention: C. Mickey Skinner
Mark E. Kimmel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy No.: (212) 735-3594
Attention: J. Gregory Milmoe
(ii) if to HFC,
Hershey Foods Corporation
100 Crystal A Drive
Hershey, Pennsylvania 17033
Telecopy No.: (717) 534-7873
Attention: William F. Christ
Robert M. Reese, Esq.
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Telecopy No.: (212) 446-4900
Attention: Glen E. Hess, P.C.
Either party may change its address by written notice to the
other party in accordance with this Section 11.
12. Modification; Nonwaiver. No alleged waiver, modification
or amendment to this Agreement or to Annex A attached hereto shall be effective
against either party hereto, unless in writing, signed by the party against
which such waiver, modification or amendment is asserted, and referring
specifically to the provision hereof alleged to be waived, modified or amended.
The failure or delay of either party to insist upon the other party's strict
performance of the provisions in this Agreement or to exercise in any respect
any right, power, privilege or remedy provided for under this Agreement shall
not operate as a waiver or relinquishment thereof, nor shall any single or
partial exercise of any right, power, privilege or remedy preclude other or
further exercise thereof,
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or the exercise of any other right, power, privilege or remedy; provided,
however, that the obligations and duties of either party with respect to the
performance of any term or condition in this Agreement shall continue in full
force and effect.
13. Relationship of Parties. Except as specifically provided
herein, none of the parties shall act or represent or hold itself out as having
authority to act as an agent or partner of the other parties, or in any way bind
or commit the other party to any obligations. Nothing contained in this
Agreement shall be construed as creating a partnership, joint venture, agency,
trust or other association of any kind, each party being individually
responsible only for its obligations as set forth in this Agreement.
14. Force Majeure. If HFC or NWPC, as applicable, is prevented
from complying, either totally or in part, with any of the terms or provisions
of this Agreement by reason of fire, flood, storm, strike, lockout or other
labor trouble, any law, order, proclamation, regulation, ordinance, demand or
requirement of any governmental authority, riot, war, rebellion or other causes
beyond the reasonable control of HFC or NWPC, as applicable, or other acts of
God, then upon written notice to NWPC or HFC, as applicable, the affected
provisions and/or other requirements of this Agreement shall be suspended during
the period of such disability and HFC shall have no liability to NWPC or HFC, as
applicable, or any other party in connection therewith. HFC shall make all
commercially reasonable efforts to remove such disability within thirty (30)
days of giving notice of such disability.
15. Interpretation. The headings and captions contained in
this Agreement and in Annex A attached hereto are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
The use of the word "including" herein shall mean "including without
limitation."
16. Counterparts. This Agreement may be executed in one or
more counterparts (including by means of telecopied signature pages), all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to the other party.
17. Entire Agreement. This Agreement and the Recapitalization
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, relating to such subject
matter.
18. Representation by Counsel; Interpretation. HFC and NWPC
acknowledge that each of them has been represented by counsel in connection with
this Agreement and the transactions contemplated hereby. Accordingly, any rule
of law or any legal decision that would require interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived.
19. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid and effective under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held
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invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
20. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania, without regard to the conflicts of law principles therein. Any
dispute arising from or in connection with this Agreement shall be subject to
the provisions of Sections 31 and 32 of the Recapitalization Agreement.
21. Annex A. Annex A attached hereto and referred to herein is
hereby incorporated in and made a part of this Agreement as if set forth in full
herein.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Transitional
Services Agreement to be executed by their duly authorized representatives as of
the date and year first set forth above.
HERSHEY FOODS CORPORATION
By: /s/ William Christ
Name: William Christ
Title: Chief Financial Officer
NEW WORLD PASTA COMPANY
By: /s/ Robert Reese
Name: Robert Reese
Title: Vice President and Assistant Secretary
<PAGE> 1
EXHIBIT 10.8
PROCUREMENT AGREEMENT
by and between
NEW WORLD PASTA COMPANY
and
MILLER MILLING COMPANY
January 28, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS......................................................1
1.1 Procurement Contracts................................2
1.2 Contract Goods.......................................2
1.3 Contract Services....................................2
1.4 Contract Goods Requirements..........................2
1.6 Plant................................................2
1.7 Procurement Services.................................2
ARTICLE 2. PROCUREMENT......................................................3
2.1 Procurement/Quantity.................................3
2.2 Quality Requirements of Individual Purchases.........3
2.3 Procurement of Contract Goods and Contract
Services Supplied by Miller's Mills................4
2.4 Permits and Licenses.................................4
2.5 Price................................................4
2.6 Payment..............................................4
2.7 Notice of Flour Requirements.........................4
2.8 Delivery of Contract Goods and Contract Services.....5
2.9 Purchase and Manufacturing Records...................5
2.10 Inspection...........................................5
2.11 Force Majeure........................................5
I
<PAGE> 3
2.12 Fee for Procurement Services.........................5
ARTICLE 3. RESPECTIVE RIGHTS, TERMINATION AND TRANSFER......................6
3.1 Term.................................................6
3.2 Breach of Obligations/Termination by NWP.............6
3.3 Termination by Miller................................6
3.4 Indemnification by NWP...............................6
3.5 Indemnification by Miller............................7
ARTICLE 4. GENERAL PROVISIONS...............................................7
4.1 Governing Law........................................7
4.2 Notices..............................................7
4.3 Terms of Sale........................................8
4.4 Breach of Agreement..................................8
4.5 Confidentiality......................................8
4.6 Arbitration..........................................8
4.7 Binding Effect and Assignment........................8
4.8 Severability.........................................9
4.9 Counterparts.........................................9
4.10 Integration..........................................9
ii
<PAGE> 4
LIST OF EXHIBITS
Exhibit A - Specifications
iii
<PAGE> 5
PROCUREMENT AGREEMENT
THIS PROCUREMENT AGREEMENT ("Agreement") is made and entered into
effective as of the 28th day of January, 1999, by and among MILLER MILLING
COMPANY, a Minnesota corporation ("Miller"), and NEW WORLD PASTA COMPANY f/k/a
HERSHEY PASTA MANUFACTURING COMPANY, a Delaware corporation ("NWP"). RECITALS
A. NWP is in the business of manufacturing distributing and selling dry
pasta and egg noodles (the "Business").
B. NWP needs to purchase substantial quantities of semolina and durum
wheat flours for use in its Business.
C. NWP owns and operates manufacturing plants in Fresno, CA, Kansas City,
KS, Omaha, NE, Lebanon, PA, Winchester, VA, and Louisville, KY ("Plant" and
"Plants").
D. Miller and NWP (as successor in interest to Hershey Pasta & Grocery
Group, a division of Hershey Foods Corporation) are parties to certain Mill
Agreements (as defined below) concerning the production and supply of semolina
and durum flour to NWP.
E. Pursuant to the Mill Agreements, NWP is required to buy and Miller is
required to supply Flour to NWP primarily for NWP's Fresno, CA, Winchester, VA,
and Lebanon, PA Plants.
F. Miller has constructed and is operating a flour mill in Fresno, CA (the
"Fresno Mill") and a flour mill in Winchester, VA (the "Winchester Mill")
(collectively, the "Mills") for the purpose of satisfying its obligations under
the Mill Agreements.
G. Miller is willing to assist NWP in the procurement of semolina, durum,
and milling, processing, transportation and other services reasonably necessary
for NWP to have an adequate supply of semolina and durum wheat flours for NWP's
production of pasta and egg noodles and NWP desires to have Miller assist NWP in
such procurements.
Now therefore, in consideration of the forgoing recitals which are
incorporated herein by reference and the mutual covenants and agreements herein
contained, and intending to be legally bound, it is agreed by and between the
parties hereto as follows:
ARTICLE 1.
DEFINITIONS
For the purposes of this Agreement, the following definitions shall have
the meanings set forth below:
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1.1 Procurement Contracts. The term "Procurement Contract" or "Procurement
Contracts" means any contract entered into by Miller either directly or
indirectly on behalf of or for the benefit of NWP pursuant to this Agreement.
1.2 Contract Goods. The term "Contract Goods" shall mean collectively
semolina and durum wheat flours, other wheat products and other ingredients,
e.g. calcium, enrichment and other flour additives requested by NWP used by NWP
to manufacture pasta and egg noodles other than Contract Goods provided by
Miller pursuant to the Mill Agreements while such Mill Agreements are in effect.
Contract Goods shall not include eggs, coloring, flavoring, packing, advertising
or related items.
1.3 Contract Services. The term "Contract Services" shall mean
collectively contracts for milling of durum wheat or other services including,
but not limited to, transportation, storage, testing, contract production of
wheat, execution of futures and hedging contracts, and other related services as
agreed to from time to time between the parties other than Contract Services
provided by Miller pursuant to the Mill Agreements.
1.4 Contract Goods Requirements. "Contract Goods Requirements" shall mean
the Contract Goods needs of the Plants as ordered by NWP from time to time as
provided herein.
1.5 Mill Agreements. "Mill Agreements" that certain Mill Agreement dated
January 28, 1999, between Miller and NWP which agreement superseded that certain
Amended and Restated Mill Agreement between Hershey Pasta & Grocery Group and
Miller dated July 29, 1998, and that certain Amended and Restated Mill Agreement
between Hershey Pasta & Grocery Group and Miller dated March, 1998, as amended
First Amendment thereto dated January 28, 1999 which was assigned to and assumed
by NWP.
1.6 Plant. The term "Plant" or "Plants" shall mean NWP's pasta production
facilities located anywhere in North America currently existing or hereafter
acquired or built.
1.7 Procurement Services. The term "Procurement Services" means the
services and activities to be provided by Miller pursuant to this Agreement
including but not limited the procurement of Contract Goods and Contract
Services.
1.8 Semolina. The flour produced from durum wheat which meets NWP
specifications. It is recognized that there is a Standard of Identity for
semolina promulgated by the U.S. Food and Drug Administration.
2
<PAGE> 7
ARTICLE 2.
PROCUREMENT
2.1 Procurement/Quantity. During the term of this Agreement and subject to
the further terms of this Agreement, Miller agrees to provide Procurement
Services to procure for the benefit of NWP Contract Goods and Contract Services
which NWP shall require during the Term to fulfill its Contract Goods
Requirements for the operation of its Business. NWP agrees to procure all such
Contract Goods and Contract Services during the Term exclusively through Miller
for so long as Miller is not in breach of its material obligations under this
Agreement. The Procurement Services shall include not only the direct
procurement in the name of Miller of Contract Goods, but shall also include the
procurement for and in the name of NWP with the consent of NWP. Such Contract
Goods shall be procured by Miller on such terms and conditions as Miller and NWP
shall agree to from time to time in the exercise of their reasonable business
judgment after giving due consideration of the Contract Goods Requirements as
communicated from time to time by NWP to Miller in writing.
2.2 Quality Requirements of Individual Purchases.
2.2.1 The Contract Goods procured by Miller for and in the name of
NWP pursuant to this Agreement shall be of a quality in accordance with
the specifications set forth in Exhibit A (the "Specification"). The
Specifications shall be changed if required by law or regulation or at
NWP's election. If NWP elects to change the specifications for Contract
Goods, it shall give Miller at least thirty (30) days prior written
notice. Such change shall apply only to Contract Goods purchased after the
change in the Specification for which Procurement Contracts have not been
entered into prior to the date on which Miller receives written notice of
such changes. If any change in the specifications results in increased
costs to Miller in providing Contract Goods and such cost increase is
documented by records kept in the ordinary course of business, then Miller
shall negotiate notify NWP of such increased costs as soon as practicable
after they become known to Miller.
2.2.2 The Contract Goods and Contract Services procured by Miller
for the benefit of NWP under the terms of this Agreement shall also
conform to all applicable federal, state and local laws and regulations.
2.2.3 Miller shall by contract, require all millers providing
Contract Goods and Contract Services to manufacture such Contract Goods in
accordance with good manufacturing practices and to maintain its mill and
related facilities in a sanitary, food grade status.
2.2.4 NWP may reject any Contract Goods which fail to comply with
the provisions of this Section and all contracts pertaining to the supply
of such Contract Goods shall require the supplier to retrieve, as
necessary, all such non-conforming Contract Goods and bear all costs and
expenses associated with such non-conforming Contract Goods, including but
not
3
<PAGE> 8
limited to, reimbursement to NWP for any costs involved in handling or
processing such Contract Goods, retrieval of such Contract Goods, costs
and expenses incurred by NWP in connection with the handling of
work-in-process or finished goods utilizing such non-conforming Contract
Goods. Costs and expenses incurred in connection with Contract Goods shall
be borne by Miller only to the extent NWP can reasonably demonstrate that
the problem with the finished goods arose from Miller's willful or
negligent failure to comply its obligations under this Article. Miller
shall be responsible for handling all claims against suppliers of Contract
Goods and Contract Services.
2.3 Procurement of Contract Goods and Contract Services Supplied by
Miller's Mills. Miller may procure Contract Goods and Contract Services from
Miller's mills provided however, that the price to be paid by NWP for such
Contract Goods shall not exceed the cost at which goods of similar kind, quality
and timeliness may be procured from sources other than Miller's Mills FOB NWP's
Plant or Plants. Nothing contained in this Section shall affect the terms on
which Miller supplies Contract Goods and/or Contract Services to NWP's Plants in
Winchester, VA, Fresno, CA and Lebanon, OH pursuant to the terms of the Mill
Agreements.
2.4 Permits and Licenses. Miller shall acquire and maintain all material
licenses and permits required for the procurement of the Contract Goods and
Contract Services and shall require all suppliers of Contract Goods and Contract
Services to acquire and maintain all material licenses and permits required for
handling, processing and production of the Contract Goods or Contract Services.
NWP shall exercise reasonable commercial judgment in obtaining and maintaining
necessary and material licenses and permits for the operation of the Plant.
2.5 Price. Miller shall use reasonable commercial efforts to procure the
Contract Goods and Contract Services [Confidential Treatment Requested by New
World Pasta Company].
2.6 Payment. Payment terms for Contract Goods and Contract Services
procured pursuant to this Agreement shall be on the same terms as required or
permitted by the suppliers or as otherwise agreed upon between the parties. NWP
shall timely pay for all Contract Goods and Contract Services procured for NWP
by Miller pursuant to this Agreement. Payment shall be made either to Miller or
the supplier of the Contract Goods and Contract Services as Miller and NWP shall
agree from time to time.
2.7 Notice of Flour Requirements. On or before the 20th day of each month,
or other schedule that the parties agree upon, NWP shall use reasonable efforts
to give a nonbinding delivery schedule to Miller, in writing or by telephone,
forecasting the type and quantity of Contract Goods and Contract Services which
NWP shall require at each Plant. Miller shall use reasonable commercial efforts
to procure Contract Goods and Contract Services in accordance with NWP's actual
order. The parties recognize that sales of pasta products in which the Contract
Goods and Contract Services will be utilized are seasonal in nature. Therefore,
NWP cannot plan or predict with certainty its need for Contract Goods. Such
forecast by NWP, therefore, shall not be binding on NWP with respect to the
amount of Contract Goods which are actually ordered.
4
<PAGE> 9
2.8 Delivery of Contract Goods and Contract Services. Miller shall use
reasonable commercial efforts to cause all Procurement Contracts for the
delivery of Contract Goods and Contract Services procured by Miller pursuant
hereto to require the delivery of Contract Goods and Contract Services to NWP at
such times as shall be ordered by NWP.
2.9 Purchase and Manufacturing Records. Miller shall keep complete, true
and accurate records and accounts with respect to all matters and inputs
affecting the procurement of Contract Goods and Contract Services, including but
not limited to, records with respect to purchasing and transporting of Contract
Goods and Contract Services, such records to be kept in accordance with
generally accepted accounting principles applied on a consistent basis from year
to year. NWP or its representatives shall have the right to audit such records
and accounts after reasonable prior notice to Miller, and Miller shall provide
NWP with monthly statements of such matters in such form as shall be reasonably
requested by NWP.
2.10 Inspection. Each Procurement Contract pertaining to the procurement
of Contract Goods and Contract Services shall afford Miller and NWP with
reasonable access to all production facilities providing or supplying Contract
Goods and Contract Services at any time during operating hours after reasonable
notification by NWP or Miller. Miller and NWP shall promptly notify the other of
the results of any and all of their respective inspections of any such
facilities. Each Procurement Contract for Contract Goods and Contract Services
shall require such supplier to provide to Miller and NWP the result of any
inspections by any regulatory or industry authority. Further, each Procurement
Contract shall require the supplier to immediately notify Miller and NWP of any
deficiencies, sanitation or quality problems in incoming grain, operations or
Contract Goods identified by Miller, regulatory authorities or any third party.
2.11 Force Majeure. Miller and NWP shall be excused from performance of
the purchase and supply provisions of this Article II by reason of circumstances
beyond their control, including, but not limited to, acts of God, disaster,
fire, floods, the elements, lockouts, strikes, embargoes, governmental acts,
wars (declared or undeclared) and riots. The party experiencing such force
majeure shall provide prompt notice to the other party and its performance shall
be excused during the existence of such force majeure. The party experiencing
such force majeure shall use its best efforts to remove, rectify or correct such
force majeure and if the force majeure extends for longer than eighteen (18)
months, the other party shall have the option of terminating this Agreement upon
written notice. Nothing contained herein shall impose any liability on Miller
for any failure of any supplier of Contract Goods to satisfy the its obligations
under any contract to provide Contract Goods.
2.12 Fee for Procurement Services. In consideration of the Procurement
Services provided by Miller, NWP shall pay Miller a minimum annual [Confidential
Treatment Requested by New World Pasta Company]. Such fees shall be paid by NWP
within thirty (30) business days after NWP's receipt from Miller of Miller's
invoice for such fees and expenses. The Minimum Fee shall be increased on each
anniversary of this Agreement [Confidential Treatment Requested by New
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<PAGE> 10
World Pasta Company]. Further, within ninety days after each anniversary of the
date hereof (or at the election of the parties, each calendar year) the parties
shall adjust the Minimum Fee [Confidential Treatment Requested by New World
Pasta Company].
ARTICLE 3.
RESPECTIVE RIGHTS, TERMINATION AND TRANSFER
3.1 Term. The Initial Term of this Agreement shall expire on [Confidential
Treatment Requested by New World Pasta Company]. On or before [Confidential
Treatment Requested by New World Pasta Company], and on or before [Confidential
Treatment Requested by New World Pasta Company] of each year thereafter, either
party may deliver notice to the other that such party has elected to terminate
this Agreement effect as of following December 31. Absence such notice this
Agreement shall continue from year to year until terminated as provided herein.
3.2 Breach of Obligations/Termination by NWP. Failure of Miller to comply
with any of its obligations or conditions herein contained, shall be a default
and shall entitle NWP to give Miller written notice to cure such default. If any
such default is not cured within thirty (30) days after receipt of such written
notice, NWP shall be entitled to terminate this Agreement by giving written
notice to take effect immediately.
3.3 Termination by Miller. Failure of NWP to comply with any of its
obligations or conditions herein contained, or in any Procurement Contract for
the Contract Goods or Contract Services procured under this Agreement,
including, but not limited to failure to purchase or pay for Contract Goods,
shall be a default and shall entitle Miller to give NWP written notice to cure
such default. If any such default is not cured within thirty (30) days after
receipt of such written notice, Miller shall be entitled to terminate this
Agreement by giving written notice to take effect thirty (30) days after such
notice.
3.4 Indemnification by NWP. NWP shall indemnify, defend and hold Miller,
its officers, directors, employees and agents harmless from any and all claims,
liabilities, losses, judgments, costs, injuries, damages, deficiencies and
expenses incurred by Miller (including reasonable attorneys' fees), in
connection with, arising out of, resulting from or related or incident to any
breach or non-fulfillment of any covenant or agreement of NWP under this
Agreement.
3.5 Indemnification by Miller. Miller shall indemnify, defend and hold
NWP, its officers, directors, employees and agents harmless from any and all
claims, liabilities, losses, judgments, costs, injuries, damages, deficiencies
and expenses incurred by NWP (including reasonable attorneys' fees), in
connection with, arising out of, resulting from or related or incident to
Miller's breach or non-fulfillment of any covenant or agreement of Miller under
this Agreement.
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ARTICLE 4.
GENERAL PROVISIONS
4.1 Governing Law. The parties hereto acknowledge that this Agreement was
made under, and shall be governed by the laws of the State of Minnesota without
regard to such state's rules regarding conflicts of laws.
4.2 Notices. Notices under this Agreement shall be in writing and may be
delivered by hand or sent by mail, courier or facsimile. Notices by mail shall
be sent by United States registered or certified mail, postage prepaid, return
receipt requested, and shall be deemed delivered five (5) days after date of
mailing. Notices sent by facsimile shall be deemed given on the date
transmitted; provided that (i) the sender receives a written confirmation to
verify the transmission, and (ii) the sender also delivers a copy of the notice
to the other party by overnight courier. Notices sent by a courier shall be
deemed delivered on the date of receipt or the date delivery is refused by the
intended recipient as evidenced by the courier's records. Notices shall be sent
to the parties at the addresses set forth below, or at such other addresses or
persons as the party may from time to time designate by written notice to the
other party:
If to Miller: Miller Milling Company
880 Grain Exchange Building
Minneapolis, Minnesota 55415
Attention: President
With a copy to: Michael L. Snow, Esquire
Maslon Edelman Borman & Brand
3300 Norwest Center
Minneapolis, Minnesota 55402
If to NWP: New World Pasta Company
P. O. Box 820
Hershey, PA 17033
Attention: Chief Executive Officer
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With a copy to: New World Pasta Company
P.O. Box 820
Hershey, PA 17033
Attention: General Counsel
VP of Corporate Development and
Administration
4.3 Terms of Sale. Except as otherwise provided in this Agreement or in
any particular contract for the purchase and delivery of any particular quantity
of Contract Goods, all sales of Contract Goods shall be governed by the Uniform
Commercial Code.
4.4 Breach of Agreement. In the event of any breach of this Agreement, the
non- breaching party may avail itself of any remedies afforded it by law, except
as otherwise provided in Section 2.09 or Section 4.07 of this Agreement which
shall govern in the event of any conflict with other provisions of this
Agreement.
4.5 Confidentiality. Both Miller and NWP hereby agree not to disclose,
without the other parties' consent, to any third party (except financial
institutions or professional personnel such as lawyers, accountants, and the
like who are employed by the party hereto or as may be required or advisable to
comply with law) the specific provisions of this Agreement.
4.6 Arbitration. In the event the parties are unable to agree upon the
pricing of any products hereunder, the amount due for any delivery, or the
quality of any delivery they shall identify a third party who shall determine
such amount, and whose determination shall be binding upon the parties hereto,
and further provided that if Miller and NWP shall be unable to agree upon the
identity of such third party, said determination shall be made by a board of
arbitration in accordance with the rules and regulations of the American
Arbitration Association, and held in Minneapolis, Minnesota. The cost of said
arbitration shall be divided between the parties so that the losing party shall
pay to the prevailing party a portion of the cost of the prevailing party's
attorneys' fees and costs which shall be equal to a percentage determined by
dividing (i) the value of the award to the prevailing party by (ii) the amount
of the prevailing party's claim in the arbitration. The decision of the
arbitrators shall be final and binding and entitled to recognition and
enforcement by the courts of the United States and by the courts of all states
of the United States.
4.7 Binding Effect and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, their successors and assigns. It
is recognized that NWP's willingness to enter this Agreement is based in part on
its reliance on Miller' practices and reputation and that, therefore, subject to
other applicable provisions of this Agreement, this Agreement can only be
assigned, sold, or disposed of by Miller by contract, by operation of law,
merger or otherwise only after the Initial Term and only to a party that meets
all of the following criteria:
4.7.1 it is not a party that has an interest, either directly or
indirectly, in any pasta manufacturing or marketing activity other than
NWP which is either a material part of such
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party's business or is in the dry pasta business (for example, this
provision would not include a company such as Con Agra based on its
current business);
4.7.2 it is a party that is financially capable of assuming all
obligations of operating the Mill and performance of this Agreement; and
4.7.3 it is a party that has significant experience and involvement
in all aspects of the operation of a durum wheat mill, including
purchasing durum Wheat and processing durum wheat into semolina and other
flour products; and NWP may assign and/or transfer all or any part of its
rights under this Agreement provided such assignment/transfer is in
connection with NWP's assignment/transfer of the Plant.
4.8 Severability. The determination that any portion or provision of this
Agreement is invalid or enforceable shall not affect the remaining portions or
provisions hereof, unless such determination of invalidity relates to the
essence or essential terms of this Agreement, in which event the entire
Agreement shall become null and void.
4.9 Counterparts. This Agreement may be executed in two or more
counterparts and all counterparts so executed shall for all purposes constitute
one agreement, binding on all the parties hereto, notwithstanding that all
parties shall not have executed the same counterpart.
4.10 Integration. This Agreement represents the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings of the parties with respect to the subject matter
hereof but specifically does not supersede the Mill Agreements which shall
continue in effect in accordance with their respective terms.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
NEW WORLD PASTA COMPANY
By: /s/ C. Mickey Skinner
-------------------------------------
Name: C. Mickey Skinner
Title: Chairman, Chief Executive Officer
and Director
MILLER MILLING COMPANY
By: /s/ John C. Miller
-------------------------------------
Name: John C. Miller
Title: Chairman, President and
Chief Executive Officer
10
<PAGE> 1
EXHIBIT 10.9
MILL AGREEMENT
by and among
MILLER MILLING COMPANY,
WINCHESTER PASTA, L.L.C.
and
NEW WORLD PASTA COMPANY
January 28, 1999
Winchester, Virginia
<PAGE> 2
TABLE OF CONTENTS
Page
GENERAL BACKGROUND.............................................................1
ARTICLE I - DEFINITIONS........................................................2
Section 1.01 Accounting Terms...........................................2
Section 1.02 Contract Goods.............................................2
Section 1.03 Contract Price.............................................2
Section 1.04 Contract Year..............................................2
Section 1.05 Daily Plant Capacity.......................................2
Section 1.06 Delivery Period............................................2
Section 1.07 Fancy Patent Flour.........................................3
Section 1.08 Flour Requirements.........................................3
Section 1.09 Initial Term...............................................3
Section 1.10 Lebanon Plant..............................................3
Section 1.11 Mill.......................................................3
Section 1.12 Mill Assets................................................3
Section 1.13 Mill Capacity..............................................3
Section 1.14 Plant......................................................3
Section 1.15 Plant Property.............................................3
Section 1.16 Premises...................................................4
Section 1.17 Semolina...................................................4
ARTICLE II - OPERATIONS........................................................4
Section 2.01 Quantity...................................................4
Section 2.02 Quality Requirements of Individual Purchases...............5
Section 2.03 Purchase of Excess Contract Goods..........................6
Section 2.04 Permits and Licenses.......................................7
Section 2.05 Price......................................................7
Section 2.06 Payment...................................................10
Section 2.07 Notice of Flour Requirements..............................10
Section 2.08 Delivery of Contract Goods................................11
Section 2.09 Failure of Supply and Liquidated Damages..................11
Section 2.10 Purchase and Manufacturing Records........................12
Section 2.11 Inspection................................................13
Section 2.12 Quantity of Contract Goods Delivered......................13
Section 2.13 Terms of Sale.............................................14
Section 2.14 Maintenance Program.......................................14
Section 2.15 Force Majeure.............................................14
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ARTICLE III - RESPECTIVE RIGHTS, TERMINATION AND TRANSFER.....................15
Section 3.01 Term......................................................15
Section 3.02 Breach of Obligations.....................................19
Section 3.03 Termination by Miller.....................................19
ARTICLE IV - GENERAL PROVISIONS...............................................20
Section 4.01 Governing Law.............................................20
Section 4.02 Right of First Refusal....................................20
Section 4.03 Notices...................................................21
Section 4.04 Terms of Sale.............................................22
Section 4.05 Breach of Agreement.......................................22
Section 4.06 Confidentiality...........................................22
Section 4.07 Arbitration...............................................23
Section 4.08 Binding Effect and Assignment.............................23
Section 4.09 Severability..............................................23
Section 4.10 Counterparts..............................................23
Section 4.11 Integration...............................................24
Section 4.12 Amendment to Prior Agreement..............................24
LIST OF EXHIBITS
Exhibit A - Specifications
Exhibit B - Delivery Procedures
Exhibit C - Legal Description for Premises
ii
<PAGE> 4
MILL AGREEMENT
THIS MILL AGREEMENT ("Agreement") is made and entered into effective as of
the 28th day of January, 1999, by and among MILLER MILLING COMPANY, a Minnesota
corporation ("Miller"), WINCHESTER PASTA, L.L.C., a Delaware limited liability
company ("WPLLC") and NEW WORLD PASTA COMPANY f/k/a HERSHEY PASTA MANUFACTURING
COMPANY, a Delaware corporation ("NWP").
In consideration of the mutual covenants and agreements herein contained,
and intending to be legally bound, it is agreed by and between the parties
hereto as follows:
GENERAL BACKGROUND
1. NWP has acquired and will operate a pasta manufacturing and processing
plant located in or near Winchester, Virginia (the "Plant") on land owned by NWP
(the "Plant Property").
2. NWP will need to purchase substantial quantities of semolina and durum
wheat flours for use in conjunction with the operation of the Plant.
3. NWP desires to have a flour mill capable of supplying the Flour
Requirements of the Plant located on the Plant Property and operated as an
integrated part of the Plant operations (the "Mill").
4. Miller has constructed and is operating the Mill for processing durum
wheat and producing Contract Goods (as hereinafter defined).
5. Miller, before commencing construction of the Mill, desired to secure a
commitment for a large volume of business on a continuing basis, which Miller
secured from
<PAGE> 5
the Hershey Pasta & Grocery Group, a division of Hershey Foods Corporation, the
assets of which have now been acquired by NWP.
6. NWP wants to purchase from Miller and Miller is willing to supply to
NWP, semolina and durum wheat flours for the Plant on the terms and conditions
hereinafter set forth.
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following definitions shall have
the meanings set forth below:
Section 1.01 Accounting Terms. Any accounting terms used in this Agreement
which are not specifically defined shall have the meanings customarily given
them in accordance with generally accepted accounting principles.
Section 1.02 Contract Goods. The term "Contract Goods" shall mean
collectively semolina and durum wheat flours used by NWP to manufacture pasta
and noodles.
Section 1.03 Contract Price. The price for Contract Goods determined in
accordance with Sections 2.05 or 3.01.
Section 1.04 Contract Year. The term "Contract Year" shall mean a calendar
year beginning on January 1 and ending on December 31.
Section 1.05 Daily Plant Capacity. The daily production capacity of the
Plant requires at least [Confidential Treatment Requested by New World Pasta
Company] per day of Contract Goods.
Section 1.06 Delivery Period. The term "Delivery Period" shall mean any
period during which Contract Goods purchased by NWP are to be delivered.
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<PAGE> 6
Section 1.07 Fancy Patent Flour. The flour produced from durum wheat which
meets NWP specifications for "fancy patent flour".
Section 1.08 Flour Requirements. "Flour Requirements" shall mean the
semolina and durum wheat flour raw material needs of the Plant as ordered by
NWP.
Section 1.09 Initial Term. As defined in Section 3.01.
Section 1.10 Lebanon Plant. Means NWP's production facility located in
Lebanon, Pennsylvania.
Section 1.11 Mill. The "Mill" shall mean the flour mill located adjacent
to the Plant Property which is capable of processing durum wheat in sufficient
quantities to supply the Plant's Flour Requirements, subject to the limitations
set forth in this Agreement.
Section 1.12 Mill Assets. As defined in Section 4.02.
Section 1.13 Mill Capacity. The term "Mill Capacity" shall mean the
quantity of Contract Goods which the Mill shall be capable of producing,
operating [Confidential Treatment Requested by New World Pasta Company]. The
Mill will be capable of producing fancy patent flours daily in amounts which are
no more than [Confidential Treatment Requested by New World Pasta Company] of
the average daily Mill Capacity.
Section 1.14 Plant. The term "Plant" shall mean NWP's pasta production
facility located in or near Winchester, Virginia.
Section 1.15 Plant Property. The land in or near Winchester, Virginia
owned by NWP on which the Plant has been constructed.
Section 1.16 Premises. The property owned by Miller Milling Company
Limited Partnership on which the Mill is located.
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Section 1.17 Semolina. The flour produced from durum wheat which meets NWP
specifications. It is recognized that there is a Standard of Identity for
semolina promulgated by the U.S. Food and Drug Administration. The Mill shall be
capable of producing semolina consistent with such standard as it now exists or
may exist in the future.
ARTICLE II
OPERATIONS
Section 2.01 Quantity. During each Contract Year and subject to the
further terms of this Agreement, NWP agrees to purchase from Miller and Miller
agrees to sell to NWP and supply from the Mill the Contract Goods which NWP
shall require during such Contract Year in conjunction with the ongoing
operation of the Plant. Except as otherwise set forth below in this Section
2.01, the parties agree that Miller's obligation to supply Contract Goods to NWP
and NWP's obligation to purchase Contract Goods from Miller under this Agreement
shall apply only to the Daily Plant Capacity as defined in Section 1.05. All
non-Contract Goods emanating from the Mill shall belong to Miller. If NWP
increases the Daily Plant Capacity to produce pasta products over the amount
stated in Section 1.05, then NWP shall permit Miller to offer, on terms and
conditions Miller deems appropriate, to supply NWP Contract Goods at the Plant
to meet such increased capacity requirements, provided, however, that at all
times Miller shall supply NWP its requirements for Contract Goods for the Plant
as ordered by NWP regardless of the Daily Plant Capacity up to a maximum annual
capacity of [Confidential Treatment Requested by New World Pasta Company] of
Contract Goods.
Section 2.02 Quality Requirements of Individual Purchases. Miller shall
sell and deliver, in accordance with the instructions of NWP and the terms of
this Agreement, the specific
4
<PAGE> 8
Contract Goods which are ordered by NWP. Such Contract Goods shall be of a
quality in accordance with the specifications set forth in Exhibit A. Further,
the specifications shall be changed if required by law or regulation or at NWP's
election. If NWP elects to change the specifications for Contract Goods, it
shall give Miller at least thirty (30) days prior notice. If any change in the
specifications results in increased costs to Miller in providing Contract Goods
and such cost increase is documented by records kept in the ordinary course of
business, then the parties shall negotiate in good faith an adjustment to the
pricing formulas of this Agreement to address such increased costs. The Contract
Goods processed and delivered by Miller to NWP under the terms of this Agreement
shall also conform to all applicable federal, state and local laws and
regulations. Miller warrants that its processing of the Contract Goods shall be
in accordance with good manufacturing practices, all applicable laws and
regulations and NWP's specifications and that the Mill shall be maintained in a
sanitary, food grade status. NWP may reject any Contract Goods which fail to
comply with the provisions of this Section and under such circumstances Miller
shall retrieve, as necessary, all such non-conforming Contract Goods and bear
all costs and expenses associated with such non-conforming Contract Goods,
including but not limited to, reimbursement to NWP for any costs involved in
handling or processing such Contract Goods, retrieval of such Contract Goods,
costs and expenses incurred by NWP in connection with the handling of
work-in-process or finished goods utilizing such non-conforming Contract Goods.
Costs and expenses incurred in connection with finished goods shall be borne by
Miller only to the extent NWP can reasonably demonstrate that the problem with
the finished goods arose from a problem with Contract Goods supplied by Miller.
Miller shall take samples at regular intervals of Contract Goods prior to
delivery to NWP.
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<PAGE> 9
Section 2.03 Purchase of Excess Contract Goods. To the extent that the
quantity of Contract Goods purchased from the Mill for use at the Plant is less
than the quantity of Contract Goods that would be required to satisfy the Daily
Plant Capacity (the amount of such difference being referred to herein as the
"Excess Contract Goods"), NWP agrees to purchase from Miller, and Miller agrees
to sell to NWP, such Excess Contract Goods for use by NWP at NWP's Lebanon
Plant. For purposes of this provision, NWP shall be obligated to purchase Excess
Contract Goods from Miller for the Lebanon Plant equal to the amount of such
Excess Contract Goods, but not more than [Confidential Treatment Requested by
New World Pasta Company] of the Lebanon Plant's annual requirements for Contract
Goods during each Contract Year. Notwithstanding the above, Miller's obligation
to supply Contract Goods to the Lebanon Plant shall extend to all NWP orders, up
to [Confidential Treatment Requested by New World Pasta Company] of the Lebanon
Plant's annual requirements for Contract Goods, but Miller shall not be
obligated to supply Contract Goods to the Plant and the Lebanon Plant in an
amount in excess of the maximum annual Mill Capacity of [Confidential Treatment
Requested by New World Pasta Company] of Contract Goods. The price and payment
terms for such Contract Goods delivered to the Lebanon Plant shall be the same
as the price and payment terms for Contract Goods supplied to the Plant under
this Agreement, except that NWP shall pay Miller for actual delivery charges
incurred to transport the Contract Goods from the Mill to the Lebanon Plant. For
purposes of this provision, all delivery shall be as reasonably directed by NWP.
In the event rail transportation is specified by NWP, the actual delivery charge
shall not exceed the lowest available rate for movement in private cars and
Miller shall be responsible for supplying the private cars. If alternate
delivery is made necessary due solely to actions or omissions of
6
<PAGE> 10
NWP, NWP will be responsible for any delivery charges in excess of [Confidential
Treatment Requested by New World Pasta Company]. At the end of the Initial Term,
if NWP renews the Agreement pursuant to Section 3.01, the transportation cost if
rail transportation is specified by NWP, will be adjusted to take into account
any increase or decrease in the cost of leasing private rail cars.
Section 2.04 Permits and Licenses. Miller shall acquire and maintain all
material licenses and permits required for the handling, processing and
production of the Contract Goods and operations of the Mill. NWP shall exercise
reasonable commercial judgment in obtaining and maintaining necessary and
material licenses and permits for the operation of the Plant.
Section 2.05 Price. NWP shall purchase from Miller and Miller shall sell
to NWP, FOB [Confidential Treatment Requested by New World Pasta Company] NWP's
requirements of Contract Goods, in conformance with Section 2.01, at the Plant.
For purposes of calculating NWP's price, the price of durum wheat FOB the Mill
will include [Confidential Treatment Requested by New World Pasta Company]. The
price that NWP shall pay for the Contract Goods delivered to the Plant,
including fancy patent flour shall be determined, at NWP's election, in
accordance with one of the following two (2) formulas:
(a) The purchase price per cwt for semolina and other durum wheat
flour specified by NWP shall be determined by the sum of the calculations below
divided by [Confidential Treatment Requested by New World Pasta Company].
(b) [Confidential Treatment Requested by New World Pasta Company].
For purposes of exercise of this provision, Miller agrees to make available for
NWP's use, [Confidential Treatment Requested by New World Pasta Company]. Each
bushel of wheat
7
<PAGE> 11
delivered by NWP hereunder shall establish the price of [Confidential Treatment
Requested by New World Pasta Company] pounds of Contract Goods to NWP. At the
time of such purchase by NWP, Miller will indicate to NWP the quantity necessary
to produce the Contract Goods being priced by NWP. NWP's delivery of said
purchases to the Mill will be evenly spread over the delivery period of the
Contract Goods. If said purchases are delivered to the Mill by rail they will be
delivered in accordance with normal rail delivery practices. The payment for
said wheat shall be made to NWP in accordance with normal terms from the date of
delivery and subject to receipt of freight and wheat purchase documentation. The
purchase price for the Contract Goods manufactured by Miller for NWP shall be
determined by the sum of the calculations below divided by [Confidential
Treatment Requested by New World Pasta Company].
Notwithstanding anything contained in this Section 2.05 to the
contrary, in the event that both Miller and NWP mutually agree, Miller may offer
to manufacture and sell to NWP Contract Goods at an amount less than the formula
pricing as provided for in any paragraph of this Section 2.05.
Section 2.06 Payment. Payment terms for Contract Goods sold pursuant to
this Agreement shall be [Confidential Treatment Requested by New World Pasta
Company] from receipt at the Plant of Miller's shipment or [Confidential
Treatment Requested by New World Pasta Company] of receipt of Miller's invoice
at NWP's billing location, whichever is later, which invoice shall not be issued
until after delivery of the subject Contract Goods, or as otherwise agreed upon
between the parties.
8
<PAGE> 12
Section 2.07 Notice of Flour Requirements. On or before the [Confidential
Treatment Requested by New World Pasta Company] day of each month, or other
schedule that the parties agree upon, NWP shall use reasonable efforts to give a
nonbinding delivery schedule to Miller, in writing or by telephone, forecasting
the type and quantity of Contract Goods which NWP shall require at the Plant
and, as may be applicable (and to the extent such orders in total do not exceed
[Confidential Treatment Requested by New World Pasta Company] of Contract Goods
per year), [Confidential Treatment Requested by New World Pasta Company], during
the following month. Miller shall deliver Contract Goods in accordance with
NWP's actual order but will not be required to deliver Contract Goods to NWP
unless and until the price for such Contract Goods has been fixed pursuant to
Section 2.05. The parties recognize that sales of pasta products in which the
Contract Goods will be utilized are seasonal in nature. Therefore, NWP cannot
plan or predict with certainty its need for Contract Goods. Such forecast by
NWP, therefore, shall not be binding on NWP with respect to the amount of
Contract Goods which are actually ordered.
Section 2.08 Delivery of Contract Goods. Delivery of Contract Goods to NWP
shall be made to the Plant at such times as shall be ordered by NWP by
[Confidential Treatment Requested by New World Pasta Company], provided,
however, that Miller shall not be required to ship Contract Goods on Saturdays,
Sundays, or any other day the Mill is closed by reason of a legal or recognized
holiday unless Miller has been notified of the need for such shipment
[Confidential Treatment Requested by New World Pasta Company] in advance. In the
event of interruption of such method of delivery of Contract Goods to the Plant
from the Mill, Miller will, unless prevented by events described in Section 2.15
supply NWP all of its
9
<PAGE> 13
requirements for the Plant in some other fashion bearing all the cost and
expense of doing so. Title to the Contract Goods shall transfer to NWP at the
point where the pneumatic pipe enters the Plant, or if another delivery method
is used, then when NWP takes possession of the Contract Goods. If the Mill is
closed or not operating, NWP may still take delivery of Contract Goods, to the
extent of inventory available, by utilizing the control panel in NWP's Plant
which controls the flow of Contract Goods through the pneumatic pipes in
accordance with agreed upon procedures between Miller and NWP. Delivery of
Contract Goods to NWP at the Lebanon Plant shall be in accordance with the
procedure set forth in Exhibit B which is attached hereto, covering Contract
Goods which are shipped either by rail or by truck. Title to the Contract Goods
shall transfer to NWP at the time of acceptance by NWP at the Lebanon Plant.
Section 2.09 Failure of Supply and Liquidated Damages. In the event that
Miller shall become unable to supply NWP with its requirements in accordance
with Section 2.01, or to perform any particular contract between Miller and NWP,
for the sale of any particular quantity or type of Contract Goods for any
reason, unless covered by Section 2.15, Miller shall either purchase sufficient
quantities and quality of comparable Contract Goods on the open market to
fulfill the orders of NWP or immediately notify NWP upon receipt of NWP's order
that Miller is unable to make the necessary purchases or to make NWP's required
deliveries, to enable NWP to effect its own cover for such orders from other
suppliers and Miller shall pay to NWP, as liquidated damages and not as a
penalty, the difference between NWP's cost of cover for any Contract Goods
(which cost includes all freight and transaction costs for such cover) which
Miller failed to so deliver and the contract price thereof. Such payment shall
be made within [Confidential Treatment Requested by New World Pasta Company]
after NWP shall have
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<PAGE> 14
paid for such cover and apprised Miller of the cost of such cover. Miller and
NWP acknowledge that the terms of this Section 2.09 which provide for liquidated
damages are not intended to apply to those force majeure circumstances described
in Section 2.15.
Section 2.10 Purchase and Manufacturing Records.
(a) Miller shall keep complete, true and accurate records and
accounts with respect to all matters and inputs affecting the price of Contract
Goods, including but not limited to, records with respect to purchasing and
transporting of flour, such records to be kept in accordance with generally
accepted accounting principles applied on a consistent basis from year to year.
NWP or its representatives shall have the right to audit such records and
accounts after reasonable prior notice to Miller, and Miller shall provide NWP
with monthly statements of such matters in such form as shall be reasonably
requested by NWP.
(b) Miller shall also keep complete, true and accurate records with
respect to manufacturing practices, quality assurance measures, analytical
procedures and data and inspection reports. Miller shall allow NWP access to
such records upon NWP's request insofar as they deal with the Contract Goods.
Section 2.11 Inspection. During the term of this Agreement, Miller shall
provide NWP with access to the Mill at any time during operating hours after
reasonable notification by NWP to Miller. NWP shall not be required to give
Miller notice in emergency situations. Miller shall promptly notify NWP of the
results of any and all inspections of the Mill by any regulatory or industry
authority. Further, Miller shall immediately notify NWP of any deficiencies,
sanitation or quality problems in incoming flour, operations or Contract Goods
identified by Miller, regulatory authorities or any third party.
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<PAGE> 15
Section 2.12 Quantity of Contract Goods Delivered. In order to determine
and track the quantity of Contract Goods delivered by Miller to NWP through the
pneumatic pipes, all Contract Goods shall be weighed by a scale at the point of
discharge from the Mill storage silos into the pneumatic pipes. For purposes of
confirming the quantity there shall also be weighing done by volumetric scale
based on totaling air lock turns. Adjustments to quantity and/or equipment shall
be made if these weighing mechanisms do not conform. At any time, NWP may enter
the Mill to check, recalibrate or otherwise investigate the weighing equipment
for accuracy and proper operation. Determination of the quantity of Contract
Goods delivered to the Lebanon Plant shall be based upon certified railroad
weight certificates if the Contract Goods are delivered by rail or upon
certified bills of lading if the Contract Goods are not delivered by rail.
Section 2.13 Terms of Sale. Except as otherwise provided in this Agreement
or in any particular contract for the purchase and delivery of any particular
quantity of Contract Goods, all sales of Contract Goods shall be governed by the
Uniform Commercial Code.
Section 2.14 Maintenance Program. Miller shall adhere to, at its cost, a
program for the maintenance of the Mill and any and all equipment installed
therein, which program shall be in keeping with the generally accepted industry
standards for such programs and which shall also be as reasonable and prudent as
Miller's program for the maintenance at other Miller facilities. Such
maintenance program shall also be consistent with all requirements and
recommendations of the equipment manufacturers.
Section 2.15 Force Majeure. Miller and NWP shall be excused from
performance of the purchase and supply provisions of this Article II by reason
of circumstances beyond their control, including, but not limited to, acts of
God, disaster, fire, floods, the elements, lockouts,
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<PAGE> 16
strikes, embargoes, governmental acts, wars (declared or undeclared) and riots.
The party experiencing such force majeure shall provide prompt notice to the
other party and its performance shall be excused during the existence of such
force majeure. The party experiencing such force majeure shall use its best
efforts to remove, rectify or correct such force majeure and if the force
majeure extends for longer than eighteen (18) months, the other party shall have
the option of terminating this Agreement upon written notice. If the force
majeure prevents Miller from supplying Contract Goods to the Plant as required
by Section 2.01, then after nine (9) months of such force majeure, and during
the continuance of such force majeure, Miller agrees to reimburse NWP for the
difference in cost to NWP of Contract Goods required to be purchased by NWP for
operation of the Plant and the cost of such Contract Goods as calculated under
Section 2.05.
ARTICLE III
RESPECTIVE RIGHTS, TERMINATION AND TRANSFER
Section 3.01 Term. The Initial Term of this Agreement shall expire on
[Confidential Treatment Requested by New World Pasta Company]; provided,
however, that the price for Contract Goods shall be adjusted, effective
[Confidential Treatment Requested by New World Pasta Company].
Both adjustments shall be calculated using the fiscal year
[Confidential Treatment Requested by New World Pasta Company] through
[Confidential Treatment Requested by New World Pasta Company] as the base year.
The calculation of these adjustments shall be made in accordance with the
following:
[Confidential Treatment Requested by New World Pasta Company].
13
<PAGE> 17
On or before [Confidential Treatment Requested by New World Pasta
Company] and on or before December 31st of each year thereafter, until this
Agreement expires or is terminated, NWP shall exercise one of the following
options by delivering written notice thereof to Miller (failure to provide such
written notice shall result in the exercise of Option (a) below):
[Confidential Treatment Requested by New World Pasta Company].
Section 3.02 Breach of Obligations. Failure of Miller to comply with any
of the obligations or conditions herein contained, including, but not limited to
late delivery or failure to meet product specifications, shall be a default and
shall entitle NWP to give Miller written notice to cure such default.
[Confidential Treatment Requested by New World Pasta Company].
Section 3.03 Termination by Miller. Failure of NWP to comply with any of
the obligations or conditions herein contained, including, but not limited to
failure to purchase or pay for Contract Goods, shall be a default and shall
entitle Miller to give NWP written notice to cure such default. If any such
default is not cured within thirty (30) days after receipt of such written
notice, Miller shall be entitled to terminate this Agreement by giving written
notice to take effect six (6) months after such notice. Upon a termination of
the Agreement under this provision, NWP and Miller shall work together to
disconnect and disassemble any physical connections between the Plant and the
Mill.
ARTICLE IV
GENERAL PROVISIONS
Section 4.01 Governing Law. The parties hereto acknowledge that this
Agreement was made under, and shall be governed by the laws of the State of
Virginia.
14
<PAGE> 18
Section 4.02 [Confidential Treatment Requested by New World Pasta
Company].
Section 4.03 Notices. Notices under this Agreement shall be in writing and
may be delivered by hand or sent by mail, courier or facsimile. Notices by mail
shall be sent by United States registered or certified mail, postage prepaid,
return receipt requested, and shall be deemed delivered five (5) days after date
of mailing. Notices sent by facsimile shall be deemed given on the date
transmitted; provided that (i) the sender receives a written confirmation to
verify the transmission, and (ii) the sender also delivers a copy of the notice
to the other party by overnight courier. Notices sent by a courier shall be
deemed delivered on the date of receipt or the date delivery is refused by the
intended recipient as evidenced by the courier's records. Notices shall be sent
to the parties at the addresses set forth below, or at such other addresses or
persons as the party may from time to time designate by written notice to the
other party:
If to Miller Miller Milling Company
or MMCLP: 880 Grain Exchange Building
Minneapolis, Minnesota 55415
Attention: President
With a copy to: Michael L. Snow, Esquire
Maslon Edelman Borman & Brand
3300 Norwest Center
Minneapolis, Minnesota 55402
If to WPLLC: Winchester Pasta, L.L.C.
100 Crystal A Drive
Hershey, Pennsylvania 17033
Attention: Chief Executive Officer
15
<PAGE> 19
With a copy to: Winchester Pasta, L.L.C.
100 Crystal A Drive
Hershey, Pennsylvania 17033
Attention: Vice President of Finance/
Chief Financial Officer
If to NWP: New World Pasta Company
100 Crystal A Drive
Hershey, Pennsylvania 17033
Attention: Chief Executive Officer
With a copy to: New World Pasta Company
100 Crystal A Drive
Hershey, Pennsylvania 17033
Attention: Vice President of Finance/
Chief Financial Officer
Section 4.04 Terms of Sale. Except as otherwise provided in this Agreement
or in any particular contract for the purchase and delivery of any particular
quantity of Contract Goods, all sales of Contract Goods shall be governed by the
Uniform Commercial Code.
Section 4.05 Breach of Agreement. In the event of any breach of this
Agreement, the non-breaching party may avail itself of any remedies afforded it
by law, except as otherwise provided in Section 2.09 or Section 4.07 of this
Agreement which shall govern in the event of any conflict with other provisions
of this Agreement.
Section 4.06 Confidentiality. Both Miller and NWP hereby agree not to
disclose, without the other parties' consent, to any third party (except
financial institutions or professional personnel such as lawyers, accountants,
and the like who are employed by the party hereto or as may be required or
advisable to comply with law) the specific provisions of this Agreement.
16
<PAGE> 20
Section 4.07 Arbitration. In the event the parties are unable to agree
upon the pricing of any products hereunder, the amount due for any delivery, or
the quality of any delivery they shall identify a third party who shall
determine such amount, and whose determination shall be binding upon the parties
hereto, and further provided that if Miller and NWP shall be unable to agree
upon the identity of such third party, said determination shall be made by a
board of arbitration in accordance with the rules and regulations of the
American Arbitration Association, and held in Minneapolis, Minnesota. The cost
of said arbitration shall be divided between the parties so that the losing
party shall pay to the prevailing party a portion of the cost of the prevailing
party's attorneys' fees and costs which shall be equal to a percentage
determined by dividing (i) the value of the award to the prevailing party by
(ii) the amount of the prevailing party's claim in the arbitration. The decision
of the arbitrators shall be final and binding and entitled to recognition and
enforcement by the courts of the United States and by the courts of all states
of the United States.
Section 4.08 Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, their successors
and assigns.
Section 4.09 Severability. The determination that any portion or provision
of this Agreement is invalid or enforceable shall not affect the remaining
portions or provisions hereof, unless such determination of invalidity relates
to the essence or essential terms of this Agreement, in which event the entire
Agreement shall become null and void.
Section 4.10 Counterparts. This Agreement may be executed in two or more
counterparts and all counterparts so executed shall for all purposes constitute
one agreement,
17
<PAGE> 21
binding on all the parties hereto, notwithstanding that all parties shall not
have executed the same counterpart.
Section 4.11 Integration. This Agreement represents the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings of the parties with respect to the subject
matter hereof.
Section 4.12 Amendment to Prior Agreement. This Agreement is an amendment
and restatement of that certain Amended and Restated Mill Agreement ("Prior
Agreement") dated effective as of the 29th day of July, 1998, by and among
Miller and HERSHEY PASTA & GROCERY GROUP, a division of Hershey Foods
Corporation, a Delaware corporation ("HPG"). This Agreement hereby supercedes
such Prior Agreement with respect to to all Flour Requirements of WPLLC, NWP and
its Affiliates at such companies' Winchester, VA and Lebanon, PA processing
plants. The Prior Agreement shall continue to apply to all Flour supplied by
Miller prior to the date hereof and all Flour Requirements ordered by HPG prior
to the date hereof.
18
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
WINCHESTER PASTA, L.L.C.
WITNESS
/s/ Sarah E. Miller By: /s/ James Bohenick
- ---------------------------- -------------------------------------
Name: James Bohenick
Title:
NEW WORLD PASTA COMPANY
WITNESS
/s/ Andrew Bauer By: /s/ C. Mickey Skinner
- ---------------------------- -------------------------------------
Name: C. Mickey Skinner
Title: Chairman,Chief Executive
Officer and Director
19
<PAGE> 23
MILLER MILLING COMPANY
WITNESS
/s/ Andrew Bauer By: /s/ John C. Miller
- ---------------------------- -------------------------------------
Name: John C. Miller
Title: Chairman, President and Chief
Executive Officer
ACKNOWLEDGMENT
Miller Milling Company Limited Partnership, a Minnesota limited
partnership, is executing this Mill Agreement solely to indicate its agreement
to be bound by the Right of First Refusal provisions contained in Section 4.02.
MILLER MILLING COMPANY LIMITED
PARTNERSHIP
By Miller Milling Company,
Its General Partner
By: /s/ John C. Miller
-------------------------------------
Name: John C. Miller
Title:
20
<PAGE> 1
EXHIBIT 10.10
AMENDED AND RESTATED
MILL AGREEMENT
Between
HERSHEY PASTA & GROCERY GROUP
and
MILLER MILLING COMPANY
March 1, 1998
(Fresno, California)
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS..............................................................1
1.1 Blended Products..................................................1
1.2 Contract Goods....................................................2
1.3 Contract Year.....................................................2
1.4 Delivery Period...................................................2
1.5 Durum Products....................................................2
1.6 HPG Plants........................................................2
1.7 Mill Capacity.....................................................2
1.8 Minimum Quantity..................................................2
1.9 Non-Durum Products................................................2
1.10 Third Party Contract..............................................2
1.11 Actual Freight Cost...............................................2
2. PURCHASE AND SALE OF DURUM PRODUCTS......................................3
2.1 Minimum Quantity..................................................3
2.2 Quantity and Quality Requirements of Individual Purchases.........3
2.3 Price and Payment.................................................3
2.4 Enrichment........................................................4
2.5 Notice of Requirements............................................4
2.6 Shipment..........................................................5
3. TERM.....................................................................5
4. TERMINATION..............................................................5
4.1 Breach of Obligations.............................................5
4.2 Bankruptcy........................................................6
5. LIQUIDATED DAMAGES IN THE EVENT OF FORCE MAJEURE.........................6
5.1 Liquidated Damages................................................6
5.2 Force Majeure.....................................................6
6. INSPECTION RIGHTS OF HPG.................................................7
7. TRANSPORTATION...........................................................7
8. STORAGE..................................................................7
8A. WHEAT STORAGE............................................................7
9. GOVERNING LAW............................................................8
<PAGE> 3
10. RIGHT OF FIRST REFUSAL...................................................8
11. NOTICE...................................................................9
12. TERMS OF SALE............................................................9
13. BREACH OF AGREEMENT.....................................................10
14. CONFIDENTIALITY.........................................................10
15. ARBITRATION.............................................................10
16. BINDING EFFECT..........................................................10
17. SEVERABILITY............................................................10
18. COUNTERPARTS............................................................11
19. INTEGRATION.............................................................11
<PAGE> 4
THIS AMENDED AND RESTATED MILL AGREEMENT ("Agreement") is made and entered
into effective as of the 1st day of March, 1998, by and between MILLER MILLING
COMPANY, a Minnesota corporation ("Miller") and HERSHEY PASTA & GROCERY GROUP, a
division of Hershey Foods Corporation, a Delaware corporation ("HPG").
RECITALS
WHEREAS, Miller has constructed and is operating a flour mill located in
Fresno, California (the "Mill"), for processing wheat and producing semolina and
various wheat flours;
WHEREAS, Miller desired to secure a commitment for a large volume of
business on a continuing basis;
WHEREAS, HPG is engaged in the manufacture of a variety of pasta and other
products at a plant located in Fresno, California (the "Plant");
WHEREAS, HPG purchases substantial quantities of durum wheat flours for
use in conjunction with the operation of the Plant;
WHEREAS, HPG agreed to purchase a portion of its requirements for durum
wheat flours for the Plant and Miller agreed to supply such requirements
pursuant to an Agreement between HPG and Miller dated September 17, 1990, which
Agreement was amended pursuant to an Amendment to Agreement dated September 2,
1992, a letter amendment as of dated August 18, 1994 and a letter amendment
dated as of April 9, 1997 (as amended, the "Mill Agreement");
WHEREAS, HPG and Miller now desire to amend and restate the Mill Agreement
in its entirety for convenience purposes on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein contained, it is agreed by and between the
parties hereto as follows:
1. DEFINITIONS. For the purposes of this Agreement, the following
definitions shall apply:
1.1 Blended Products. The term "Blended Products" shall mean any
flour comprised of no less than [Confidential Treatment Requested by New World
Pasta Company].
1
<PAGE> 5
1.2 Contract Goods. The term "Contract Goods" shall mean
collectively Durum Products, Non-Durum Products, and Blended Products.
1.3 Contract Year. The term "Contract Year" shall mean a period of
twelve (12) consecutive months commencing each year on the date, or anniversary
of the date, on which the term of this Agreement shall commence pursuant to
Section 3 of this Agreement.
1.4 Delivery Period. The term "Delivery Period" shall mean any
period during which Contract Goods purchased by HPG pursuant to a contract with
a third party are to be delivered.
1.5 Durum Products. The term "Durum Products" shall mean no less
than [Confidential Treatment Requested by New World Pasta Company].
1.6 HPG Plants. The terms "HPG Plant" or the term "the Plant" shall
mean HPG's plant located in Fresno, California.
1.7 Mill Capacity. The term "Mill Capacity" shall mean the quantity
of Contract Goods which the Mill shall be capable of producing, [Confidential
Treatment Requested by New World Pasta Company].
1.8 Minimum Quantity. The term "Minimum Quantity" shall have the
meaning set forth in Section 2.1 below.
1.9 Non-Durum Products. The term "Non-Durum Products" shall mean any
flour products made in whole from wheat other than durum wheat.
1.10 Third Party Contract. The term "Third Party Contract" shall
mean any contract with a third party for any Contract Goods.
1.11 Actual Freight Cost. The term "Actual Freight Cost" shall have
the meaning set forth in Section 2.3
2. PURCHASE AND SALE OF DURUM PRODUCTS.
2.1 Minimum Quantity. During each Contract Year and subject to the further
terms of this contract, HPG agrees to purchase from Miller and Miller agrees to
sell to HPG and supply from the Mill:
[Confidential Treatment Requested by New World Pasta Company]
2
<PAGE> 6
2.2 Quantity and Quality Requirements of Individual Purchases. HPG agrees
that during the course of the Contract Year it shall purchase such quantities of
Contract Goods, in the aggregate, from Miller such that by the end of a Contract
Year, HPG shall have purchased at least [Confidential Treatment Requested by New
World Pasta Company] of its aggregate purchases of goods for use in the Plant,
which are the equivalent of Contract Goods, from Miller.
HPG may order, at its discretion, any amount of the specific type of
Contract Goods, subject only to the aforestated aggregate purchase requirement.
Miller shall sell and deliver, in accordance with the instructions of HPG and
the terms of this Agreement, the specific Contract Goods which are ordered by
HPG. Such Contract Goods shall be of a quality in accordance with the
specifications as set forth in Schedule A. The specifications set forth on
Schedule A may be changed if mutually agreed upon by the parties.
In no event, however, shall Miller be required to sell to HPG Contract
Goods in excess of the Mill Capacity pursuant to the terms of this Agreement.
2.3 Price and Payment. It is intended by both parties that HPG shall buy
the Contract Goods from Miller, and Miller shall sell and deliver the Contract
Goods to HPG, F.O.B. [Confidential Treatment Requested by New World Pasta
Company] at a price equal to the Actual Contract Price. The Actual Contract
Price shall be calculated as follows:
[Confidential Treatment Requested by New World Pasta Company]
Effective September 1, 1998, Miller will offer HPG the
following volume incentive discount off the agreed upon purchase
prices specified above for Contract Goods purchased from the Mill:
Purchases Quantity Discount
------------------ --------
[Confidential Treatment Requested by New World Pasta Company]
2.4 Enrichment. In the event HPG is purchasing any Third Party Contract
goods similar to Contract Goods and such similar goods are enriched as per HPG's
specifications, then Miller shall also enrich the Contract Goods purchased by
HPG, per HPG's specifications, for the same price, terms and conditions as
stated in such Third Party Contract; provided, however, that in the event said
Third Party Contract does not provide for enrichment, then Miller will, at HPG's
3
<PAGE> 7
request, enrich said Contract Goods and the cost, to be negotiated by both
parties, shall be paid by HPG to Miller as an additional cost and expense of
HPG.
2.5 Notice of Requirements. On or before the [Confidential Treatment
Requested by New World Pasta Company] day of each month, HPG shall use
reasonable efforts to give a delivery schedule to Miller, in writing or by
telephone, forecasting the type and quantity of Contract Goods which HPG shall
require at the Plant during the following month. The quantity of Contract Goods
which HPG may order to be delivered to HPG during any given week shall not,
without the prior written consent of Miller, exceed an amount equal to the
production capacity of the Mill for such week. The parties recognize that sales
of pasta products in which the Contract Goods will be utilized are seasonal in
nature. Therefore, HPG cannot plan or predict with certainty its need for
Contract Goods. HPG agrees it shall use reasonable, good faith efforts to
provide Miller with a forecast of HPG's intended purchases of Contract Goods
within [Confidential Treatment Requested by New World Pasta Company] of expected
delivery. [Confidential Treatment Requested by New World Pasta Company].
2.6 Shipment. Delivery of Contract Goods to HPG shall be made at such
times as shall be ordered by HPG, provided, however, that Miller, shall not be
required to ship Contract Goods on Saturdays, Sundays, or any other day the Mill
is closed by reason of a legal or union- bargained holiday unless special
prearrangements have been made.
Miller shall deliver Contract Goods F.O.B. [Confidential Treatment
Requested by New World Pasta Company] in accordance with orders placed by HPG.
Delay in delivery resulting from the unavailability of the agreed upon mode of
transportation from the Mill to HPG's plant shall not constitute breach of this
Agreement and shall not give rise to a claim by HPG for damages, unless
otherwise set forth in the delivery terms or transportation arrangements, if (a)
such delay does not exceed [Confidential Treatment Requested by New World Pasta
Company], (b) such unavailability is not the fault of Miller (which may include
a one (1) week period each year at which time the Mill's operations shall cease
for fumigation, maintenance, and repairs, for which Miller shall provide
[Confidential Treatment Requested by New World Pasta Company] advance notice to
HPG), and (c) Miller has used reasonable efforts to provide a reasonable
substitute mode of transportation.
4
<PAGE> 8
3. TERM. The term of this Agreement shall be a period commencing with the first
day of the month following that in which such production of Contract Goods
commenced and shall expire on [Confidential Treatment Requested by New World
Pasta Company].
4. TERMINATION.
4.1 Breach of Obligations. Failure of Miller to comply with any of the
obligations or conditions herein contained, including, but not limited to late
delivery or failure to meet product specifications, shall be a default and shall
entitle HPG to give Miller written notice to cure such default. If any such
default is not cured within [Confidential Treatment Requested by New World Pasta
Company] after receipt of such written notice, HPG shall be entitled to
terminate this Agreement by giving written notice to take effect immediately.
4.2 Bankruptcy. If either party shall file a voluntary petition in
bankruptcy, be declared a bankrupt, make an assignment for the benefit of
creditors or suffer the appointment of a receiver or a trustee of its assets,
that party shall be in breach of this Agreement and the other party shall have
the right to terminate this Agreement by giving written notice to take effect
immediately.
5. LIQUIDATED DAMAGES IN THE EVENT OF FORCE MAJEURE.
5.1 Liquidated Damages. In the event that Miller shall become unable to
supply HPG with its requirements in accordance with Section 2 of this Agreement,
or to perform any particular contract between Miller and HPG, for the sale of
any particular quantity or type of Contract Goods for any reason beyond the
control of Miller, unless covered by Section 5.2, Miller shall either purchase
sufficient quantities and quality of comparable Contract Goods on the open
market to fulfill the orders of HPG or notify HPG that Miller is unable to make
the necessary purchases to enable HPG to effect its own cover for such orders
from other suppliers and Miller shall pay, as liquidated damages and not as a
penalty, to HPG the difference between the cost of cover for any Contract Goods
which Miller failed to so deliver and the Actual Contract Price thereof. Such
payment shall be made within 30 days after HPG shall have paid for such cover
and apprised Miller of the cost of such cover. Miller and HPG acknowledge that
the terms of this Section 5.1 which provide for liquidated damages are not
intended to apply to those force majeure circumstances described in Section 5.2
below.
5
<PAGE> 9
5.1.1. For purposes of Section 5.1, the Actual Contract Price of a
particular quantity of any Contract Goods ordered by HPG which Miller
failed to deliver shall equal the price fixed for such Contract Goods in
accordance with Section 2.3 at the time such order was placed.
5.2 Force Majeure. Miller and HPG shall be excused from performance of the
purchase and supply provisions of this Agreement by reason of circumstances
beyond their control, including, but not limited to, acts of God, disaster,
fire, floods, the elements, lockouts, strikes, embargoes, governmental acts,
wars (declared or undeclared) and riots. The party experiencing such force
majeure shall provide prompt notice to the other party and its performance shall
be excused during the existence of such force majeure. The party experiencing
such force majeure shall use its best efforts to remove, rectify or correct such
force majeure and if the force majeure extends for longer than eighteen (18)
months, the other party shall have the option of terminating this Agreement upon
written notice. If the force majeure prevents Miller from supplying Contract
Goods to the Plant as set forth in this Agreement, then after nine (9) months of
such force majeure, and during the continuance of such force majeure, Miller
agrees to reimburse HPG for the difference in cost to HPG of Contract Goods
required to be purchased by HPG for operation of the Plant and the cost of such
Contract Goods as calculated under subsection 2.3.
6. INSPECTION RIGHTS OF HPG. During the term of this Agreement, HPG is hereby
granted the rights to examine, at any time that the Mill is open, the Mill and
the raw materials used to manufacture Contract Goods.
7. TRANSPORTATION. Miller will deliver Contract Goods to the Plant by truck
which carrier shall meet the reasonable approval of HPG. Should HPG request
deliveries by a mode other than truck, then HPG will reimburse Miller for the
actual additional cost incurred by Miller because of the increase in
transportation costs.
8. STORAGE. HPG has, at [Confidential Treatment Requested by New World Pasta
Company], constructed storage at the HPG plant sufficient to hold [Confidential
Treatment Requested by New World Pasta Company] of Contract Goods, single
identity at a time. HPG agrees to use this capacity only for Miller produced
products. The form and method of such
6
<PAGE> 10
construction was agreed to by and between Miller and HPG. At the termination or
the expiration of this Agreement, HPG shall own, at no cost, the storage
facility free and clear of any liens, claims or encumbrances.
8A. WHEAT STORAGE. Miller has constructed and will make available to HPG
additional storage at the Mill sufficient to hold an additional [Confidential
Treatment Requested by New World Pasta Company] of wheat (in addition to the
current storage capacity of [Confidential Treatment Requested by New World Pasta
Company]). HPG will pay Miller for the use of this additional storage (for each
bushel HPG stores in excess of [Confidential Treatment Requested by New World
Pasta Company]) a per bushel amount as follows:
[Confidential Treatment Requested by New World Pasta Company]
HPG's right to use of the storage is always dependent on [Confidential
Treatment Requested by New World Pasta Company].
9. GOVERNING LAW. The parties hereto acknowledge that this Agreement was made
under, and shall be governed by, the laws of the State of California.
10. [Confidential Treatment Requested by New World Pasta Company].
11. NOTICE. All notices under this Agreement shall be in writing and may be
delivered by hand or sent by mail, courier or facsimile. Notices by mail shall
be sent by United States registered or certified mail, postage prepaid, return
receipt requested, and shall be deemed delivered five (5) days after date of
mailing. Notices sent by facsimile shall be deemed received on the day sent;
provided that (i) the sender receives written confirmation that the facsimile
has been sent, and (ii) the sender delivers a copy thereof to the other party by
overnight courier. Notices by courier shall be deemed to have been received at
the time of delivery or refusal of delivery as confirmed by the courier's
records. Notices shall be sent to the parties at the addresses set forth below,
or at such other addresses or persons as the party may from time to time
designate by written notice to the other party:
If to Miller: Miller Milling Company
800 Grain Exchange Building
Minneapolis, Minnesota 55415
Attention: President
7
<PAGE> 11
With copy to: Michael L. Snow
3300 Norwest Center
Minneapolis, Minnesota 55402
If to HPG: Hershey Pasta & Grocery Group
100 Crystal A Drive
Hershey, Pennsylvania 17033
Attention: President
With copy to: Hershey Pasta & Grocery Group
100 Crystal A Drive
Hershey, Pennsylvania 17033
Attention: Vice President Finance
12. TERMS OF SALE. Except as otherwise provided in this Agreement or in any
particular contract for the purchase and delivery of any particular quantity of
Contract Goods, all sales of Contract Goods shall be governed by the Uniform
Commercial Code.
13. BREACH OF AGREEMENT. In the event of any breach of this
Agreement, the non- breaching party may avail itself of any remedies afforded it
by law.
14. CONFIDENTIALITY. Both Miller and HPG hereby agree not to disclose to
any third party (except financial institutions or professional personnel such as
lawyers, accountants, and the like who are employed by the party hereto) the
specific provisions of this Agreement.
15. ARBITRATION. In the event the parties are unable to agree upon the pricing
of any products hereunder, the amount due for any delivery, or the quality of
any delivery they shall identify a third party who shall determine such amount,
and whose determination shall be binding upon the parties hereto, and further
provided that if Miller and HPG shall be unable to agree upon the identity of
such third party, said determination shall be made by a board of arbitration in
accordance with the rules and regulations of the American Arbitration
Association, and held in San Francisco or Los Angeles, California. The cost of
said arbitration shall be divided between the parties so that the losing party
shall pay to the prevailing party a portion of the cost of the prevailing
party's attorneys' fees and costs which shall be equal to a percentage
determined by dividing (i) the value of the award to the prevailing party by
(ii) the amount of the prevailing party's claim in the arbitration. The decision
of the arbitrators shall be final and
8
<PAGE> 12
binding and entitled to recognition and enforcement by the courts of the United
States and by the courts of all states of the United States.
16. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and assigns. It is recognized
that HPG's willingness to enter this Agreement is based in part on its reliance
on Miller's practices and reputation and that, therefore, this Agreement cannot
be assigned, sold, or disposed of by Miller by contract or by law, without HPG's
written consent.
17. SEVERABILITY. The determination that any portion or provision of this
Agreement is invalid or unenforceable shall not affect the remaining portions or
provisions hereof, unless such determination of invalidity relates to the
essence or essential terms of this Agreement, in which event the entire
Agreement shall become null and void.
18. COUNTERPARTS. This Agreement may be executed in two or more counterparts and
all counterparts so executed shall for all purposes constitute one agreement,
binding on all the parties hereto, notwithstanding that all parties shall not
have executed the same counterpart.
19. INTEGRATION. This Agreement represents the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings of the parties including, but not limited to, the
Agreement between HPG and Miller dated September 17, 1990, as amended by the
Amendment to Agreement dated September 2, 1992, the letter agreement dated
August 18, 1994 and the letter agreement dated April 9, 1997.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
WITNESS MILLER MILLING COMPANY
/s/ Andrew Bauer By /s/ John C. Miller
- --------------------------- ---------------------------------
Its President
WITNESS HERSHEY PASTA & GROCERY GROUP
/s/ Mark E. Kimmel By /s/ Jay A. Carr
- --------------------------- ---------------------------------
Its President
9
<PAGE> 1
EXHIBIT 10.11
FIRST AMENDMENT TO
AMENDED AND RESTATED MILL AGREEMENT
This First Amendment to Amended and Restated Mill Agreement ("Amendment")
is entered into effective as of January 28th, 1999, by and between New World
Pasta Company f/k/a Hershey Pasta Manufacturing Company, a Delaware corporation
("NWP") and Miller Milling Company, a Minnesota corporation ("Miller").
RECITALS:
WHEREAS, Miller and Hershey Pasta & Grocery Group, a division of Hershey
Foods Corporation, a Delaware corporation ("HPG") entered into an Amended and
Restated Mill Agreement dated March 1, 1998 (the "Mill Agreement"); and
WHEREAS, NWP has acquired various assets previously owned by HPG
including, among others, a pasta manufacturing plant located in Fresno,
California; and
WHEREAS, HPG has assigned its rights and obligations to NWP under the Mill
Agreement and NWP has assumed the rights and obligations of HPG under the Mill
Agreement; and
WHEREAS, Miller and NWP now desire to amend the Mill Agreement on the
terms and conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions: Those capitalized terms which are used in this Amendment
and are not defined herein shall have the respective meaning ascribed to them in
the Mill Agreement. Any reference to the "Mill Agreement" shall mean the Mill
Agreement as amended by this Amendment.
2. Assignment and Assumption. NWP hereby agrees to assume and be bound by
all of the obligations of HPG under the Mill Agreement arising from and after
the effective date.
3. Wheat Storage. Section 8A of the Mill Agreement is hereby amended in
its entirety to read as follows:
"8A. WHEAT STORAGE. Miller has constructed and will make available to HPG
additional storage at the Mill sufficient to hold an additional
[Confidential Treatment Requested by New World Pasta Company] of wheat (in
addition to the
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current storage capacity of [Confidential Treatment Requested by New World
Pasta Company]). HPG will pay Miller for the use of this additional
storage (for each bushel HPG stores in excess of [Confidential Treatment
Requested by New World Pasta Company]) a per bushel amount as follows:
[Confidential Treatment Requested by New World Pasta Company]
HPG's right to use of the storage is always dependent on [Confidential
Treatment Requested by New World Pasta Company].
4. Binding Effect. Section 16 of the Agreement is amended to read in its
entirety to read as follows:
"16. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and assigns."
5. Reaffirmation. Except as otherwise modified by this Amendment, all the
terms and conditions of the Mill Agreement remain in full force and affect.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to be
effective on the date first above written.
WITNESS MILLER MILLING COMPANY
/s/ Andrew Bauer By /s/ John C. Miller
- ---------------------------- ---------------------------------
Name: John C. Miller
Title: Chairman, President
and Chief Executive Officer
WITNESS NEW WORLD PASTA COMPANY
/s/ Donald Dimitrievich By /s/ C. Mickey Skinner
- ---------------------------- ---------------------------------
Name: C. Mickey Skinner
Title: Chairman and Chief Executive
Officer
3
<PAGE> 1
EXHIBIT 10.12
TAX SHARING AGREEMENT
Tax Sharing Agreement (the "Agreement"), dated as of January 28, 1999,
by and among New World Pasta, LLC, a Delaware limited liability company
("Parent"), and New World Pasta Company, a Delaware corporation ("Sub").
WHEREAS, Parent and Sub (collectively and including any other
includible corporations, the "Members") are includible corporations in an
affiliated group of corporations of which Parent is the common parent (the
"Group"), all within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, Parent, and Sub wish to allocate and settle between Parent and
Sub in an equitable manner the consolidated federal income tax liabilities of
the Group.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Parent, and Sub agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall be defined as follows:
(a) "Estimated Tax Payments" shall mean for a Taxable Period
(as defined in Section 1(e)) the aggregate payments for such Taxable Period
provided in Section 2 hereof.
(b) "Final Determination" shall mean a closing agreement with
the Internal Revenue Service (the "IRS"), a claim for refund that has been
allowed, a deficiency notice with respect to which the period for filing a
petition with the United States Tax Court has expired, or a decision of any
court of competent jurisdiction that is not subject to appeal or for which the
time for appeal has expired.
(c) "Separate Tax Liability" for a Taxable Period shall mean
the amount, if any, of the federal income tax liability (including, without
limitation, liability for any penalty, fine, additions to tax, interest, minimum
tax and other items of any nature applicable to Sub in connection with the
determination of Sub's federal income tax liability) that Sub and its
subsidiaries would have incurred if Sub had filed (i) a consolidated federal
income tax return as parent together with its subsidiaries that would qualify as
includible corporations with Sub under Section 1504 of the Code or (ii) separate
federal income tax return in the event no such subsidiaries exist, as the case
may be, for the Taxable Period and
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all prior Taxable Periods, and computed the applicable tax liability in a manner
consistent with (i)general tax accounting principles, (ii) the Code and the
Treasury Regulations promulgated thereunder (the "Treasury Regulations") and
(iii) Sub's and its subsidiaries', if any, practice in computing federal income
tax liability.
(d) "Taxable Period" shall mean any taxable year or portion
thereof ending on or after the date hereof with respect to which a consolidated
federal income tax return including Sub is or is expected to be filed on behalf
of the Group.
2. Estimated Tax Payments.
(a) For each calendar quarter in the Taxable Period that
includes the date of this Agreement, Sub shall pay to Parent on behalf of Sub
and its subsidiaries an amount equal to the amount of any estimated federal
income taxes that Sub would have been required to pay with respect to such
quarter if Sub was filing a consolidated federal income tax return with Sub as
the parent or separate federal income tax return, as the case may be, for the
Taxable Period including such quarter. Such amount shall be payable by Sub to
Parent at least five (5) days prior to the date on which such estimated federal
income tax payment would have been due. Such hypothetical estimated federal
income tax liability shall be determined by Sub in a manner consistent with
Section 1(c) hereof.
(b) Thirty days before the end of the fourth quarter of each
Taxable Period that ends after the date hereof, Sub shall provide Parent with an
estimate of the Separate Tax Liability for the following Taxable Period and the
amount of estimated federal income taxes that Sub would have been required to
pay with respect to each quarter in the following Taxable Period if the Sub was
filing a consolidated federal income tax return with Sub as the parent or
separate federal income tax return, as the case may be, for such Taxable Period,
which estimates shall be prepared in a manner consistent with Section 1(c)
hereof and shall be approved by Parent. Parent shall notify Sub of its
disagreement with such estimates within 15 days of Parent's receipt of such
estimates. Upon such notification, Parent and Sub will negotiate in good faith
to resolve the dispute, but if no agreement is reached, Sub's estimates shall be
final, provided that such estimates were prepared in a manner consistent with
Section 1(c) hereof. For each of the first three calendar quarters in every
Taxable Period that begins after the date hereof, Sub shall pay to Parent an
amount equal to the estimated federal income taxes that Sub would have been
required to pay with respect to such quarter if Sub was filing a consolidated
federal income tax return with Sub as the parent or separate federal income tax
return, as the case may be, for the Taxable Period that includes such quarter.
Such amount shall be payable by Sub to Parent at least 5 days prior to the date
on which such estimated federal income tax payment would have been due. If,
during the course of a Taxable Period, there is a material change in Sub's
estimates of the Separate Tax Liability of Sub for such Taxable Period and the
estimated tax payments resulting therefrom, Sub shall notify Parent of such
changes, and the provisions of this Section
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2(b) shall apply as if such new estimates were submitted to Parent during the
fourth quarter of the prior Taxable Period, except that Sub shall not be
required to adjust any payments already made to Sub with respect to such current
Taxable Period to reflect such new estimates. Notwithstanding anything contrary
in this Section 2(b), the amount that Sub and its subsidiaries shall pay to
Parent each calendar quarter pursuant to this Section 2(b) shall not exceed the
amount of estimated federal income taxes that Sub would have been obligated to
pay to the IRS with respect to such quarter if Sub was filing a consolidated
federal income tax return with Sub as the parent or separate federal income tax
return, as the case may be, for the Taxable Period that includes such quarter
and all prior Taxable Periods (and such hypothetical estimated federal income
tax liability shall be determined by Sub in a manner consistent with Section
1(c) hereof).
(c) In the event Parent and Sub are ineligible to be
includible corporations in an affiliated group that files a consolidated federal
income tax return that includes Sub for any Taxable Period, any payments by Sub
to Parent made pursuant to this Section 2 for such Taxable Period shall be
accrued as a liability of Parent to Sub.
3. Payments and Accruals.
(a) For every Taxable Period, (i) Sub shall pay to Parent an
amount equal to the excess, if any, of the actual Separate Tax Liability for
such Taxable Period over the Estimated Tax Payments that it has paid to Parent
for such Taxable Period or (ii) Parent shall accrue as a liability to Sub an
amount equal to the excess, if any, of Sub's Estimated Tax Payments that have
been paid to Parent for such Taxable Period over the actual Separate Tax
Liability for such Taxable Period.
(b) As soon as practicable following the close of Sub's
taxable year, Sub shall compute the actual Separate Tax Liability, which
computation shall be reviewed by Parent's independent public accountants.
(c) If Parent receives from the IRS as a result of a Final
Determination a refund or credit attributable to the Sub in respect of the
Separate Tax Liability, appropriate adjustments will be made to subsequent
payments of Sub required hereunder to Parent.
4. Time and Manner of Payment and Accrual. Except as otherwise provided
in Section 3(c), payments and accruals pursuant to Section 3(a) hereof shall be
made no sooner than ten (10) days prior to and no later than five (5) days prior
to the due date of the Group's consolidated federal income tax return for the
Taxable Period in question, without giving effect to any extensions. If the due
date for such return is extended, such payments and accruals shall be
recalculated by Sub no sooner than ten (10) days prior to and no later than five
(5) days prior to the filing date for such return, and any difference between
such
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<PAGE> 4
recalculated payments and accruals and such payments and accruals (prior to such
recalculation) shall be paid to or accrued for the party entitled thereto at the
time of such recalculation.
All payments Sub is required to make hereunder shall be paid
in immediately available funds as instructed by Parent in writing.
5. Adjustments.
(a) Adjustment of Tax Liability. In the event of any
redetermination of the consolidated federal income tax liability of the Group
for any Taxable Period as a result of audit by the IRS, amended return, claim
for refund or otherwise, the Separate Tax Liability shall be re-computed by Sub
and Parent's independent public accountants for such Taxable Period to take into
account such redetermination, and the payments and accruals pursuant to Section
3 hereof shall be appropriately adjusted. Any reconciliation between Parent and
Sub required by such adjustment shall be paid by Sub, or accrued as a liability
of Parent, as the case may be, no sooner than ten (10) days prior to and no
later than five (5) days following the earlier of (i) the date of a Final
Determination with respect to such redetermination or (ii) the earliest date
such adjustment can reasonably be calculated.
(b) Deconsolidation.
(i) In the event that it is determined that Sub has ceased to
be a Member of the Group with respect to any Taxable Period, the amount
of any payments ("Deconsolidated Payments") made by Parent or Sub with
respect to such or subsequent Tax able Periods under Sections 2 and 3
hereof (taking into account any adjustments pursuant to paragraph (a)
of this Section 5) shall be repaid by Sub, or accrued as a liability of
Parent, as the case may be, with interest at the rate determined under
Section 6621(a)(2) of the Code no sooner than ten (10) days prior to
and no later than five (5) days following the earlier of (i) the date
of a Final Determination with respect to such determination or (ii) the
earliest date such adjustment can reasonably be calculated. In the
event Parent accrues a liability to Sub under this Section 5(b)(i) (or
Section 2(c) hereof), Parent shall promptly (i) repay to Sub any
Deconsolidated Payments that Parent has not forwarded to the IRS; and
(ii)(a) file a request with the IRS for a refund of all Deconsolidated
Payments that Parent has forwarded to the IRS and pay to Sub all
amounts received from the IRS pursuant to such refund request or (b)
apply for and receive permission from the IRS to have all
Deconsolidated Payments that Parent has forwarded to the IRS credited
as payments made by Sub to the IRS (in accordance with Treasury
regulation section 1.1502-75(f)(2)). For purposes of this Section
5(b)(i), interest shall be computed in the same manner as the IRS
would have computed interest with respect to a hypothetical
overpayment equivalent to the amount to be repaid or accrued from the
date of such hypothetical overpayment until the date repaid or accrued.
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(ii) Notwithstanding anything in this Agreement to the
contrary, the provisions of the final sentence of Section 3(a) shall
continue to apply following Sub's ceasing to be a Member of the Group
for any reason.
6. Parent as Agent; Filing of Returns; Payment of Taxes.
(a) For each Taxable Period of the Group, Parent shall file,
and cause all Members to join in the filing of, consolidated federal income tax
returns. Sub hereby consents to the filing of such returns, the making of such
elections and applications and the execution of any other documents as Parent
reasonably believes may be required or appropriate for the filing of such
returns.
(b) Sub hereby appoints Parent as its agent, as long as Sub is
a member of the Group, (i) for the purpose of filing all consolidated federal
income tax returns for the Group and making any election or application or
taking any action in connection therewith on behalf of Sub and (ii) in
connection with any audit, examination or other proceeding relating to any taxes
of the Group (a "Proceeding"), to take any action in respect of any Proceeding,
to control any Proceeding, and to initiate any claim for refund, file any
amended return or take any other action Parent deems appropriate. Sub, at its
own cost and expense, shall prepare all such tax returns and conduct all
Proceedings in each case subject to the control of Parent.
(c) Parent shall make all required payments of the federal
consolidated tax liability (including estimated tax payments), if any, of the
Group to the IRS provided that Sub shall have made all payments required of it
hereunder.
7. Cooperation. In the event that the preparation of federal income tax
returns, amended returns, claims for refund, an IRS examination or litigation
relating to the foregoing may require the use of records and information that is
within the exclusive possession and control of Parent or any Member or former
Member, Parent and each Member or former Member shall provide such records,
information and assistance (which may include making employees of any of the
foregoing entities available to provide additional information and explanatory
material thereunder) as are requested by Parent or Sub, as the case may be,
during regular business hours, in connection with any of the developments
described in the preceding sentence. The decision to settle any issue with the
taxing authority shall be Parent's decision but Parent shall in good faith take
into account the intent of this Agreement to treat Sub as it would have been
treated on a consolidated federal income tax return with Sub as the parent or
separate federal income return, as the case may be, and shall endeavor to make a
settlement that is consistent with that intent. Any of the information obtained
pursuant to this Section 7 or any provision hereof providing for the sharing of
information shall be kept confidential by the parties hereto.
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8. State, Local and Foreign Taxes. In the event the Parent elects, or
is required to elect, to file combined, unitary or consolidated state, local or
foreign income tax returns with Sub or any of Sub's subsidiaries, the provisions
hereof shall be applicable to the amount and time of payment by Sub to the
Parent or the accrual of a liability by Parent to Sub.
9. Operating Principles. Parent and Sub agree to (i) act, subject to
principles of sound tax planning, to minimize payments required hereunder, (ii)
utilize cash received from any tax authority in respect of prior payments
hereunder to satisfy any unpaid accruals hereunder and (iii) pay timely amounts
paid hereunder in respect of Separate Tax Liability (including for this purpose
the equivalent amounts corresponding to state, local or foreign taxes computed
in accordance with Section 8 hereof) to the appropriate taxing authority and
return to the payor the excess, if any, of (a) such amount over (b) the amount
actually paid in respect thereof to such taxing authority.
10. Binding Effect; Successors. This Agreement shall be binding upon
each Member of the Group, whether or not such Member was a Member upon the
execution of this Agreement. Parent shall cause each present Member of the Group
formally to assent to the terms hereof and shall cause each future Member of the
Group to so assent promptly after becoming a Member of the Group. This Agreement
shall inure to the benefit of and be binding upon any successors or assigns of
the parties hereto.
11. Governing Law. This Agreement shall be governed by the laws of the
State of New York without regard to principles of conflicts of law which would
apply a law of a jurisdiction other than the law of the State of New York to
this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused their names
to be subscribed and executed by their respective officers effective as of the
date first written above.
NEW WORLD PASTA, LLC
By: /s/ David Y. Ying
Name: David Y. Ying
Title: President
NEW WORLD PASTA COMPANY
By: /s/ C. Mickey Skinner
Name: C. Mickey Skinner
Title: Chairman and Chief Executive Officer
S-1
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 28, 1999, by and between New
World Pasta Company, a Delaware corporation (the "Company"), and C. Mickey
Skinner (the "Executive").
WHEREAS, Hershey Foods Corporation, a Pennsylvania corporation
("Hershey"), the Company and New World Pasta, LLC, a Delaware limited liability
company ("New World"), have entered into a Recapitalization Agreement dated as
of December 15, 1998, as amended (the "Recapitalization Agreement");
WHEREAS, pursuant to the Recapitalization Agreement, prior to
or at the closing of the transactions contemplated thereby, Hershey has, among
other things, (i) transferred, or caused to be transferred, certain assets,
subject to certain liabilities, to the Company and (ii) caused the Company to be
recapitalized (collectively, the "Transactions"), all in accordance with the
terms and conditions set forth in the Recapitalization Agreement;
WHEREAS, the Company desires that Executive serve as the Chair
man of the Board of Directors ("Chairman") and Chief Executive Officer ("CEO")
of the Company upon consummation of the Transactions, and Executive desires to
hold such positions under the terms and conditions of this Agreement; and
WHEREAS, the Board of Directors of the Company (the "Company
Board") has approved and authorized the Company to enter into this Agreement
with Executive.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
1. Employment. The Company hereby employs Executive, and
Executive hereby accepts employment with the Company, upon the terms and subject
to the conditions set forth herein.
<PAGE> 2
2. Term.
(a) Subject to Section 13 hereof, the initial term of
employment by the Company of Executive pursuant to this Agreement (the "Initial
Term") is for a period commencing on the date hereof and terminating on the
third anniversary thereof (the "Initial Termination Date").
(b) Not later than 180 days prior to the Initial Termination
Date, and provided that the Agreement has not been earlier terminated pursuant
to Section 13 hereof, Executive shall be entitled, by written notice to the
Company, to extend the Initial Term for an additional two (2) year period (the
"Renewal Term") commencing on the Initial Termination Date on a full-time or a
part-time basis, such election to be set forth in such notice. The Initial Term,
as may be extended pursuant to this Section 2(b) or earlier terminated is
referred to herein as the "Term."
3. Position.
(a) During the Initial Term and, in the event that Executive
elects pursuant to Section 2 hereof to be employed on a full-time basis during
the Renewal Term, Executive shall serve as the Chairman and CEO of the Company,
supervising the conduct of the business and affairs of the Company and
performing such other duties as the Company Board shall determine.
(b) During the Renewal Term and, in the event that Executive
elects pursuant to Section 2 hereof to be employed on a part-time basis,
Executive shall serve as Chairman of the Company Board, and in such other
capacity as the Company Board in its discretion, shall determine.
4. Duties.
(a) During the Initial Term and, in the event that Executive
elects pursuant to Section 2 hereof to be employed on a full-time basis during
the Renewal Term, Executive shall devote such time and attention to his duties
as are commensurate with his responsibilities as Chairman and CEO of the
Company.
(b) During the Renewal Term, in the event that Executive
elects pursuant to Section 2 hereof to be employed on a part-time basis,
Executive shall devote such time and attention to the business and affairs of
the Company as shall be agreed upon by Executive and the Company Board.
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(c) Executive may, to the extent feasible and consistent with
the terms of this Agreement, perform his services to the Company in Florida
5. Salary and Bonus.
(a) During the Initial Term and, in the event that Executive
elects pursuant to Section 2 hereof to be employed on a full-time basis during
the Renewal Term, the Company shall pay to Executive a base salary at the rate
of $400,000 per year (the "Base Salary"), subject to adjustments pursuant to the
terms of Section 5(c) hereof.
(b) During the Renewal Term, in the event that Executive
elects pursuant to Section 2 hereof to be employed on a part-time basis, the
Company shall pay to Executive a base salary at the rate of $250,000 per year
(the "Part-Time Base Salary"), subject to adjustments pursuant to the terms of
Section 5(c) hereof.
(c) Commencing on the first anniversary hereof and on or prior
to each anniversary hereof during the Term, the Company Board or the
Compensation Committee of the Company Board (the "Compensation Committee") shall
review the Base Salary or the Part-Time Base Salary, as applicable, annually and
shall adjust the Base Salary or Part-Time Base Salary, as applicable, based upon
performance and merit. The Base Salary or Part-Time Base Salary, as applicable,
shall be payable to Executive in substantially equal installments in accordance
with the Company's normal payroll practices, but in no event less often than
semi-monthly.
(d) For the Company's fiscal year ending December 31, 1999,
and for each fiscal year during the Term thereafter, Executive shall be eligible
to receive an annual cash bonus equal to up to fifty percent (50%) of his Base
Salary or Part-Time Base Salary, as applicable, subject to the terms of a Bonus
Compensation Plan to be approved by the Board or the Compensation Committee.
(e) In the event of a material acquisition by the Company of
assets or stock of one or more companies, whether by merger or otherwise (an
"Acquisition"), the Executive and the Company shall negotiate in good faith an
adjustment of the Executive's compensation hereunder such that Executive's
compensation, as adjusted, is commensurate with his duties and responsibilities
after giving effect to the Acquisition.
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6. Equity Interest in the Company. On or promptly after the Closing
Date, the Company will establish a stock option plan (the "Plan") substantially
in the form of Exhibit A hereto pursuant to which the Company may grant to
employees of the Company options to purchase up to 910,166 shares of common
stock of the Company. Pursuant to the Plan and subject to the terms of the stock
option agreement between Executive and the Company, substantially in the form of
Exhibit B hereto, the Company shall grant Executive options to purchase an
aggregate of 111,111 shares of such common stock with an exercise price of $10
per share and an aggregate of 59,102 shares of such common stock with an
exercise price of $73.50 per share. The Company shall cause its principal
stockholders to enter into an agreement with the Executive substantially in the
form of Exhibit C hereto providing for certain payments to the Executive with
respect to the preferred stock of the Company.
7. Vacation, Holidays and Sick Leave. During the Term, Executive shall
be entitled to paid vacation, paid holidays and sick leave in accordance with
the Company's standard policies for its senior executive officers, which
policies shall provide Executive with benefits no less favorable than those
provided to any other senior executive officer of the Company; it being
understood that holidays and sick leave provided by the Company shall be no less
favorable in the aggregate than those provided by the Hershey Pasta Group.
8. Business Expenses. Executive shall be reimbursed for all reasonable
and necessary business expenses incurred by (i) him in connection with his
employment (including, without limitation, expenses for first-class air travel
on all Company business) and (ii) his spouse in connection with her
accompaniment of Executive on business trips where it is customary for
Executive's spouse to attend, in each case, upon timely submission by Executive
of receipts and other documentation as required by the Internal Revenue Code of
1986, as amended (the "Code"), and in accordance with the Company's normal
expense reimbursement policies.
9. Health, Welfare and Pension Benefits. During the Term, Executive and
eligible members of his family shall be eligible to participate fully in all (i)
health and dental benefits and insurance programs; (ii) life and short- and
long-term disability benefits and insurance programs and (iii) pension and
retirement benefits, all as available to senior executive officers of the
Company generally, which benefits (excluding all retirement plans other than
Section 401(k) savings plans) shall be no less favorable in the aggregate than
those similar benefits available
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to senior executives of Hershey Pasta Group provided the cost of all such
benefits are within the pro forma budget of the Company at the closing of the
Transactions.
10. Membership Dues; Tax Returns; etc. During the Term, the Company
shall reimburse Executive for (i) annual membership dues and assessments at one
country club of Executive's choice not to exceed $12,000 per year (increased
annually by the increase in the Consumer Price Index for the preceding year),
(ii) the cost of annual personal income tax return preparation in an amount not
to exceed $2,000 per year and (iii) an annual physical.
11. Car Allowance. During the Term, the Executive shall be entitled to
an allowance of $1200 per month, for an automobile to be used by Executive in
conducting or promoting business for the Company.
12. D&O Coverage. During the Term, the Company shall maintain directors
and officers liability insurance for its directors and officers, in such amounts
as the Company Board believes is reasonably necessary.
13. Termination of Agreement. The employment by the Company of
Executive pursuant to this Agreement shall not be terminated prior to the end of
the then applicable Term, except as set forth in this Section 13.
(a) By Mutual Consent. The employment by the Company of
Executive pursuant to this Agreement may be terminated at any time by the mutual
written agreement of the Company and Executive.
(b) Death. The employment by the Company of Executive pursuant
to this Agreement shall be terminated upon the death of Executive, in which
event Executive's spouse or heirs shall receive the (i) Executive's Base Salary
or Part-Time Base Salary, as applicable, and benefits to be paid or provided to
Executive under this Agreement through the Date of Termination and (ii) the Base
Salary or Part-Time Base Salary, as applicable, and benefits pursuant to Section
9 hereof to be paid or provided to Executive under this Agreement for one (1)
year after the Date of Termination.
(c) Disability. The employment by the Company of Executive
pursuant to this Agreement may be terminated by written notice to Executive at
the option of the Company in the event that (i) Executive becomes unable to
perform his normal duties by reason of physical or mental illness or accident
for any twelve
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(12) consecutive month period, or (ii) the Company receives written opinions
from both a physician for the Company and a physician for Executive that
Executive will be so disabled. In the event the employment by the Company of
Executive is terminated pursuant to this Section 13(c), Executive shall be
entitled to receive (i) all Base Salary or Part-Time Base Salary, as applicable,
and benefits to be paid or provided to Executive under this Agreement through
the Date of Termination and (ii) the Base Salary or Part-Time Base Salary, as
applicable, and benefits pursuant to Section 9 hereof to be paid or provided to
Executive for one (1) year after the Date of Termination; provided, however,
that amounts payable to Executive under this Section 13(c) shall be reduced by
the proceeds of any short- and/or long-term disability payments under the
Company plans referred to in Section 9 hereof to which Executive may be entitled
during such period.
(d) By the Company for Cause. The employment of the Executive
pursuant to this Agreement may be terminated by the Company by written notice to
Executive ("Notice of Termination") for Cause. In the event the employment by
the Company of Executive is terminated pursuant to this Section 13(d), Executive
shall be entitled to receive all Base Salary or Part-Time Base Salary, as
applicable, and benefits to be paid or provided to Executive under this
Agreement through the Date of Termination.
(e) By the Company Without Cause. The employment by the
Company of Executive pursuant to this Agreement may be terminated by the Company
at any time without Cause by delivery of a Notice of Termination to Executive.
In the event the employment by the Company of Executive is terminated pursuant
to this Section 13(e), Executive shall be entitled to receive (i) all Base
Salary or Part-Time Base Salary, as applicable, and benefits to be paid or
provided to Executive under this Agreement through the Date of Termination and
(ii) the Base Salary and benefits to be paid or provided to Executive under this
Agreement for the remainder of the Term; provided, however, that if employment
by the Company of Executive is terminated during the Initial Term pursuant to
this Section 13(e), Executive shall be entitled to receive the Part-Time Base
Salary and benefits to be paid or provided to Executive under this Agreement
during the two years following the Initial Term.
Notwithstanding the foregoing and subject to Section 14
hereof, in the event the employment by the Company of Executive is terminated
pursuant to this Section 13(e) following a determination, in good faith, by the
Company Board after notice to Executive and a reasonable opportunity to cure
(not
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less than 30 days), that one or both of the following events has occurred: (i)
Executive has failed to perform his material duties in a reasonably
satisfactory manner; or (ii) Executive has breached any material provision of
this Agreement, then Executive shall only be entitled to receive all Base Salary
or Part-Time Base Salary, as applicable, and benefits to be paid or provided to
Executive under this Agreement through the Date of Termination and no more.
(f) By Executive for Good Reason. The employment by the
Executive pursuant to this Agreement may be terminated by Executive by written
notice to the Company of his resignation ("Notice of Resignation") for Good
Reason (as defined herein). In the event the employment by the Company of
Executive is terminated pursuant to this Section 13(f), Executive shall be
entitled to receive (i) all Base Salary or Part-Time Base Salary, as applicable,
and benefits to be paid or provided to Executive under this Agreement through
the Date of Termination and (ii) the Base Salary and benefits to be paid or
provided to Executive under this Agreement for the remainder of the Term;
provided, however, that if employment by the Company of Executive is terminated
during the Initial Term pursuant to this Section 13(f), Executive shall be
entitled to receive the Part-Time Base Salary and benefits to be paid or
provided to Executive under this Agreement during the two years following the
Initial Term.
(g) By Executive Without Good Reason. The employment of
Executive by the Company pursuant to this Agreement may be terminated by
Executive by delivery of a Notice of Resignation at any time without Good
Reason. In the event the employment by the Company of Executive is terminated
pursuant to this Section 13(g), Executive shall be entitled to receive all Base
Salary or Part-Time Base Salary, as applicable, and benefits to be paid or
provided to Executive under this Agreement through the Date of Termination.
(h) Change of Control. The employment by the Company of
Executive pursuant to this Agreement shall terminate, without any further action
required by either the Company or Executive, upon the occurrence of a Change of
Control (as defined herein); provided, however, that if in connection with such
Change of Control, Executive does not have the right to receive cash or
marketable securities with respect to his equity investment in the Company, his
options under the Plan and under the Agreement attached as Exhibit C hereto,
this Agreement shall not terminate upon such Change of Control but shall become
terminable by the Executive at any time within sixty (60) days following such
Change of Control. In the event that the employment by the Company of Executive
is terminated pursuant
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to this Section 13(h), whether automatically or by Executive, Executive shall be
entitled to receive all Base Salary or Part-Time Base Salary, as applicable, and
benefits to be paid or provided to Executive under this Agreement through the
Date of Termination.
(i) Date of Termination. Executive's Date of Termination shall
be: (i) if the parties hereto mutually agree to terminate this Agreement
pursuant to Section 13(a) hereof, the date designated by the parties in such
agreement; (ii) if Executive's employment by the Company is terminated pursuant
to Section 13(b), the date of Executive's death; (iii) if Executive's employment
by the Company is terminated pursuant to Section 13(c), the last day of the
applicable period referred to in Section 13(c)(i) hereof or the date upon which
the Company receives written opinions from both a physician for the Company and
a physician for Executive referred to in Section 13(c)(ii) hereof; (iv) if
Executive's employment by the Company is terminated pursuant to Section 13(d),
the date on which a Notice of Termination is given; (v) if Executive's
employment by the Company is terminated pursuant to Section 13(e) or 13(g),
sixty (60) days after the date the Notice of Termination or Notice of
Resignation, as the case may be, is given (provided, that the Company, in its
sole discretion may waive all or any part of such 60-day period); (vi) if
Executive's employment by the Company is terminated pursuant to Section 13(f),
the date on which a Notice of Resignation is given; and (vii) if Executive's
employment by the Company is terminated pursuant to Section 13(h), the date of
the Change of Control; provided, however, that if Executive terminates the
Agreement pursuant to Section 13(h) within sixty (60) days following the Change
of Control, the Date of Termination shall be the date on which the Notice of
Resignation is given. If, within thirty (30) days after any Notice of
Termination is given pursuant to Section 13(c), Executive notifies the Company
that a dispute exists concerning Executive's termination, the Date of
Termination shall be the date on which the dispute is finally determined in
favor of termination of Executive's employment by the Company hereunder, either
by mutual written agreement of the parties or by a binding and final arbitration
award; provided, however, that Executive's Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and Executive
pursues the resolution of such dispute with reasonable diligence.
14. Arbitration. Notwithstanding any other provision of this Agreement,
in the event that this Agreement is terminated following a determination by the
Company Board as described in the second paragraph of Section 13(e), the
Executive may, by written notice to the Company within ten business days
following the delivery of the Notice of Termination to Executive, require to
submit such
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determination to binding arbitration pursuant to the rules of the American
Arbitration Association in Philadelphia, Pennsylvania (including reasonable
discovery as determined by the arbitrator) and the order of such arbitrator
shall be conclusive, final and binding on all parties hereto and may be entered
as a judgment in any court having jurisdiction over the parties. In the event
that Executive timely requires the Company to submit such determination to
arbitration as provided in the immediately preceding sentence and diligently
pursues such arbitration, the Company shall continue to pay Executive his Base
Salary or Part-Time Base Salary, as applicable, and benefits to be paid or
provided to Executive under this Agreement until the earlier of (i) a
determination by the arbitrator and (ii) the period provided for payment
pursuant to the first paragraph of Section 13(e) hereof; provided, however, that
Executive shall promptly repay to the Company all amounts paid to him pursuant
to this sentence (including the cost of all benefits provided) in the event that
the Executive does not prevail in such arbitration. Executive acknowledges and
agrees that in the event that he does not comply with his obligations pursuant
to the immediately preceding sentence, the Company may set off such amount
against any obligations owed to Executive.
15. Representations.
(a) The Company represents and warrants that this Agreement
has been authorized by all necessary corporate action of the Company and is a
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms.
(b) Executive represents and warrants that he is not a party
to any agreement or instrument which would prevent him from entering into or
performing his duties in any way under this Agreement and that this Agreement is
a valid and binding agreement of Executive enforceable against Executive in
accordance with its terms.
16. Successors. This Agreement is a personal contract and the rights
and interests of Executive hereunder may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him, except as otherwise expressly
permitted by the provisions of this Agreement. This Agreement shall inure to the
benefit of and be enforceable by Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount would still be
payable to him hereunder had Executive continued to live, all such amounts,
unless otherwise provided herein,
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shall be paid in accordance with the terms of this Agreement to his devisee,
legatee or other designee or, if there is no such designee, to his estate.
17. Non-Competition Covenants.
(a) Executive will not, during the Term and for any period
during which Executive is receiving payments from the Company pursuant to this
Agreement, engage in Competition (as defined herein) with the Company.
(b) Without limiting the generality of foregoing, during the
Term and for any period during which Executive is receiving payments from the
Company pursuant to this Agreement, Executive will not, directly or indirectly,
for his benefit or for the benefit of any other person or entity, do any of the
following: (i) solicit Restricted Business from any customer doing business with
the Company, provided that, after the Termination Date, the restriction set
forth in this clause (i) shall be limited to such customers with which the
Company has done business during the twelve months immediately preceding the
Date of Termination; (ii) solicit Restricted Business from any potential
customer of the business of the Company, which has been the subject of a written
or oral bid, offer or proposal by the Company, or of substantial preparation by
the Company with a view to making such a bid, proposal or offer, provided that,
after the Termination Date, the restriction set forth in this clause (ii) shall
be limited to such bids, offers and proposals by the Company, in any case,
during the three months immediately preceding the Date of Termination; (iii)
solicit the employment or services of any person who is employed by or is a
consultant to the Company; or (iv) otherwise wrongfully interfere with the
business or accounts of the Company, including through the making of any false
statements or comments of a defamatory or disparaging nature to third parties
regarding the Company or any of its officers, directors, personnel,
stockholders, products or services.
(c) Notwithstanding the provisions of Sections 17(a) and
17(b), in the event that this Agreement is terminated pursuant to Section 13(h)
(whether automatically or by Executive), then the provisions of Sections 17(a)
and 17(b) shall remain in effect for a period of two (2) years thereafter.
(d) Executive further acknowledges and agrees that due to the
uniqueness of his services and the confidential nature of the information he
will possess, the covenants set forth in this Section 17 are reasonable and
necessary for the protection of the business and goodwill of the Company; and it
is the intention of
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the parties hereto that this Section 17 shall be enforceable to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which such enforcement is sought. Accordingly, without limiting
the generality of Section 22 hereof, it is the intention of the parties hereto
that if, in the opinion of any court of competent jurisdiction, any provision or
clause set forth in this Section 17 is not reasonable in any respect, including,
without limitation, with respect to the scope of the time, place or manner
restrictions set forth herein, such court shall have the right, power and
authority to modify any and all such provisions and clauses as to such court
shall appear not unreasonable and to enforce the remainder of this Section 17 as
so modified.
18. Confidentiality Covenant. (a) During the Term and for a period of
seven years thereafter, Executive will not, directly or indirectly, whether
individually, as a director, stockholder, owner, partner, member, officer,
employee, principal or agent of any business, or in any other capacity, make
known, disclose, furnish, make available or utilize any of the Company's
confidential information, other than in the proper performance of the duties
contemplated by the Agreement, or as required by law; provided that, prior to
disclosing any of the confidential information required by law, Executive will
promptly notify the Company so that the Company may seek a protective order or
other appropriate remedy. Executive will return all confidential information,
including all photocopies, extracts and summaries thereof, and any such
information stored electronically on tapes, computer disks or in any other
manner to the Company at any time upon request by the Company and, in any event,
promptly after the termination of his employment for any reason; provided,
however, that Executive may retain one copy of such information and may use such
information in connection with (i) any dispute with the Company or (ii) any
action brought against Executive where such information is relevant.
Confidential information does not include any information available to or
already in the hands of the public, any information known to Executive prior to
the date hereof, any information disclosed to Executive by a third party who is
not under a duty of confidentiality with respect to such information, any
information independently developed by Executive without the use of confidential
information of the Company.
(b) Company will not disclose any information concerning the
Executive to any person including but not limited to the reason for any
termination of employment of the Executive, provided however, that the Company
may disclose such information to its insurers as and to the extent they have a
need to know such information and provided further that the Company may disclose
such information as and to the extent necessary and relevant to any dispute
between the
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Company and the Executive and as and to the extent such disclosure or any other
disclosure is required by law.
19. Entire Agreement. This Agreement contains all the
understandings between the parties hereto pertaining to the matters referred to
herein, and supersedes any other undertakings and agreements, whether oral or in
writing, previously entered into by them with respect thereto. Executive
represents that, in executing this Agreement, he does not rely and has not
relied upon any representation or statement made by the Company not set forth
herein with regard to the subject matter or effect of this Agreement or
otherwise.
20. Amendment or Modification; Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by Executive and by a duly authorized officer of the Company.
No waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
21. Notices. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be (i) delivered
by hand, (ii) delivered by a nationally recognized commercial overnight delivery
service, (iii) mailed postage prepaid by first class mail or (iv) transmitted by
facsimile transmitted to the party concerned at the address or telecopier number
set forth below:
To Executive at:
Mr. C. Mickey Skinner
6975 Green Tree Drive
Naples, Florida 34108
with copies to:
Maslon Edelman Borman & Brand LLP
3300 Norwest Center
Minneapolis, MN 55402
Attention: Larry A. Koch
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To the Company at:
New World Pasta Company
100 Crystal A. Drive
Hershey, Pennsylvania 17033-0810
Attention: General Counsel
with copies to:
Joseph, Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Facsimile (212) 286-8626
Attention: David Y. Ying
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Facsimile (302) 651-3001
Attention: Robert B. Pincus
Such notices shall be effective: (i) in the case of hand
deliveries when received; (ii) in the case of an overnight delivery service, on
the next business day after being placed in the possession of such delivery
service, with delivery charges prepaid; (iii) in the case of mail, seven (7)
days after deposit in the postal system, first class mail, postage prepaid; and
(iv) in the case of facsimile notices, when electronic confirmation of receipt
is received by the sender. Any party may change its address and telecopy number
by written notice to the other given in accordance with this Section 21;
provided, however, that such change shall be effective when received.
22. Severability. If any provision or clause of this Agreement
or the application of any such provision or clause to any party or circumstances
shall be determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision or clause to such person or circumstances other than those to
which it is so determined
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to be invalid and unenforceable, shall not be affected thereby, and each
provision or clause hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
23. Survivorship. The respective rights and obligations or the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
24. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to it conflicts of law principles.
25. Headings. All descriptive headings of sections and
paragraphs in this Agreement are intended solely for convenience, and no
provision of this Agreement is to be construed by reference to the heading of
any section or paragraph.
26. Withholding. All payments to Executive under this
Agreement shall be reduced by all applicable withholding required by federal,
state or local law.
27. Specific Performance. Each party hereto acknowledges that
money damages would be both incalculable and an insufficient remedy for any
breach of this Agreement by such party and that any such breach would cause the
other parties, irreparable harm. Accordingly, each party hereto also agrees
that, in the event of any breach or threatened breach of the provisions of this
Agreement by such party, the other parties shall be entitled to equitable relief
without the requirement of posting a bond or other security, including in the
form of injunctions and orders for specific performance, in addition to all
other remedies available to such other parties at law or in equity.
28. Counterparts. This Agreement may be executed in counter
parts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
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29. Definitions.
(a) "Cause" means the determination, in good faith, by the
Company Board, after notice to Executive and a reasonable opportunity to cure of
no less than 30 days, that one or more of the following events has occurred: (i)
any reckless or grossly negligent act by Executive materially injuring the
interest, business or reputation of the Company, or any of its parents,
subsidiaries or affiliates; (ii) Executive's commission of any felony; or (iii)
any misappropriation or embezzlement of the property of the Company, or any of
its parents, subsidiaries or affiliates.
(b) "Change of Control" includes the occurrence of any of the
following events: (i) any "Person" (within the meaning of Section 12(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than New World or its affiliates, becomes a Beneficial Owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors; (ii) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other Company, other
than a merger or consolidation that would result in the voting securities of
the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent thereof) at least
fifty percent (50%) of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation; (iii) the stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets; or (iv) the following individuals
cease for any reason to constitute a majority of the number of directors then
serving: individuals who, as of January 30, 1999, constitute the Company Board
and any new director (other than a director whose initial assumption of office
is in connection with an actual or threatened election contest, including but
not limited to a consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Company Board or nomination
for election by the Company's stockholders was approved or recommended by a vote
of at least a majority of the directors then still in office who either were
directors on January 30, 1999 or whose appointment, election or nomination for
election was previously so approved or recommended.
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(c) "Competition" means engaging in, or otherwise directly or
indirectly being employed by or acting as a consultant or lender to, or being a
director, officer, employee, principal, licensor, trustee, broker, agent,
stockholder, member, owner, joint venturer or partner of, or permitting a name
to be used in connection with the activities of any other business or
organization which engages, directly or through Affiliates it controls, in the
Restricted Business, provided that, it will not be a violation for Executive to
(i) become the registered or beneficial owner of up to one percent (1%) of any
class or series of the capital stock of a publicly traded corporation that is
engaged in Competition or (ii) acquire up to one percent (1%) of any issue of
publicly traded debt securities of a corporation that is engaged in Competition,
it being understood that Executive may not actively participate in the business
of any such corporation, by reason of such ownership or acquisition or
otherwise, until such time as this covenant expires.
(d) "Good Reason" for termination includes the occurrence of
any of following events without the prior consent of Executive: (i) removal of
Executive from Executive's then current position; (ii) material reduction by the
Company of Executive's then current duties, responsibilities or authority or the
assignment to Executive of duties materially inconsistent with his then current
position; (iii) relocation of the Company's headquarters to a location more than
25 miles from the greater Harrisburg, Pennsylvania metropolitan area; or (iv)
material breach by the Company of Employment Agreement, which breach remains
uncured for a period of thirty days after receipt by the Company of written
notice from Executive.
(e) "Restricted Business" means the manufacturing,
distribution, marketing or sale of pasta or egg noodle products or any other
business which constitutes more than 10% of the consolidated revenues of the
Company during the fiscal year ending immediately prior to any such
determination or the Date of Termination, as the case may be.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Employment Agreement as of the date first above written.
NEW WORLD PASTA COMPANY
By: /s/ John C. Miller
John C. Miller
President and Director
EXECUTIVE
By: /s/ C. Mickey Skinner
C. Mickey Skinner
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<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 28, 1999, by and between New
World Pasta Company, a Delaware corporation (the "Company"), and John C. Miller
(the "Executive").
WHEREAS, Hershey Foods Corporation, a Pennsylvania corporation
("Hershey"), the Company and New World Pasta, LLC, a Delaware limited liability
company ("New World"), have entered into a Recapitalization Agreement dated as
of December 15, 1998, as amended (the "Recapitalization Agreement");
WHEREAS, pursuant to the Recapitalization Agreement, prior to
or at the closing of the transactions contemplated thereby, Hershey has, among
other things, (i) transferred, or caused to be transferred, certain assets,
subject to certain liabilities, to the Company and (ii) caused the Company to be
recapitalized (collectively, the "Transactions"), all in accordance with the
terms and conditions set forth in the Recapitalization Agreement;
WHEREAS, the Company desires that Executive serve as President
of the Company ("President") and as Co-Chairman of the Board of Directors of the
Company upon consummation of the Transactions, and Executive desires to hold
such positions under the terms and conditions of this Agreement; and
WHEREAS, Executive is currently the President and Chief
Executive Officer of Miller Milling Company and a partner in Miller Milling
Company Limited Partnership (collectively, "Miller Milling") and will continue
to serve in such positions following the consummation of the Transactions.
WHEREAS, the Board of Directors of the Company (the "Company
Board") has approved and authorized the Company to enter into this Agreement
with Executive.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
<PAGE> 2
1. Employment. The Company hereby employs Executive, and
Executive hereby accepts employment with the Company, on a part-time basis, upon
the terms and subject to the conditions set forth herein.
2. Term.
(a) Subject to Section 10 hereof, the initial term of
employment by the Company of Executive pursuant to this Agreement (the "Initial
Term") is for a period commencing on the date hereof and terminating on the
third anniversary thereof (the "Initial Termination Date").
(b) Provided that the Agreement has not been earlier
terminated pursuant to Section 10 hereof, the Initial Term shall be extended for
an additional two (2) year period (the "Renewal Term") commencing on the Initial
Termination Date, unless not later than 90 days prior to the Initial Termination
Date, Executive or the Company shall, by written notice, elect not to so extend
the Initial Term. The Initial Term, as may be extended pursuant to this Section
2(b) or earlier terminated is referred to herein as the "Term."
3. Position.
During the Term, Executive shall serve as the President of the
Company and Co-Chairman of the Company Board.
4. Duties.
During the Term, Executive shall perform such duties
as are commensurate with his position as President of the Company, taking into
consideration Executive's part-time status.
5. Salary and Bonus.
(a) During the Term the Company shall pay to
Executive a base salary at the rate of $200,000 per year, subject to adjustments
pursuant to the terms of Section 5(b) hereof (the "Base Salary").
(b) Commencing on the first anniversary hereof and on
or prior to each anniversary hereof during the Term, the Company Board or the
Compensation Committee of the Company Board (the "Compensation Committee") shall
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<PAGE> 3
review the Base Salary annually and shall increase the Base Salary by an amount
equal to the percentage increase in the Consumer Price Index for the
Minneapolis, Minnesota metropolitan area during the most recently ended calendar
year. The Base Salary shall be payable to Executive in substantially equal
installments in accordance with the Company's normal payroll practices, but in
no event less often than semi-monthly.
(c) For the Company's fiscal year ending December 31, 1999,
and for each fiscal year during the Term thereafter, Executive shall be eligible
to receive an annual cash bonus equal to up to fifty percent (50%) of his Base
Salary, subject to the terms of a Bonus Compensation Plan to be approved by the
Board or the Compensation Committee.
(d) In the event of a material acquisition by the Company of
assets or stock of one or more companies, whether by merger or otherwise (an
"Acquisition"), the Executive and the Company shall negotiate in good faith an
adjustment of the Executive's compensation hereunder such that Executive's
compensation, as adjusted, is commensurate with his duties and responsibilities
after giving effect to the Acquisition.
6. Equity Interest in the Company. On or promptly after the Closing
Date, the Company will establish a stock option plan (the "Plan") substantially
in the form of Exhibit A hereto pursuant to which the Company may grant to
employees of the Company options to purchase up to 910,166 shares of common
stock of the Company. Pursuant to the Plan and subject to the terms of the stock
option agreement between Executive and the Company, substantially in the form of
Exhibit B hereto, the Company shall grant Executive options to purchase an
aggregate of 92,778 shares of such common stock with an exercise price of $10
per share and an aggregate of 108,158 shares of such common stock with an
exercise price of $73.50 per share. The Company shall cause its principal
stockholders to enter into an agreement with the Executive substantially in the
form of Exhibit C hereto providing for certain payments to the Executive with
respect to the preferred stock of the Company.
7. Business Expenses. Executive shall be reimbursed for all reasonable
and necessary business expenses incurred by him in connection with his
employment (including, without limitation, expenses for first-class air travel
on all Company business), upon timely submission by Executive of receipts and
other documentation as required by the Internal Revenue Code of 1986, as amended
(the
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<PAGE> 4
"Code"), and in accordance with the Company's normal expense reimbursement
policies.
8. Welfare and Other Benefits. During the Term, Executive shall be
eligible to participate fully in all life and short- and long-term disability
benefits and insurance programs available to senior executive officers of the
Company generally. Executive shall be entitled to participate in, and receive
Company contributions to, any Section 401(k) savings plan available to senior
executive officers of the Company generally.
9. D&O Coverage. During the Term, the Company shall maintain directors
and officers liability insurance for its directors and officers, in such amounts
as the Company Board believes is reasonably necessary.
10. Termination of Agreement. The employment by the Company of
Executive pursuant to this Agreement shall not be terminated prior to the end of
the then applicable Term, except as set forth in this Section 10.
(a) By Mutual Consent. The employment by the Company of
Executive pursuant to this Agreement may be terminated at any time by the mutual
written agreement of the Company and Executive.
(b) Death. The employment by the Company of Executive pursuant
to this Agreement shall be terminated upon the death of Executive, in which
event Executive's spouse or heirs shall receive the (i) Executive's Base Salary
and benefits to be paid or provided to Executive under this Agreement through
the Date of Termination and (ii) the Base Salary and benefits pursuant to
Section 8 hereof to be paid or provided to Executive under this Agreement for
one (1) year after the Date of Termination.
(c) Disability. The employment by the Company of Executive
pursuant to this Agreement may be terminated by written notice to Executive at
the option of the Company in the event that (i) Executive becomes unable to
perform his normal duties by reason of physical or mental illness or accident
for any twelve (12) consecutive month period, or (ii) the Company receives
written opinions from both a physician for the Company and a physician for
Executive that Executive will be so disabled. In the event the employment by the
Company of Executive is terminated pursuant to this Section 10(c), Executive
shall be entitled to receive (i) all Base Salary and benefits to be paid or
provided to Executive under this Agreement
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<PAGE> 5
through the Date of Termination and (ii) the Base Salary and benefits pursuant
to Section 8 hereof to be paid or provided to Executive for one (1) year after
the Date of Termination; provided, however, that amounts payable to Executive
under this Section 10(c) shall be reduced by the proceeds of any short- and/or
long-term disability payments under the Company plans referred to in Section 8
hereof to which Executive may be entitled during such period.
(d) By the Company for Cause. The employment of the Executive
pursuant to this Agreement may be terminated by the Company by written notice to
Executive ("Notice of Termination") for Cause. In the event the employment by
the Company of Executive is terminated pursuant to this Section 10(d), Executive
shall be entitled to receive all Base Salary and benefits to be paid or provided
to Executive under this Agreement through the Date of Termination.
(e) By the Company Without Cause. The employment by the
Company of Executive pursuant to this Agreement may be terminated by the Company
at any time without Cause by delivery of a Notice of Termination to Executive.
In the event the employment by the Company of Executive is terminated pursuant
to this Section 10(e), Executive shall be entitled to receive (i) all Base
Salary and benefits to be paid or provided to Executive under this Agreement
through the Date of Termination and (ii) the Base Salary and benefits to be paid
or provided to Executive under this Agreement for the remainder of the Term.
Notwithstanding the foregoing and subject to Section 11
hereof, in the event the employment by the Company of Executive is terminated
pursuant to this Section 10(e) following a determination, in good faith, by the
Company Board after notice to Executive and a reasonable opportunity to cure
(not less than 30 days), that one or both of the following events has occurred:
(i) Executive has failed to perform his material duties in a reasonably
satisfactory manner; or (ii) Executive has breached any material provision of
this Agreement, then Executive shall only be entitled to receive all Base Salary
and benefits to be paid or provided to Executive under this Agreement through
the Date of Termination and no more.
(f) By Executive for Good Reason. The employment by the
Executive pursuant to this Agreement may be terminated by Executive by written
notice to the Company of his resignation ("Notice of Resignation") for Good
Reason (as defined herein). In the event the employment by the Company of
Executive is terminated pursuant to this Section 10(f), Executive shall be
entitled to receive (i) all Base Salary and benefits to be paid or provided to
Executive under this Agreement
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<PAGE> 6
through the Date of Termination and (ii) the Base Salary and benefits to be paid
or provided to Executive under this Agreement for the remainder of the Term.
(g) By Executive Without Good Reason. The employment of
Executive by the Company pursuant to this Agreement may be terminated by
Executive by delivery of a Notice of Resignation at any time without Good
Reason. In the event the employment by the Company of Executive is terminated
pursuant to this Section 10(g), Executive shall be entitled to receive all Base
Salary and benefits to be paid or provided to Executive under this Agreement
through the Date of Termination.
(h) Change of Control. The employment by the Company of
Executive pursuant to this Agreement shall terminate, without any further action
required by either the Company or Executive, upon the occurrence of a Change of
Control (as defined herein); provided, however, that if in connection with such
Change of Control, Executive does not have the right to receive cash or
marketable securities with respect to his equity investment in the Company, his
options under the Plan and under the Agreement attached as Exhibit C hereto,
this Agreement shall not terminate upon such Change of Control but shall become
terminable by the Executive at any time within sixty (60) days following such
Change of Control. In the event that the employment by the Company of Executive
is terminated pursuant to this Section 10(h), whether automatically or by
Executive, Executive shall be entitled to receive all Base Salary and benefits
to be paid or provided to Executive under this Agreement through the Date of
Termination.
(i) Date of Termination. Executive's Date of Termination shall
be: (i) if the parties hereto mutually agree to terminate this Agreement
pursuant to Section 10(a) hereof, the date designated by the parties in such
agreement; (ii) if Executive's employment by the Company is terminated pursuant
to Section 10(b), the date of Executive's death; (iii) if Executive's employment
by the Company is terminated pursuant to Section 10(c), the last day of the
applicable period referred to in Section 10(c)(i) hereof or the date upon which
the Company receives written opinions from both a physician for the Company and
a physician for Executive referred to in Section 10(c)(ii) hereof; (iv) if
Executive's employment by the Company is terminated pursuant to Section 10(d),
the date on which a Notice of Termination is given; (v) if Executive's
employment by the Company is terminated pursuant to Section 10(e) or 10(g),
sixty (60) days after the date the Notice of Termination or Notice of
Resignation, as the case may be, is given (provided, that the Company, in its
sole discretion may waive all or any part of such 60-day period); (vi) if Execu-
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<PAGE> 7
tive's employment by the Company is terminated pursuant to Section 10(f), the
date on which a Notice of Resignation is given; and (vii) if Executive's
employment by the Company is terminated pursuant to Section 10(h), the date of
the Change of Control; provided, however, that if Executive terminates the
Agreement pursuant to Section 10(h) within sixty (60) days following the Change
of Control, the Date of Termination shall be the date on which the Notice of
Resignation is given. If, within thirty (30) days after any Notice of
Termination is given pursuant to Section 10(c), Executive notifies the Company
that a dispute exists concerning Executive's termination, the Date of
Termination shall be the date on which the dispute is finally determined in
favor of termination of Executive's employment by the Company hereunder, either
by mutual written agreement of the parties or by a binding and final arbitration
award; provided, however, that Executive's Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and Executive
pursues the resolution of such dispute with reasonable diligence.
11. Arbitration. Notwithstanding any other provision of this
Agreement, in the event that this Agreement is terminated following a
determination by the Company Board as described in the second paragraph of
Section 10(e), the Executive may, by written notice to the Company within ten
business days following the delivery of the Notice of Termination to Executive,
require to submit such determination to binding arbitration pursuant to the
rules of the American Arbitration Association in Philadelphia, Pennsylvania
(including reasonable discovery as determined by the arbitrator) and the order
of such arbitrator shall be conclusive, final and binding on all parties hereto
and may be entered as a judgment in any court having jurisdiction over the
parties. In the event that Executive timely requires the Company to submit such
determination to arbitration as provided in the immediately preceding sentence
and diligently pursues such arbitration, the Company shall continue to pay
Executive his Base Salary and benefits to be paid or provided to Executive under
this Agreement until the earlier of (i) a determination by the arbitrator and
(ii) the period provided for payment pursuant to the first paragraph of Section
10(e) hereof; provided, however, that Executive shall promptly repay to the
Company all amounts paid to him pursuant to this sentence (including the cost of
all benefits provided) in the event that the Executive does not prevail in such
arbitration. Executive acknowledges and agrees that in the event that he does
not comply with his obligations pursuant to the immediately preceding sentence,
the Company may set off such amount against any obligations owed to Executive.
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<PAGE> 8
12. Representations.
(a) The Company represents and warrants that this Agreement
has been authorized by all necessary corporate action of the Company and is a
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms.
(b) Executive represents and warrants that he is not a party
to any agreement or instrument which would prevent him from entering into or
performing his duties in any way under this Agreement and that this Agreement is
a valid and binding agreement of Executive enforceable against Executive in
accordance with its terms.
13. Successors. This Agreement is a personal contract and the rights
and interests of Executive hereunder may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him, except as otherwise expressly
permitted by the provisions of this Agreement. This Agreement shall inure to the
benefit of and be enforceable by Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount would still be
payable to him hereunder had Executive continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to his devisee, legatee or other designee or, if there is no such
designee, to his estate.
14. Non-Competition Covenants.
(a) Executive will not, during the Term and for any period
during which Executive is receiving payments from the Company pursuant to this
Agreement, engage in Competition (as defined herein) with the Company.
(b) Without limiting the generality of foregoing, during the
Term and for any period during which Executive is receiving payments from the
Company pursuant to this Agreement, Executive will not, directly or indirectly,
for his benefit or for the benefit of any other person or entity, do any of the
following: (i) solicit Restricted Business from any customer doing business with
the Company, provided that, after the Termination Date, the restriction set
forth in this clause (i) shall be limited to such customers with which the
Company has done business during the twelve months immediately preceding the
Date of Termination; (ii) solicit Restricted Business from any potential
customer of the business of the Company,
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<PAGE> 9
which has been the subject of a written or oral bid, offer or proposal by the
Company, or of substantial preparation by the Company with a view to making such
a bid, proposal or offer, provided that, after the Termination Date, the
restriction set forth in this clause (ii) shall be limited to such bids, offers
and proposals by the Company, in any case, during the three months immediately
preceding the Date of Termination; (iii) solicit the employment or services of
any person who is employed by or is a consultant to the Company; or (iv)
otherwise wrongfully interfere with the business or accounts of the Company,
including through the making of any false statements or comments of a defamatory
or disparaging nature to third parties regarding the Company or any of its
officers, directors, personnel, stockholders, products or services. Nothing
contained herein shall be construed to (i) restrict Executive from continuing to
serve as an officer, director and shareholder of Miller Milling, so long as
Miller Milling does not, directly or through Affiliates it controls, engage in
Competition with the Company, (ii) restrict Miller Milling from providing
milling and related services to any entity engaged in Competition with the
Company or (iii) prevent Miller Milling or the Executive from continuing its or
his ownership in TABLEX-MILLER S.A. de CV.
(c) Notwithstanding the provisions of Sections 14(a) and
14(b), in the event that this Agreement is terminated pursuant to Section 10(h)
(whether automatically or by Executive), then the provisions of Sections 14(a)
and 14(b) shall remain in effect for a period of two (2) years thereafter.
(d) Executive further acknowledges and agrees that due to the
uniqueness of his services and the confidential nature of the information he
will possess, the covenants set forth in this Section 14 are reasonable and
necessary for the protection of the business and goodwill of the Company; and it
is the intention of the parties hereto that this Section 14 shall be enforceable
to the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which such enforcement is sought. Accordingly, without
limiting the generality of Section 19 hereof, it is the intention of the parties
hereto that if, in the opinion of any court of competent jurisdiction, any
provision or clause set forth in this Section 14 is not reasonable in any
respect, including, without limitation, with respect to the scope of the time,
place or manner restrictions set forth herein, such court shall have the right,
power and authority to modify any and all such provisions and clauses as to such
court shall appear not unreasonable and to enforce the remainder of this Section
14 as so modified.
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<PAGE> 10
15. Confidentiality Covenant. (a) During the Term and for a
period of seven years thereafter, Executive will not, directly or indirectly,
whether individually, as a director, stockholder, owner, partner, member,
officer, employee, principal or agent of any business, or in any other capacity,
make known, disclose, furnish, make available or utilize any of the Company's
confidential information, other than in the proper performance of the duties
contemplated by the Agreement, or as required by law; provided that, prior to
disclosing any of the confidential information required by law, Executive will
promptly notify the Company so that the Company may seek a protective order or
other appropriate remedy. Executive will return all confidential information,
including all photocopies, extracts and summaries thereof, and any such
information stored electronically on tapes, computer disks or in any other
manner to the Company at any time upon request by the Company and, in any event,
promptly after the termination of his employment for any reason; provided,
however, that Executive may retain one copy of such information and may use such
information in connection with (i) any dispute with the Company or (ii) any
action brought against Executive where such information is relevant.
Confidential information does not include any information available to or
already in the hands of the public, any information known to Executive prior to
the date hereof, any information disclosed to Executive by a third party who is
not under a duty of confidentiality with respect to such information, any
information independently developed by Executive without the use of confidential
information of the Company.
(b) Company will not disclose any information concerning the
Executive to any person including but not limited to the reason for any
termination of employment of the Executive, provided however, that the Company
may disclose such information to its insurers as and to the extent they have a
need to know such information and provided further that the Company may disclose
such information as and to the extent necessary and relevant to any dispute
between the Company and the Executive and as and to the extent such disclosure
or any other disclosure is required by law.
16. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes any other undertakings and agreements, whether oral or in writing,
previously entered into by them with respect thereto. Executive represents that,
in executing this Agreement, he does not rely and has not relied upon any
representation or statement made by the Company not set forth herein with regard
to the subject matter or effect of this Agreement or otherwise.
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<PAGE> 11
17. Amendment or Modification; Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is agreed to in
writing, signed by Executive and by a duly authorized officer of the Company. No
waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
18. Notices. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be (i) delivered by hand,
(ii) delivered by a nationally recognized commercial overnight delivery service,
(iii) mailed postage prepaid by first class mail or (iv) transmitted by
facsimile transmitted to the party concerned at the address or telecopier number
set forth below:
To Executive at:
Mr. John C. Miller
Miller Milling Company
880 Grain Exchange Building
301 Fourth Avenue South
Minneapolis, MN 55415
with copies to:
Maslon Edelman Borman & Brand LLP
3300 Norwest Center
Minneapolis, MN 55402
Attention: Larry A. Koch
To the Company at:
New World Pasta Company
100 Crystal A. Drive
Hershey, Pennsylvania 17033-0810
Attention: General Counsel
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<PAGE> 12
with copies to:
Joseph, Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Facsimile (212) 286-8626
Attention: David Y. Ying
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Facsimile (302) 651-3001
Attention: Robert B. Pincus
Such notices shall be effective: (i) in the case of hand
deliveries when received; (ii) in the case of an overnight delivery service, on
the next business day after being placed in the possession of such delivery
service, with delivery charges prepaid; (iii) in the case of mail, seven (7)
days after deposit in the postal system, first class mail, postage prepaid; and
(iv) in the case of facsimile notices, when electronic confirmation of receipt
is received by the sender. Any party may change its address and telecopy number
by written notice to the other given in accordance with this Section 18;
provided, however, that such change shall be effective when received.
19. Severability. If any provision or clause of this Agreement
or the application of any such provision or clause to any party or circumstances
shall be determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision or clause to such person or circumstances other than those to
which it is so determined to be invalid and unenforceable, shall not be affected
thereby, and each provision or clause hereof shall be validated and shall be
enforced to the fullest extent permitted by law.
20. Survivorship. The respective rights and obligations or the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
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<PAGE> 13
21. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to it
conflicts of law principles.
22. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
23. Withholding. All payments to Executive under this Agreement shall
be reduced by all applicable withholding required by federal, state or local
law.
24. Specific Performance. Each party hereto acknowledges that money
damages would be both incalculable and an insufficient remedy for any breach of
this Agreement by such party and that any such breach would cause the other
parties, irreparable harm. Accordingly, each party hereto also agrees that, in
the event of any breach or threatened breach of the provisions of this Agreement
by such party, the other parties shall be entitled to equitable relief without
the requirement of posting a bond or other security, including in the form of
injunctions and orders for specific performance, in addition to all other
remedies available to such other parties at law or in equity.
25. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
26. Definitions.
(a) "Cause" means the determination, in good faith, by the
Company Board, after notice to Executive and a reasonable opportunity to cure of
not less than 30 days, that one or more of the following events has occurred:
(i) any reckless or grossly negligent act by Executive materially injuring the
interest, business or reputation of the Company, or any of its parents,
subsidiaries or affiliates; (ii) Executive's commission of any felony; or (iii)
any misappropriation or embezzlement of the property of the Company, or any of
its parents, subsidiaries or affiliates.
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<PAGE> 14
(b) "Change of Control" includes the occurrence of any of the
following events: (i) any "Person" (within the meaning of Section 12(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than New World or its affiliates, becomes a Beneficial Owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors; (ii) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other Company, other
than a merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least fifty percent
(50%) of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation; or (iii) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets; or (iv) the following individuals cease for any reason
to constitute a majority of the number of directors then serving: individuals
who, as of January 30, 1999, constitute the Company Board and any new director
(other than a director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Company Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at least a
majority of the directors then still in office who either were directors on
January 30, 1999 or whose appointment, election or nomination for election was
previously so approved or recommended.
(c) "Competition" means engaging in, or otherwise directly or
indirectly being employed by or acting as a consultant or lender to, or being a
director, officer, employee, principal, licensor, trustee, broker, agent,
stockholder, member, owner, joint venturer or partner of, or permitting a name
to be used in connection with the activities of any other business or
organization which engages, directly or through Affiliates it controls, in the
Restricted Business, provided that, it will not be a violation for Executive to
become the registered or beneficial owner of up to seven and one-half percent (7
1/2%) of any class or series of capital stock or indebtedness of an entity
engaged in Competition; it being understood that Executive may not actively
participate in the business of any such entity, by reason of such
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<PAGE> 15
ownership or acquisition or otherwise, until such time as this covenant expires.
An entity shall not be deemed to be engaged in Competition with the Company if
less than 10% of its consolidated revenues are derived from the Restricted
Business.
(d) "Good Reason" for termination includes the occurrence of
any of following events without the prior consent of Executive: (i) removal of
Executive from Executive's then current position; (ii) material reduction by the
Company of Executive's then current duties, responsibilities or authority or the
assignment to Executive of duties materially inconsistent with his then current
position; (iii) relocation of the Company's headquarters to a location more than
25 miles from the greater Harrisburg, Pennsylvania metropolitan area; or (iv)
material breach by the Company of Employment Agreement, which breach remains
uncured for a period of thirty days after receipt by the Company of written
notice from Executive.
(e) "Restricted Business" means the manufacturing,
distribution, marketing and sale of pasta or egg noodle products in the United
States and any other business within the United States which constitutes more
than 10% of the consolidated revenues of the Company in the fiscal year ending
immediately prior to any such determination or the Date of Termination, as the
case may be.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Employment Agreement as of the date first above written.
NEW WORLD PASTA COMPANY
By: /s/ C. Mickey Skinner
C. Mickey Skinner
Chairman, Chief Executive Officer
and Director
EXECUTIVE
By: /s/ John C. Miller
John C. Miller
16
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 28, 1999, by and between New
World Pasta Company, a Delaware corporation (the "Company"), and Michael L.
Snow (the "Executive").
WHEREAS, Hershey Foods Corporation, a Pennsylvania corporation
("Hershey"), the Company and New World Pasta, LLC, a Delaware limited liability
company ("New World"), have entered into a Recapitalization Agreement dated as
of December 15, 1998, as amended (the "Recapitalization Agreement");
WHEREAS, pursuant to the Recapitalization Agreement, prior to
or at the closing of the transactions contemplated thereby, Hershey has, among
other things, (i) transferred, or caused to be transferred, certain assets,
subject to certain liabilities, to the Company and (ii) caused the Company to be
recapitalized (collectively, the "Transactions"), all in accordance with the
terms and conditions set forth in the Recapitalization Agreement;
WHEREAS, the Company desires that Executive serve as Executive
Vice President of the Company ("President") and as a member of the Board of
Directors of the Company upon consummation of the Transactions, and Executive
desires to hold such positions under the terms and conditions of this Agreement;
and
WHEREAS, Executive is currently the Executive Vice President
of Miller Milling Company and a partner in Miller Milling Company Limited
Partnership (collectively, "Miller Milling") and will continue to serve in such
positions following the consummation of the Transactions.
WHEREAS, the Board of Directors of the Company (the "Company
Board") has approved and authorized the Company to enter into this Agreement
with Executive.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and intending to be legally bound hereby, the
parties agree as follows:
<PAGE> 2
1. Employment. The Company hereby employs Executive, and
Executive hereby accepts employment with the Company, on a part-time basis, upon
the terms and subject to the conditions set forth herein.
2. Term.
(a) Subject to Section 10 hereof, the initial term of
employment by the Company of Executive pursuant to this Agreement (the "Initial
Term") is for a period commencing on the date hereof and terminating on the
third anniversary thereof (the "Initial Termination Date").
(b) Provided that the Agreement has not been earlier
terminated pursuant to Section 10 hereof, the Initial Term shall be extended for
an additional two (2) year period (the "Renewal Term") commencing on the Initial
Termination Date, unless not later than 90 days prior to the Initial Termination
Date, Executive or the Company shall, by written notice, elect not to so extend
the Initial Term. The Initial Term, as may be extended pursuant to this Section
2(b) or earlier terminated is referred to herein as the "Term."
3. Position.
During the Term, Executive shall serve as the Executive Vice
President of the Company and a member of the Company Board.
4. Duties.
During the Term, Executive shall perform such duties as are
commensurate with his position as Executive Vice President of the Company,
taking into consideration Executive's part-time status.
5. Salary and Bonus.
(a) During the Term the Company shall pay to
Executive a base salary at the rate of $100,000 per year, subject to adjustments
pursuant to the terms of Section 5(b) hereof (the "Base Salary").
(b) Commencing on the first anniversary hereof and on
or prior to each anniversary hereof during the Term, the Company Board or the
Compensation Committee of the Company Board (the "Compensation Committee") shall
2
<PAGE> 3
review the Base Salary annually and shall increase the Base Salary by an amount
equal to the percentage increase in the Consumer Price Index for the
Minneapolis, Minnesota metropolitan area during the most recently ended calendar
year. The Base Salary shall be payable to Executive in substantially equal
installments in accordance with the Company's normal payroll practices, but in
no event less often than semi-monthly.
(c) For the Company's fiscal year ending December 31, 1999,
and for each fiscal year during the Term thereafter, Executive shall be eligible
to receive an annual cash bonus equal to up to fifty percent (50%) of his Base
Salary, subject to the terms of a Bonus Compensation Plan to be approved by the
Board or the Compensation Committee.
(d) In the event of a material acquisition by the Company of
assets or stock of one or more companies, whether by merger or otherwise (an
"Acquisition"), the Executive and the Company shall negotiate in good faith an
adjustment of the Executive's compensation hereunder such that Executive's
compensation, as adjusted, is commensurate with his duties and responsibilities
after giving effect to the Acquisition.
6. Equity Interest in the Company. On or promptly after the Closing
Date, the Company will establish a stock option plan (the "Plan") substantially
in the form of Exhibit A hereto pursuant to which the Company may grant to
employees of the Company options to purchase up to 910,166 shares of common
stock of the Company. Pursuant to the Plan and subject to the terms of the stock
option agreement between Executive and the Company, substantially in the form of
Exhibit B hereto, the Company shall grant Executive options to purchase an
aggregate of 92,778 shares of such common stock with an exercise price of $10
per share and an aggregate of 49,054 shares of such common stock with an
exercise price of $73.50 per share. The Company shall cause its principal
stockholders to enter into an agreement with the Executive substantially in the
form of Exhibit C hereto providing for certain payments to the Executive with
respect to the preferred stock of the Company.
7. Business Expenses. Executive shall be reimbursed for all reasonable
and necessary business expenses incurred by him in connection with his
employment (including, without limitation, expenses for first-class air travel
on all Company business), upon timely submission by Executive of receipts and
other documentation as required by the Internal Revenue Code of 1986, as amended
(the
3
<PAGE> 4
"Code"), and in accordance with the Company's normal expense reimbursement
policies.
8. Welfare and Other Benefits. During the Term, Executive shall be
eligible to participate fully in all life and short- and long-term disability
benefits and insurance programs available to senior executive officers of the
Company generally. Executive shall be entitled to participate in, and receive
Company contributions to, any Section 401(k) savings plan available to senior
executive officers of the Company generally.
9. D&O Coverage. During the Term, the Company shall maintain directors
and officers liability insurance for its directors and officers, in such amounts
as the Company Board believes is reasonably necessary.
10. Termination of Agreement. The employment by the Company of
Executive pursuant to this Agreement shall not be terminated prior to the end of
the then applicable Term, except as set forth in this Section 10.
(a) By Mutual Consent. The employment by the Company of
Executive pursuant to this Agreement may be terminated at any time by the mutual
written agreement of the Company and Executive.
(b) Death. The employment by the Company of Executive pursuant
to this Agreement shall be terminated upon the death of Executive, in which
event Executive's spouse or heirs shall receive the (i) Executive's Base Salary
and benefits to be paid or provided to Executive under this Agreement through
the Date of Termination and (ii) the Base Salary and benefits pursuant to
Section 8 hereof to be paid or provided to Executive under this Agreement for
one (1) year after the Date of Termination.
(c) Disability. The employment by the Company of Executive
pursuant to this Agreement may be terminated by written notice to Executive at
the option of the Company in the event that (i) Executive becomes unable to
perform his normal duties by reason of physical or mental illness or accident
for any twelve (12) consecutive month period, (ii) the Company receives written
opinions from both a physician for the Company and a physician for Executive
that Executive will be so disabled. In the event the employment by the Company
of Executive is terminated pursuant to this Section 10(c), Executive shall be
entitled to receive (i) all Base Salary and benefits to be paid or provided to
Executive under this Agreement
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<PAGE> 5
through the Date of Termination and (ii) the Base Salary and benefits pursuant
to Section 8 hereof to be paid or provided to Executive for one (1) year after
the Date of Termination; provided, however, that amounts payable to Executive
under this Section 10(c) shall be reduced by the proceeds of any short- and/or
long-term disability payments under the Company plans referred to in Section 8
hereof to which Executive may be entitled during such period.
(d) By the Company for Cause. The employment of the Executive
pursuant to this Agreement may be terminated by the Company by written notice to
Executive ("Notice of Termination") for Cause. In the event the employment by
the Company of Executive is terminated pursuant to this Section 10(d), Executive
shall be entitled to receive all Base Salary and benefits to be paid or provided
to Executive under this Agreement through the Date of Termination.
(e) By the Company Without Cause. The employment by the
Company of Executive pursuant to this Agreement may be terminated by the Company
at any time without Cause by delivery of a Notice of Termination to Executive.
In the event the employment by the Company of Executive is terminated pursuant
to this Section 10(e), Executive shall be entitled to receive (i) all Base
Salary and benefits to be paid or provided to Executive under this Agreement
through the Date of Termination and (ii) the Base Salary and benefits to be paid
or provided to Executive under this Agreement for the remainder of the Term.
Notwithstanding the foregoing and subject to Section 11
hereof, in the event the employment by the Company of Executive is terminated
pursuant to this Section 10(e) following a determination, in good faith, by the
Company Board after notice to Executive and a reasonable opportunity to cure
(not less than 30 days), that one or both of the following events has occurred:
(i) Executive has failed to perform his material duties in a reasonably
satisfactory manner; or (ii) Executive has breached any material provision of
this Agreement, then Executive shall only be entitled to receive all Base Salary
and benefits to be paid or provided to Executive under this Agreement through
the Date of Termination and no more.
(f) By Executive for Good Reason. The employment by the
Executive pursuant to this Agreement may be terminated by Executive by written
notice to the Company of his resignation ("Notice of Resignation") for Good
Reason (as defined herein). In the event the employment by the Company of
Executive is terminated pursuant to this Section 10(f), Executive shall be
entitled to receive (i) all Base Salary and benefits to be paid or provided to
Executive under this Agreement
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<PAGE> 6
through the Date of Termination and (ii) the Base Salary and benefits to be paid
or provided to Executive under this Agreement for the remainder of the Term.
(g) By Executive Without Good Reason. The employment of
Executive by the Company pursuant to this Agreement may be terminated by
Executive by delivery of a Notice of Resignation at any time without Good
Reason. In the event the employment by the Company of Executive is terminated
pursuant to this Section 10(g), Executive shall be entitled to receive all Base
Salary and benefits to be paid or provided to Executive under this Agreement
through the Date of Termination.
(h) Change of Control. The employment by the Company of
Executive pursuant to this Agreement shall terminate, without any further action
required by either the Company or Executive, upon the occurrence of a Change of
Control (as defined herein); provided, however, that if in connection with such
Change of Control, Executive does not have the right to receive cash or
marketable securities with respect to his equity investment in the Company, his
options under the Plan and under the Agreement attached as Exhibit C hereto,
this Agreement shall not terminate upon such Change of Control but shall become
terminable by the Executive at any time within sixty (60) days following such
Change of Control. In the event that the employment by the Company of Executive
is terminated pursuant to this Section 10(h), whether automatically or by
Executive, Executive shall be entitled to receive all Base Salary and benefits
to be paid or provided to Executive under this Agreement through the Date of
Termination.
(i) Date of Termination. Executive's Date of Termination shall
be: (i) if the parties hereto mutually agree to terminate this Agreement
pursuant to Section 10(a) hereof, the date designated by the parties in such
agreement; (ii) if Executive's employment by the Company is terminated pursuant
to Section 10(b), the date of Executive's death; (iii) if Executive's employment
by the Company is terminated pursuant to Section 10(c), the last day of the
applicable period referred to in Section 10(c)(i) hereof or the date upon which
the Company receives written opinions from both a physician for the Company and
a physician for Executive referred to in Section 10(c)(ii) hereof; (iv) if
Executive's employment by the Company is terminated pursuant to Section 10(d),
the date on which a Notice of Termination is given; (v) if Executive's
employment by the Company is terminated pursuant to Section 10(e) or 10(g),
sixty (60) days after the date the Notice of Termination or Notice of
Resignation, as the case may be, is given (provided, that the Company, in its
sole discretion may waive all or any part of such 60-day period); (vi) if Execu-
6
<PAGE> 7
tive's employment by the Company is terminated pursuant to Section 10(f), the
date on which a Notice of Resignation is given; and (vii) if Executive's
employment by the Company is terminated pursuant to Section 10(h), the date of
the Change of Control; provided, however, that if Executive terminates the
Agreement pursuant to Section 10(h) within sixty (60) days following the Change
of Control, the Date of Termination shall be the date on which the Notice of
Resignation is given. If, within thirty (30) days after any Notice of
Termination is given pursuant to Section 10(c), Executive notifies the Company
that a dispute exists concerning Executive's termination, the Date of
Termination shall be the date on which the dispute is finally determined in
favor of termination of Executive's employment by the Company hereunder, either
by mutual written agreement of the parties or by a binding and final arbitration
award; provided, however, that Executive's Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and Executive
pursues the resolution of such dispute with reasonable diligence.
11. Arbitration. Notwithstanding any other provision of this
Agreement, in the event that this Agreement is terminated following a
determination by the Company Board as described in the second paragraph of
Section 10(e), the Executive may, by written notice to the Company within ten
business days following the delivery of the Notice of Termination to Executive,
require to submit such determination to binding arbitration pursuant to the
rules of the American Arbitration Association in Philadelphia, Pennsylvania
(including reasonable discovery as determined by the arbitrator) and the order
of such arbitrator shall be conclusive, final and binding on all parties hereto
and may be entered as a judgment in any court having jurisdiction over the
parties. In the event that Executive timely requires the Company to submit such
determination to arbitration as provided in the immediately preceding sentence
and diligently pursues such arbitration, the Company shall continue to pay
Executive his Base Salary and benefits to be paid or provided to Executive under
this Agreement until the earlier of (i) a determination by the arbitrator and
(ii) the period provided for payment pursuant to the first paragraph of Section
10(e) hereof; provided, however, that Executive shall promptly repay to the
Company all amounts paid to him pursuant to this sentence (including the cost of
all benefits provided) in the event that the Executive does not prevail in such
arbitration. Executive acknowledges and agrees that in the event that he does
not comply with his obligations pursuant to the immediately preceding sentence,
the Company may set off such amount against any obligations owed to Executive.
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<PAGE> 8
12. Representations.
(a) The Company represents and warrants that this Agreement
has been authorized by all necessary corporate action of the Company and is a
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms.
(b) Executive represents and warrants that he is not a party
to any agreement or instrument which would prevent him from entering into or
performing his duties in any way under this Agreement and that this Agreement is
a valid and binding agreement of Executive enforceable against Executive in
accordance with its terms.
13. Successors. This Agreement is a personal contract and the rights
and interests of Executive hereunder may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him, except as otherwise expressly
permitted by the provisions of this Agreement. This Agreement shall inure to the
benefit of and be enforceable by Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount would still be
payable to him hereunder had Executive continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to his devisee, legatee or other designee or, if there is no such
designee, to his estate.
14. Non-Competition Covenants.
(a) Executive will not, during the Term and for any period
during which Executive is receiving payments from the Company pursuant to this
Agreement, engage in Competition (as defined herein) with the Company.
(b) Without limiting the generality of foregoing, during the
Term and for any period during which Executive is receiving payments from the
Company pursuant to this Agreement, Executive will not, directly or indirectly,
for his benefit or for the benefit of any other person or entity, do any of the
following: (i) solicit Restricted Business from any customer doing business with
the Company, provided that, after the Termination Date, the restriction set
forth in this clause (i) shall be limited to such customers with which the
Company has done business during the twelve months immediately preceding the
Date of Termination; (ii) solicit Restricted Business from any potential
customer of the business of the Company,
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<PAGE> 9
which has been the subject of a written or oral bid, offer or proposal by the
Company, or of substantial preparation by the Company with a view to making such
a bid, proposal or offer, provided that, after the Termination Date, the
restriction set forth in this clause (ii) shall be limited to such bids, offers
and proposals by the Company, in any case, during the three months immediately
preceding the Date of Termination; (iii) solicit the employment or services of
any person who is employed by or is a consultant to the Company; or (iv)
otherwise wrongfully interfere with the business or accounts of the Company,
including through the making of any false statements or comments of a defamatory
or disparaging nature to third parties regarding the Company or any of its
officers, directors, personnel, stockholders, products or services. Nothing
contained herein shall be construed to (i) restrict Executive from continuing to
serve as an officer, director and shareholder of Miller Milling, so long as
Miller Milling does not, directly or through Affiliates it controls, engage in
Competition with the Company, (ii) restrict Miller Milling from providing
milling and related services to any entity engaged in Competition with the
Company or (iii) prevent Miller Milling or the Executive from continuing its or
his ownership in TABLEX-MILLER S.A. de CV.
(c) Notwithstanding the provisions of Sections 14(a) and
14(b), in the event that this Agreement is terminated pursuant to Section 10(h)
(whether automatically or by Executive), then the provisions of Sections 14(a)
and 14(b) shall remain in effect for a period of two (2) years thereafter.
(d) Executive further acknowledges and agrees that due to the
uniqueness of his services and the confidential nature of the information he
will possess, the covenants set forth in this Section 14 are reasonable and
necessary for the protection of the business and goodwill of the Company; and it
is the intention of the parties hereto that this Section 14 shall be enforceable
to the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which such enforcement is sought. Accordingly, without
limiting the generality of Section 19 hereof, it is the intention of the parties
hereto that if, in the opinion of any court of competent jurisdiction, any
provision or clause set forth in this Section 14 is not reasonable in any
respect, including, without limitation, with respect to the scope of the time,
place or manner restrictions set forth herein, such court shall have the right,
power and authority to modify any and all such provisions and clauses as to such
court shall appear not unreasonable and to enforce the remainder of this Section
14 as so modified.
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<PAGE> 10
15. Confidentiality Covenant. (a) During the Term and for a period of
seven years thereafter, Executive will not, directly or indirectly, whether
individually, as a director, stockholder, owner, partner, member, officer,
employee, principal or agent of any business, or in any other capacity, make
known, disclose, furnish, make available or utilize any of the Company's
confidential information, other than in the proper performance of the duties
contemplated by the Agreement, or as required by law; provided that, prior to
disclosing any of the confidential information required by law, Executive will
promptly notify the Company so that the Company may seek a protective order or
other appropriate remedy. Executive will return all confidential information,
including all photocopies, extracts and summaries thereof, and any such
information stored electronically on tapes, computer disks or in any other
manner to the Company at any time upon request by the Company and, in any event,
promptly after the termination of his employment for any reason; provided,
however, that Executive may retain one copy of such information and may use such
information in connection with (i) any dispute with the Company or (ii) any
action brought against Executive where such information is relevant.
Confidential information does not include any information available to or
already in the hands of the public, any information known to Executive prior to
the date hereof, any information disclosed to Executive by a third party who is
not under a duty of confidentiality with respect to such information, any
information independently developed by Executive without the use of confidential
information of the Company.
(b) Company will not disclose any information concerning the
Executive to any person including but not limited to the reason for any
termination of employment of the Executive, provided however, that the Company
may disclose such information to its insurers as and to the extent they have a
need to know such information and provided further that the Company may disclose
such information as and to the extent necessary and relevant to any dispute
between the Company and the Executive and as and to the extent such disclosure
or any other disclosure is required by law.
16. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes any other undertakings and agreements, whether oral or in writing,
previously entered into by them with respect thereto. Executive represents that,
in executing this Agreement, he does not rely and has not relied upon any
representation or statement made by the Company not set forth herein with regard
to the subject matter or effect of this Agreement or otherwise.
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<PAGE> 11
17. Amendment or Modification; Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by Executive and by a duly authorized officer of the Company.
No waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
18. Notices. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be (i) delivered
by hand, (ii) delivered by a nationally recognized commercial overnight delivery
service, (iii) mailed postage prepaid by first class mail or (iv) transmitted by
facsimile transmitted to the party concerned at the address or telecopier number
set forth below:
To Executive at:
Mr. Michael L. Snow
Miller Milling Company
880 Grain Exchange Building
301 Fourth Avenue South
Minneapolis, MN 55415
with copies to:
Maslon Edelman Borman & Brand LLP
3300 Norwest Center
Minneapolis, MN 55402
Attention: Larry A. Koch
To the Company at:
New World Pasta Company
100 Crystal A. Drive
Hershey, Pennsylvania 17033-0810
Attention: General Counsel
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<PAGE> 12
with copies to:
Joseph, Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Facsimile (212) 286-8626
Attention: David Y. Ying
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Facsimile (302) 651-3001
Attention: Robert B. Pincus
Such notices shall be effective: (i) in the case of hand
deliveries when received; (ii) in the case of an overnight delivery service, on
the next business day after being placed in the possession of such delivery
service, with delivery charges prepaid; (iii) in the case of mail, seven (7)
days after deposit in the postal system, first class mail, postage prepaid; and
(iv) in the case of facsimile notices, when electronic confirmation of receipt
is received by the sender. Any party may change its address and telecopy number
by written notice to the other given in accordance with this Section 18;
provided, however, that such change shall be effective when received.
19. Severability. If any provision or clause of this Agreement
or the application of any such provision or clause to any party or circumstances
shall be determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision or clause to such person or circumstances other than those to
which it is so determined to be invalid and unenforceable, shall not be affected
thereby, and each provision or clause hereof shall be validated and shall be
enforced to the fullest extent permitted by law.
20. Survivorship. The respective rights and obligations or the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
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<PAGE> 13
21. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to it
conflicts of law principles.
22. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
23. Withholding. All payments to Executive under this Agreement shall
be reduced by all applicable withholding required by federal, state or local
law.
24. Specific Performance. Each party hereto acknowledges that money
damages would be both incalculable and an insufficient remedy for any breach of
this Agreement by such party and that any such breach would cause the other
parties, irreparable harm. Accordingly, each party hereto also agrees that, in
the event of any breach or threatened breach of the provisions of this Agreement
by such party, the other parties shall be entitled to equitable relief without
the requirement of posting a bond or other security, including in the form of
injunctions and orders for specific performance, in addition to all other
remedies available to such other parties at law or in equity.
25. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
26. Definitions.
(a) "Cause" means the determination, in good faith, by the
Company Board, after notice to Executive and a reasonable opportunity to cure of
not less than 30 days, that one or more of the following events has occurred:
(i) any reckless or grossly negligent act by Executive materially injuring the
interest, business or reputation of the Company, or any of its parents,
subsidiaries or affiliates; (ii) Executive's commission of any felony; or (iii)
any misappropriation or embezzlement of the property of the Company, or any of
its parents, subsidiaries or affiliates.
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<PAGE> 14
(b) "Change of Control" includes the occurrence of any of the
following events: (i) any "Person" (within the meaning of Section 12(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than New World or its affiliates, becomes a Beneficial Owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors; (ii) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other Company, other
than a merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least fifty percent
(50%) of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation; (iii) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets; or (iv) the following individuals cease for any reason
to constitute a majority of the number of directors then serving: individuals
who, as of January 30, 1999, constitute the Company Board and any new director
(other than a director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Company Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at least a
majority of the directors then still in office who either were directors on
January 30, 1999 or whose appointment, election or nomination for election was
previously so approved or recommended.
(c) "Competition" means engaging in, or otherwise directly or
indirectly being employed by or acting as a consultant or lender to, or being a
director, officer, employee, principal, licensor, trustee, broker, agent,
stockholder, member, owner, joint venturer or partner of, or permitting a name
to be used in connection with the activities of any other business or
organization which engages, directly or through Affiliates it controls, in the
Restricted Business, provided that, it will not be a violation for Executive to
become the registered or beneficial owner of up to seven and one-half percent (7
1/2%) of any class or series of capital stock or indebtedness of an entity
engaged in Competition; it being understood that Executive may not actively
participate in the business of any such entity, by reason of such
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<PAGE> 15
ownership or acquisition or otherwise, until such time as this covenant expires.
An entity shall not be deemed to be engaged in Competition with the Company if
less than 10% of its consolidated revenues are derived from the Restricted
Business.
(d) "Good Reason" for termination includes the occurrence of
any of following events without the prior consent of Executive: (i) removal of
Executive from Executive's then current position; (ii) material reduction by the
Company of Executive's then current duties, responsibilities or authority or the
assignment to Executive of duties materially inconsistent with his then current
position; (iii) relocation of the Company's headquarters to a location more than
25 miles from the greater Harrisburg, Pennsylvania metropolitan area; or (iv)
material breach by the Company of Employment Agreement, which breach remains
uncured for a period of thirty days after receipt by the Company of written
notice from Executive.
(e) "Restricted Business" means the manufacturing,
distribution, marketing and sale of pasta or egg noodle products in the United
States and any other business within the United States which constitutes more
than 10% of the consolidated revenues of the Company in the fiscal year ending
immediately prior to any such determination or the Date of Termination, as the
case may be.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Employment Agreement as of the date first above written.
NEW WORLD PASTA COMPANY
By: C. Mickey Skinner
C. Mickey Skinner
Chairman, Chief Executive Officer
and Director
EXECUTIVE
By: Michael L. Snow
Michael L. Snow
16
<PAGE> 1
EXHIBIT 10.16
NEW WORLD PASTA COMPANY
1999 STOCK OPTION PLAN
1. Purpose; Types of Awards.
The purposes of the 1999 New World Pasta Company Long-Term Incentive
Plan (the "Plan") are to afford an incentive to selected employees, directors
and consultants of New World Pasta Company (the "Company") or any Subsidiary or
Affiliate that now exists or hereafter is organized or acquired, to continue as
employees, directors or consultants, as the case may be, to increase their
efforts on behalf of the Company and to promote the success of the Company's
business. Pursuant to the Plan, there may be granted stock options (including
"incentive stock options" and "nonqualified stock options"), stock appreciation
rights (either in connection with stock options granted under the Plan or
independently of stock options) and restricted stock.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means an affiliate of the Company, as defined
in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
(b) "Award" means any Option granted under the Plan.
(c) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(d) "Beneficial Owner" means any beneficial owner of
securities within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(e) "Board" means the Board of Directors of the Company.
<PAGE> 2
(f) "Cause" (i) for any person receiving an Award under the
Plan who also has an employment agreement with the Company, shall have the
meaning set forth in such employment agreement and (ii) for any other person
receiving an Award under the Plan, means the determination, in good faith, by
the Board, after notice to Grantee and a reasonable opportunity to cure, that
one or more of the following events has occurred:
(A) Grantee has failed to perform his material duties
for the Company in a reasonably satisfactory manner;
(B) any reckless or grossly negligent act by Grantee
materially injuring the interest, business or reputation of
the Company, or any of its parent, Subsidiaries or Affiliates;
(C) Grantee's commission of any felony (including
entry of a nolo contendere plea); or
(D) any misappropriation or embezzlement of the
property of the Company, or any of its parent, Subsidiaries or
Affiliates.
(g) "Change in Control" means the occurrence of any of the
following events:
(i) any Person, other than New World Pasta, LLC, a
Delaware limited liability company, or its
Affiliates, becomes a Beneficial Owner of more than
fifty percent (50%) of the combined voting power of
the then outstanding voting securities of the Company
entitled to vote generally in the election of
directors;
(ii) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the
Company with any other Company, other than a merger
or consolidation that would result in the voting
securities of the Company outstanding immediately
prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity
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<PAGE> 3
or any parent thereof) at least fifty percent (50%)
of the combined voting power of the securities of the
Company or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation;
(iii) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or
there is consummated an agreement for the sale or
disposition by the Company of all or substantially
all of the Company's assets; or
(iv) the following individuals cease for any reason to
constitute a majority of the number of directors then
serving: individuals who, as of January 30, 1999,
constitute the Board and any new director (other than
a director whose initial assumption of office is in
connection with an actual or threatened election
contest, including but not limited to a consent
solicitation, relating to the election of directors
of the Company) whose appointment or election by the
Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of
at least a majority of the directors then still in
office who either were directors on January 30, 1999
or whose appointment, election or nomination for
election was previously so approved or recommended.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(i) "Committee" means the Compensation Committee established
by the Board.
(j) "Company" means New World Pasta Company or any successor
corporation.
(k) "Effective Date" means January 28, 1999, the date that the
Plan was adopted by the Board.
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<PAGE> 4
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(m) "Fair Market Value" means, with respect to Stock or other
property, the fair market value of such Stock or other property determined by
such methods or procedures as shall be established from time to time by the
Committee. Unless otherwise determined by the Committee in good faith, the per
share Fair Market Value of Stock as of a particular date shall mean (i) the
closing sales price per share of Stock on the national securities exchange on
which the Stock is principally traded, for the last preceding date on which
there was a sale of such Stock on such exchange, or (ii) if the shares of Stock
are then traded in an over-the-counter market, the average of the closing bid
and asked prices for the shares of Stock in such over-the-counter market for the
last preceding date on which there was a sale of such Stock in such market, or
(iii) if the shares of Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the Committee,
in its reasonable discretion, shall determine.
(n) "Grantee" means a person who, as an employee or director
of, or independent contractor with respect to, the Company, a Subsidiary or an
Affiliate, has been granted an Award under the Plan.
(o) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(p) "NQSO" means any Option that is designated as a
nonqualified stock option.
(q) "Option" means a right, granted to a Grantee under Section
6(c), to purchase shares of Stock. An Option may be either an ISO or an NQSO;
provided that ISOs may be granted only to employees of the Company or a
Subsidiary.
(r) "Person" means any person within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act.
(s) "Plan" means this New World Pasta Company 1999 Long-Term
Incentive Plan, as amended from time to time.
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(t) "Stock" means shares of the common stock, par value $.01
per share, of the Company.
(u) "Stockholders Agreement" means the Stockholders Agreement,
dated as of January 28, 1999, among the Company, New World Pasta LLC, Miller
Pasta LLC, Hershey Foods Corporation and the other signatories thereto.
(v) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of granting of an Award,
each of the corporations (other than the last corporation in the unbroken chain)
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
(w) "Ten Percent Stockholder" means a Grantee who, at the time
an ISO is granted, owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company.
3. Administration.
The Plan shall be administered by the Committee. The Committee shall
have the authority in its discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the type and
number of Awards to be granted, the number of shares of Stock to which an Award
may relate and the terms, conditions and restrictions relating to any Award; to
determine whether, to what extent, and under what circumstances an Award may be
settled, cancelled, forfeited, exchanged, or surrendered; to make adjustments in
the terms and conditions applicable to Awards; to designate Affiliates; to
construe and interpret the Plan and any Award; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of the Award Agreements (which need not be identical for each
Grantee); and to make all other determinations deemed necessary or advisable for
the administration of the Plan.
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<PAGE> 6
The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including, without limitation, the Company, and any Subsidiary, Affiliate or
Grantee (or any person claiming any rights under the Plan from or through any
Grantee) and any stockholder.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Award
granted hereunder.
4. Eligibility.
Awards may be granted to selected employees, directors and consultants
of the Company and its present or future Subsidiaries and Affiliates, in the
discretion of the Committee. In determining the persons to whom Awards shall be
granted and the type of any Award (including the number of shares to be covered
by such Award), the Committee shall take into account such factors as the
Committee shall deem relevant in connection with accomplishing the purposes of
the Plan.
5. Stock Subject to the Plan.
(a) Number. The maximum number of shares of Stock reserved for
the grant or settlement of Awards under the Plan shall be 910,166, subject to
adjustment as provided herein. Such shares may, in whole or in part, be
authorized but unissued shares or shares that shall have been or may be
reacquired by the Company in the open market, in private transactions or
otherwise. If any shares subject to an Award are forfeited, cancelled, exchanged
or surrendered or if an Award otherwise terminates or expires without a
distribution of shares to the Grantee, the shares of stock with respect to such
Award shall, to the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, again be available for Awards under the
Plan. Upon the exercise of any Award granted in
6
<PAGE> 7
tandem with any other Awards or awards, such related Awards or awards shall be
cancelled to the extent of the number of shares of Stock as to which the Award
is exercised and, notwithstanding the foregoing, such number of shares shall no
longer be available for Awards under the Plan.
(b) Certain Adjustments. In the event that any dividend or
other distribution (whether in the form of cash, Stock or other property),
recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate in the
exercise of its reasonable discretion to any or all of (i) the number and kind
of shares of Stock or other property (including cash) that may thereafter be
issued in connection with Awards, (ii) the number and kind of shares of Stock or
other property (including cash) issued or issuable in respect of outstanding
Awards, (iii) the exercise price, grant price or purchase price relating to any
Award; provided that, with respect to ISOs, such adjustment shall be made in
accordance with Section 424(h) of the Code, and (iv) the individual limitations
applicable to Awards.
(c) Certain Reduction to Awards. In the event that, at any
time or from time to time, the Company wishes to hire one or more additional
employees after the date hereof and the Committee, with the concurrence of the
Chief Executive officer, believes that such employee or employees should be
granted Awards hereunder, such Awards shall be made, to the greatest extent
possible, with respect to Stock which remains available for issuance under the
Plan as a result of the forfeiture, cancellation, exchange, surrender,
termination or expiration of Awards previously granted under the Plan. To the
extent that there is not sufficient Stock available to make any such Award, the
number of shares of Stock issuable upon exercise of all then outstanding Options
shall be reduced pro rata among all holders thereof in order to provide
sufficient shares of Stock to grant such Award(s); provided, however, that in no
event shall the number of shares of Stock initially issuable upon exercise of
any Option be reduced by more than 15% in the aggregate.
Notwithstanding the foregoing, the reduction provided hereby shall not
apply in order to grant Awards to new employees of the Company hired in
connection with any material acquisition by the Company of assets or stock of
one or more companies, whether by merger otherwise.
7
<PAGE> 8
6. Specific Terms of Awards.
(a) General. The term of each Award shall be for such period
as may be determined by the Committee. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a Subsidiary
or Affiliate upon the grant, maturation or exercise of an Award may be made in
such forms as the Committee shall determine at the date of grant or thereafter,
including, without limitation, cash, Stock or other property, and may be made in
a single payment or transfer, in installments or on a deferred basis. The
Committee may make rules relating to installment or deferred payments with
respect to Awards, including, without limitation, the rate of interest to be
credited with respect to such payments. In addition to the foregoing, the
Committee may impose on any Award or the exercise thereof, at the date of grant
or thereafter, such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall reasonably determine.
(b) Certain Restrictions. Notwithstanding anything in the Plan
to the contrary, the shares of Stock issued to any Grantee that is a party to
the Stockholders Agreement (or, in the case of Miller Pasta, LLC, the members of
Miller Pasta, LLC who are officers or directors of the Company) (collectively,
"Investor Grantees") upon exercise of each Option shall, to the extent of the
rights, duties and obligations of such Grantee (or such member) under the
Stockholders Agreement, be subject to all terms and conditions set forth in the
Stockholders Agreement and, with respect to such persons, the Stockholders
Agreement is, to such extent, hereby incorporated by reference herein. As a
condition to the exercise of any Option, (i) each Grantee that is not an
Investor Grantee shall be required to execute and deliver to the Company
executed copies of such documents, in form and substance reasonably satisfactory
to the Committee, to the effect set forth in Article IV (providing for
substantially the same restrictions on Transfer as the Miller Pasta Controlling
Members (as such terms are defined therein)) and Article V (but only with
respect to Piggyback Registrations, as defined therein) of the Stockholders
Agreement and (ii) each Grantee shall be required to execute and deliver to the
Company such written representations and other documents as may be necessary or
reasonably desirable, in the opinion of the Committee, for purposes of
compliance with federal or state securities or other laws. Any certificate or
certificates representing shares of Stock subject to an Award shall bear a
legend substantially to the effect of the legend set forth in the Stockholders
Agreement.
8
<PAGE> 9
(c) Awards. The Committee is authorized to grant to Grantees
the following Awards under the Plan, as deemed by the Committee to be consistent
with the purposes of the Plan. The Committee shall determine the terms and
conditions of such Awards at the date of grant or thereafter. The Committee is
authorized to grant Options to Grantees on the following terms and conditions:
(i) Type of Award. The Award Agreement evidencing the
grant of an Option under the Plan shall designate the
Option as an ISO or an NQSO.
(ii) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by
the Committee; provided that, of the 910,166 shares
of Stock reserved for the grant or settlement of
Awards under the Plan, 555,556 shall have an exercise
price of $10.00 per share and 354,610 shall have an
exercise price of $73.50, and provided further, that
in the case of an ISO, such exercise price shall be
not less than the Fair Market Value of a share of
Common Stock on the date of grant of such Option. The
date as of which the Committee adopts a resolution
expressly granting an Option shall be considered the
day on which such Option is granted. In the
Committee's reasonable discretion, following the
Initial Public Offering (as defined in the
Stockholders Agreement), the exercise price for Stock
subject to an Option may be paid in cash or by an
exchange of Stock previously owned by the Grantee, or
a combination of both, in an amount having a combined
value equal to such exercise price. In the
Committee's reasonable discretion, a Grantee may
elect to pay all or a portion of the aggregate
exercise price by cashless exercise as provided below
by giving notice of such exercise to the Company.
Upon receipt of a notice of cashless exercise, the
Company shall deliver to the Grantee (without payment
by the holder of any exercise price) that number of
shares of Stock that is equal to the quotient
obtained by dividing (x) the value of the Option or
portion thereof on the exercise date (determined by
subtracting the aggregate
9
<PAGE> 10
exercise price for the shares of Stock in effect on
the exercise date from the aggregate Fair Market
Value of the shares of Stock by (y) the Fair Market
Value of one share of Company Common Stock. A notice
of "cashless exercise" shall state the number of
shares of Stock as to which the Option is being
exercised.
(iii) Term and Exercisability of Options. Options shall
become exercisable over the exercise period (which
shall not exceed ten years from the date of grant),
at such times and upon such conditions as the
Committee may determine, as reflected in the Award
Agreement; provided that, the Committee shall have
the authority to accelerate the exercisability of any
outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems
appropriate. An Option may be exercised to the extent
of any or all full shares of Stock as to which the
Option has become exercisable, by giving written
notice of such exercise to the Committee or its
designated agent.
(iv) Termination of Employment, etc. An Option may not be
exercised unless the Grantee is then in the employ
of, a director of, or maintains a consulting
relationship with, the Company or a Subsidiary or an
Affiliate (or a company or a parent or subsidiary
company of such company issuing or assuming the
Option in a transaction to which Section 424(a) of
the Code applies), and unless the Grantee has
remained continuously so employed, or continuously
maintained such relationship, since the date of grant
of the Option; provided that, unless provided
otherwise in the applicable Award Agreement or
otherwise determined by the Committee:
(A) In case of termination of a Grantee's employment or
service with the Company, Affiliate or a Subsidiary (i) due to the death or
disability of the Grantee, (ii) by the Company, Affiliate or a Subsidiary
without Cause or (iii) by the Grantee for any reason, such Grantee's Option,
only to the extent then exercisable, shall remain
10
<PAGE> 11
exercisable as to the number of shares of Stock for which it was exercisable as
of the date of termination for a period of ninety days immediately following
such termination of employment or service and shall be cancelled and terminated
with respect to the remainder of the shares of Stock subject thereto as of the
date of termination.
(B) In case of termination of a Grantee's employment or service with
the Company, Affiliate or a Subsidiary by the Company or a Subsidiary for Cause,
such Grantee's Option, whether or not then exercisable, shall be cancelled and
terminated as of the date of such termination.
(C) Notwithstanding anything to the contrary in the Plan or any Award
Agreement, in no event may any Option be exercised after the expiration of the
term of such Option, as set forth in the applicable Award Agreement.
(v) Other Provisions. Options may be subject to such
other conditions prescribe in its discretion or as
may be required by applicable law.
(vi) ISOs. Options granted as ISOs shall be subject to the
following special terms and conditions, in addition
to the general terms and conditions specified herein.
(A) Value of Shares. The aggregate Fair Market Value (determined as of
the date ISOs are granted) of the shares of Common Stock with respect to which
ISOs granted under this Plan and all other plans of the Company become
exercisable for the first time by each Grantee during any calendar year shall
not exceed $100,000.
(B) Ten Percent Stockholder. In the case of an ISO granted to a Ten
Percent Stockholder, (x) the exercise price shall not be less than one hundred
ten percent (110%) of the Fair Market Value of the shares of Common Stock on the
date of grant of such ISO, and (y) the exercise period shall not exceed five (5)
years from the date of grant of such ISO.
11
<PAGE> 12
(d) Change of Control. Notwithstanding any provision hereof to
the contrary, upon the occurrence of a Change of Control prior to the expiration
of the term of any Option, such Option, whether then exercisable or otherwise,
shall become exercisable and shall remain exercisable for a period of ninety
days immediately following such Change of Control.
7. General Provisions.
(a) Nontransferability. Unless otherwise provided in an Award
Agreement, Awards shall not be transferable by a Grantee except by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, and shall be exercisable during the lifetime
of a Grantee only by such Grantee or his guardian or legal representative.
(b) No Right to Continued Employment, etc. Nothing in the Plan
or in any Award granted or any Award Agreement, entered into pursuant hereto
shall confer upon any Grantee the right to continue in the employ of or to
continue as a director or an independent contractor of the Company, any
Subsidiary or any Affiliate or to be entitled to any remuneration or benefits
not set forth in the Plan or such Award Agreement, or to interfere with or limit
in any way the right of the Company or any such Subsidiary or Affiliate to
terminate such Grantee's employment, director or independent contractor
relationship.
(c) Taxes. The Company or any Subsidiary or Affiliate is
authorized to withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Stock, or any other payment to
a Grantee, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Grantees to satisfy obligations for
the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock or
other property and to make cash payments in respect thereof in satisfaction of a
Grantee's tax obligations.
(d) Stockholder Approval; Amendment and Termination. The Plan
shall take effect on the Effective Date but the Plan (and any grants of Awards
made prior to the stockholder approval mentioned herein) shall be subject to the
requisite approval of the stockholders of the Company, which approval must occur
within twelve (12) months of the date that the Plan is adopted by the Board. In
the
12
<PAGE> 13
event that the stockholders of the Company do not ratify the Plan at a meeting
of the stockholders at which such issue is considered and voted upon, then upon
such event the Plan and all rights hereunder shall immediately terminate and no
Grantee (or any permitted transferee thereof) shall have any remaining rights
under the Plan or any Award Agreement entered into in connection herewith. The
Board may at any time and from time to time alter, amend, suspend, or terminate
the Plan in whole or in part. Notwithstanding the foregoing, no such action
shall affect adversely any of the rights of any Grantee, without such Grantee's
consent, under any Award theretofore granted under the Plan. Unless earlier
terminated by the Board pursuant to the provisions of the Plan, the power to
grant Awards under the Plan will automatically terminate ten years after the
adoption of the Plan by the Board. If the Plan is terminated, any unexercised
Award shall continue to be exercisable in accordance with its terms and the
terms of the Plan in effect immediately prior to such termination.
(e) No Rights to Awards; No Stockholder Rights. No Grantee
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Grantees. Except as provided
specifically herein, a Grantee or a transferee of an Award shall have no rights
as a stockholder with respect to any shares covered by the Award until the date
of the issuance of a stock certificate to him for such shares.
(f) Unfunded Status of Awards. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Grantee any rights that
are greater than those of a general creditor of the Company.
(g) No Fractional Shares. No fractional shares of Stock shall
be issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares.
(h) Regulations and Other Approvals.
(i) The obligation of the Company to sell or deliver
Stock with respect to any Award granted under the
Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and
state securities
13
<PAGE> 14
laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or
appropriate by the Committee.
(ii) Each Award is subject to the requirement that, if at
any time the Committee determines, in its absolute
discretion, that the listing, registration or
qualification of Stock issuable pursuant to the Plan
is required by any securities exchange or under any
state or federal law, or the consent or approval of
any governmental regulatory body is necessary or
desirable as a condition of, or in connection with,
the grant of an Award or the issuance of Stock, no
such Award shall be granted or payment made or Stock
issued, in whole or in part, unless listing,
registration, qualification, consent or approval has
been effected or obtained free of any conditions not
acceptable to the Committee.
(iii) In the event that the disposition of Stock acquired
pursuant to the Plan is not covered by a then current
registration statement under the Securities Act of
1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Stock
shall be restricted against transfer to the extent
required by the Securities Act or regulations
thereunder, and the Committee may require a Grantee
receiving Stock pursuant to the Plan, as a condition
precedent to receipt of such Stock, to represent to
the Company in writing that the Stock acquired by
such Grantee is acquired for investment only and not
with a view to distribution.
(iv) Promptly after the Initial Sale Date (as defined in
the Stockholders Agreement), the Company shall cause
to be filed with the U.S. Securities and Exchange
Commission, a registration statement on Form S-8 or
other applicable form with respect to the shares of
Stock to be issued upon exercise of Awards. The
Company will use all reasonable efforts to cause such
registration statement to become and remain
effective; it being
14
<PAGE> 15
understood that the sale of such shares of Stock will
remain subject to the restrictions referred to in
Section 6(b) hereof.
(i) Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Delaware without giving effect to the conflict of laws principles thereof.
15
<PAGE> 1
EXHIBIT 10.17
NEW WORLD PASTA COMPANY
1999 STOCK OPTION PLAN
FORM OF
STOCK OPTION AGREEMENT
[SKINNER, MILLER, SNOW]
Name of Optionee: [ ]
Optioned Shares:
[QUALIFIED STOCK OPTION] ______ shares of common stock, $.01
par value, of New World Pasta
Company ("Shares")
Per Share Option Price: [#] Shares at $10.00
[#] Shares at $73.50
Option Grant Date: January 28, 1999
Date Qualified Stock
Option Becomes Exercisable:
Shares at $10.00 Shares at $73.50
[#] Shares, on January 28, 2000 [#] Shares, on January 28, 2000
[#] Shares, on January 28, 2001 [#] Shares, on January 28, 2001
<PAGE> 2
[#] Shares, on January 28, 2002 [#] Shares, on January 28, 2002
[#] Shares, on January 28, 2003 [#] Shares, on January 28, 2003
[#] Shares, on January 28, 2004 [#] Shares, on January 28, 2004
Termination Date: January 28, 2009
2
<PAGE> 3
This Stock Option Agreement (this "Agreement") is executed and
delivered as of the Option Grant Date by and between New World Pasta Company
(the "Company") and the Optionee. The Optionee and the Company hereby agree as
follows:
i. The Company, pursuant to the New World Pasta Company 1999 Stock Option
Plan (the "Plan"), which is incorporated herein by reference, and
subject to the terms and conditions thereof, hereby grants to the
Optionee an option to purchase the Optioned Shares at the Per Share
Option Price.
ii. The Option granted hereby shall be treated as a qualified stock option
under the Internal Revenue Code.
iii. The Option granted hereby shall terminate, subject to the provisions of
the Plan, no later than at the close of business on the Termination
Date.
iv. The Optionee shall comply with and be bound by all the terms and
conditions contained in the Plan.
v. Notwithstanding Section 6(c) of the Plan, in the case of termination of
the Optionee's employment or service with the Company, Affiliate (as
defined in the Plan) or Subsidiary (as defined in the Plan)(i) due to
the death or Disability (as defined in the Optionee's employment
agreement) of the Optionee, (ii) by the Optionee for Good Reason (as
defined in the Optionee's employment agreement) or (iii) upon the
occurrence of a Change of Control (as defined in the Plan), the
Optionee's Options, whether then exercisable or otherwise, shall become
exercisable, and shall remain exercisable for a period of ninety days
from the Date of Termination (as defined in the Optionee's employment
agreement).
vi. Notwithstanding Section 6(c) of the Plan, in the case of termination of
the Optionee's employment or service with the Company, Affiliate or
Subsidiary without Cause (as defined in the Optionee's employment
agreement), (i) if the Board of Directors of the Company has determined
in good faith, after notice and reasonable opportunity to cure, that
the Optionee has failed to perform material duties in a reasonably
satisfactory manner, the Optionee's Options, only to the extent then
exercisable, shall remain exercisable as to the number of shares of
Stock (as defined in the Plan) that were exercisable as of the Date of
Termination for a period of ninety days immediately following such Date
of Termination and shall be cancelled and terminated with respect to
the remainder of the shares of Stock subject thereto as of the Date of
Termination or (ii) if the Board of Directors of the Company has not
made such determination, the Optionee's Options, whether then
exercisable or otherwise, shall become exercisable and shall remain
exercisable for a period of ninety days from the Date of Termination.
3
<PAGE> 4
vii. Notwithstanding Section 6(c) of the Plan, in the case of termination of
the Optionee's employment or service with the Company, Affiliate or
Subsidiary by the Optionee without Good Reason, the Optionee's Options,
only to the extent then exercisable, shall remain exercisable as to the
number of shares of Stock that were exercisable as of the Date of
Termination for a period of ninety days immediately following such Date
of Termination and shall be cancelled and terminated with respect to
the remainder of the shares of Stock subject thereto as of the Date of
Termination.
viii. Notwithstanding Section 6(c) of the Plan, in the case of termination of
the Optionee's employment or service with the Company, Affiliate or
Subsidiary with Cause (as defined in the Optionee's employment
agreement), all of the Optionee's Options shall be cancelled and
terminated as of the Date of Termination.
ix. Options granted hereby shall not be transferable except by will or the
laws of descent and distribution. During the lifetime of the Optionee,
the Option may be exercised only by the Optionee, the guardian or legal
representative of the Optionee.
x. The obligation of the Company to sell and deliver any stock under this
Option is specifically subject to all provisions of the Plan and all
applicable laws, rules, regulations and governmental and stockholder
approvals.
xi. Any notice by the Optionee to the Company hereunder shall be in writing
and shall be deemed duly given if mailed to the Company at its
principal offices. Any notice by the Company to the Optionee shall be
in writing and shall be deemed duly given if mailed to the Optionee at
the address last specified to the Company by the Optionee. All notices
sent by mail must be sent by certified mail, return receipt requested.
xii. The validity and construction of this Agreement shall be governed by
the laws of the State of Delaware without reference to such State's
principles of conflicts of law.
4
<PAGE> 5
THE AGREEMENT IS MADE UNDER AND SUBJECT TO THE PROVISIONS OF THE PLAN, AND ALL
OF THE PROVISIONS OF THE PLAN ARE ALSO PROVISIONS OF THE AGREEMENT. IF THERE IS
A DIFFERENCE OR CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT AND THE
PROVISIONS OF THE PLAN, THE PROVISIONS OF THE PLAN WILL GOVERN (EXCEPT AS
EXPRESSLY SET FORTH IN THE PLAN). BY SIGNING THE AGREEMENT, THE OPTIONEE
ACCEPTS AND AGREES TO ALL OF THE FOREGOING TERMS AND PROVISIONS AND TO ALL OF
THE TERMS AND PROVISIONS OF THE PLAN INCORPORATED HEREIN BY REFERENCE AND
CONFIRMS THAT HE HAS RECEIVED A COPY OF THE PLAN.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized representative and the Optionee has hereunto set
his hand as of the Option Grant Date.
NEW WORLD PASTA COMPANY:
By:
Name:
Title:
Optionee
5
<PAGE> 1
EXHIBIT 10.18
NEW WORLD PASTA COMPANY
1999 STOCK OPTION PLAN
FORM OF
STOCK OPTION AGREEMENT
Name of Optionee: [ ]
Optioned Shares:
[QUALIFIED STOCK OPTION] _______ shares of common stock, $.01 par
value, of New World Pasta Company
("Shares")
Per Share Option Price: [#] Shares at $10.00
[#] Shares at $73.50
Option Grant Date: January 28, 1999
Date Qualified Stock
Option Becomes Exercisable:
Shares at $10.00 Shares at $73.50
[#] Shares, on January 28, 2000 [#] Shares, on January 28, 2000
[#] Shares, on January 28, 2001 [#] Shares, on January 28, 2001
<PAGE> 2
[#] Shares, on January 28, 2002 [#] Shares, on January 28, 2002
[#] Shares, on January 28, 2003 [#] Shares, on January 28, 2003
[#] Shares, on January 28, 2004 [#] Shares, on January 28, 2004
Termination Date: January 28, 2009
2
<PAGE> 3
This Stock Option Agreement (this "Agreement") is executed and
delivered as of the Option Grant Date by and between New World Pasta Company
(the "Company") and the Optionee. The Optionee and the Company hereby agree as
follows:
i. The Company, pursuant to the New World Pasta Company 1999 Stock Option
Plan (the "Plan"), which is incorporated herein by reference, and
subject to the terms and conditions thereof, hereby grants to the
Optionee an option to purchase the Optioned Shares at the Per Share
Option Price.
ii. The Option granted hereby shall be treated as a qualified stock option
under the Internal Revenue Code.
iii. The Option granted hereby shall terminate, subject to the provisions of
the Plan, no later than at the close of business on the Termination
Date.
iv. The Optionee shall comply with and be bound by all the terms and
conditions contained in the Plan.
v. Options granted hereby shall not be transferable except by will or the
laws of descent and distribution. During the lifetime of the Optionee,
the Option may be exercised only by the Optionee, the guardian or legal
representative of the Optionee.
vi. The obligation of the Company to sell and deliver any stock under this
Option is specifically subject to all provisions of the Plan, and all
applicable laws, rules, regulations and governmental and stockholder
approvals.
vii. Any notice by the Optionee to the Company hereunder shall be in writing
and shall be deemed duly given if mailed to the Company at its
principal offices. Any notice by the Company to the Optionee shall be
in writing and shall be deemed duly given if mailed to the Optionee at
the address last specified to the Company by the Optionee. All notices
sent by mail must be sent by certified mail, return receipt requested.
viii. The validity and construction of this Agreement shall be governed by
the laws of the State of Delaware without reference to such State's
principles of conflicts of law.
3
<PAGE> 4
THE AGREEMENT IS MADE UNDER AND SUBJECT TO THE PROVISIONS OF THE PLAN, AND ALL
OF THE PROVISIONS OF THE PLAN ARE ALSO PROVISIONS OF THE AGREEMENT. IF THERE IS
A DIFFERENCE OR CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT AND THE
PROVISIONS OF THE PLAN, THE PROVISIONS OF THE PLAN WILL GOVERN (EXCEPT AS
EXPRESSLY SET FORTH IN THE PLAN). BY SIGNING THE AGREEMENT, THE OPTIONEE ACCEPTS
AND AGREES TO ALL OF THE FOREGOING TERMS AND PROVISIONS AND TO ALL OF THE TERMS
AND PROVISIONS OF THE PLAN INCORPORATED HEREIN BY REFERENCE AND CONFIRMS THAT
HE HAS RECEIVED A COPY OF THE PLAN.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized representative and the Optionee has hereunto set
his hand as of the Option Grant Date.
NEW WORLD PASTA COMPANY:
By:____________________________________
Name:
Title:
________________________________________
Optionee
4
<PAGE> 1
EXHIBIT 10.19
NEW WORLD PASTA COMPANY
1999 STOCK OPTION PLAN
FORM OF
STOCK OPTION AGREEMENT
[SKINNER, MILLER, SNOW]
Name of Optionee: [ ]
Optioned Shares:
[NONQUALIFIED STOCK OPTION] ______ shares of common stock,
$.01 par value, of New World
Pasta Company ("Shares")
Per Share Option Price: [#] Shares at $10.00
[#] Shares at $73.50
Option Grant Date: January 28, 1999
Date Qualified Stock
Option Becomes Exercisable:
Shares at $10.00 Shares at $73.50
[#] Shares, on January 28, 2000 [#] Shares, on January 28, 2000
[#] Shares, on January 28, 2001 [#] Shares, on January 28, 2001
<PAGE> 2
[#] Shares, on January 28, 2002 [#] Shares, on January 28, 2002
[#] Shares, on January 28, 2003 [#] Shares, on January 28, 2003
[#] Shares, on January 28, 2004 [#] Shares, on January 28, 2004
Termination Date: January 28, 2009
2
<PAGE> 3
This Stock Option Agreement (this "Agreement") is executed and
delivered as of the Option Grant Date by and between New World Pasta Company
(the "Company") and the Optionee. The Optionee and the Company hereby agree as
follows:
i. The Company, pursuant to the New World Pasta Company 1999 Stock Option
Plan (the "Plan"), which is incorporated herein by reference, and
subject to the terms and conditions thereof, hereby grants to the
Optionee an option to purchase the Optioned Shares at the Per Share
Option Price.
ii. The Option granted hereby shall not be treated as a qualified stock
option under the Internal Revenue Code.
iii. The Option granted hereby shall terminate, subject to the provisions of
the Plan, no later than at the close of business on the Termination
Date.
iv. The Optionee shall comply with and be bound by all the terms and
conditions contained in the Plan.
v. Notwithstanding Section 6(c) of the Plan, in the case of termination of
the Optionee's employment or service with the Company, Affiliate (as
defined in the Plan) or Subsidiary (as defined in the Plan)(i) due to
the death or Disability (as defined in the Optionee's employment
agreement) of the Optionee, (ii) by the Optionee for Good Reason (as
defined in the Optionee's employment agreement) or (iii) upon the
occurrence of a Change of Control (as defined in the Plan), the
Optionee's Options, whether then exercisable or otherwise, shall become
exercisable, and shall remain exercisable for a period of ninety days
from the Date of Termination (as defined in the Optionee's employment
agreement).
vi. Notwithstanding Section 6(c) of the Plan, in the case of termination of
the Optionee's employment or service with the Company, Affiliate or
Subsidiary without Cause (as defined in the Optionee's employment
agreement), (i) if the Board of Directors of the Company has determined
in good faith, after notice and reasonable opportunity to cure, that
the Optionee has failed to perform material duties in a reasonably
satisfactory manner, the Optionee's Options, only to the extent then
exercisable, shall remain exercisable as to the number of shares of
Stock (as defined in the Plan) that were exercisable as of the Date of
Termination for a period of ninety days immediately following such Date
of Termination and shall be cancelled and terminated with respect to
the remainder of the shares of Stock subject thereto as of the Date of
Termination or (ii) if the Board of Directors of the Company has not
made such determination, the Optionee's Options, whether then
exercisable or otherwise, shall become exercisable and shall remain
exercisable for a period of ninety days from the Date of Termination.
3
<PAGE> 4
vii. Notwithstanding Section 6(c) of the Plan, in the case of termination of
the Optionee's employment or service with the Company, Affiliate or
Subsidiary by the Optionee without Good Reason, the Optionee's Options,
only to the extent then exercisable, shall remain exercisable as to the
number of shares of Stock that were exercisable as of the Date of
Termination for a period of ninety days immediately following such Date
of Termination and shall be cancelled and terminated with respect to
the remainder of the shares of Stock subject thereto as of the Date of
Termination.
viii. Notwithstanding Section 6(c) of the Plan, in the case of termination of
the Optionee's employment or service with the Company, Affiliate or
Subsidiary with Cause (as defined in the Optionee's employment
agreement), all of the Optionee's Options shall be cancelled and
terminated as of the Date of Termination.
ix. Options granted hereby shall not be transferable except by will or the
laws of descent and distribution. During the lifetime of the Optionee,
the Option may be exercised only by the Optionee, the guardian or legal
representative of the Optionee.
x. The obligation of the Company to sell and deliver any stock under this
Option is specifically subject to all provisions of the Plan and all
applicable laws, rules, regulations and governmental and stockholder
approvals.
xi. Any notice by the Optionee to the Company hereunder shall be in writing
and shall be deemed duly given if mailed to the Company at its
principal offices. Any notice by the Company to the Optionee shall be
in writing and shall be deemed duly given if mailed to the Optionee at
the address last specified to the Company by the Optionee. All notices
sent by mail must be sent by certified mail, return receipt requested.
xii. The validity and construction of this Agreement shall be governed by
the laws of the State of Delaware without reference to such State's
principles of conflicts of law.
4
<PAGE> 5
THE AGREEMENT IS MADE UNDER AND SUBJECT TO THE PROVISIONS OF THE PLAN, AND ALL
OF THE PROVISIONS OF THE PLAN ARE ALSO PROVISIONS OF THE AGREEMENT. IF THERE IS
A DIFFERENCE OR CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT AND THE
PROVISIONS OF THE PLAN, THE PROVISIONS OF THE PLAN WILL GOVERN (EXCEPT AS
EXPRESSLY SET FORTH IN THE PLAN). BY SIGNING THE AGREEMENT, THE OPTIONEE
ACCEPTS AND AGREES TO ALL OF THE FOREGOING TERMS AND PROVISIONS AND TO ALL OF
THE TERMS AND PROVISIONS OF THE PLAN INCORPORATED HEREIN BY REFERENCE AND
CONFIRMS THAT HE HAS RECEIVED A COPY OF THE PLAN.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized representative and the Optionee has hereunto set
his hand as of the Option Grant Date.
NEW WORLD PASTA COMPANY:
By:
Name:
Title:
Optionee
5
<PAGE> 1
EXHIBIT 10.20
NEW WORLD PASTA COMPANY
1999 STOCK OPTION PLAN
FORM OF
STOCK OPTION AGREEMENT
Name of Optionee: [ ]
Optioned Shares:
[NONQUALIFIED STOCK OPTION] _______ shares of common
stock, $.01 par value, of New
World Pasta Company
("Shares")
Per Share Option Price: [#] Shares at $10.00
[#] Shares at $73.50
Option Grant Date: January 28, 1999
Date Qualified Stock
Option Becomes Exercisable:
Shares at $10.00 Shares at $73.50
[#] Shares, on January 28, 2000 [#] Shares, on January 28, 2000
[#] Shares, on January 28, 2001 [#] Shares, on January 28, 2001
<PAGE> 2
[#] Shares, on January 28, 2002 [#] Shares, on January 28, 2002
[#] Shares, on January 28, 2003 [#] Shares, on January 28, 2003
[#] Shares, on January 28, 2004 [#] Shares, on January 28, 2004
Termination Date: January 28, 2009
2
<PAGE> 3
This Stock Option Agreement (this "Agreement") is executed and
delivered as of the Option Grant Date by and between New World Pasta Company
(the "Company") and the Optionee. The Optionee and the Company hereby agree as
follows:
i. The Company, pursuant to the New World Pasta Company 1999 Stock Option
Plan (the "Plan"), which is incorporated herein by reference, and
subject to the terms and conditions thereof, hereby grants to the
Optionee an option to purchase the Optioned Shares at the Per Share
Option Price.
ii. The Option granted hereby shall not be treated as a qualified stock
option under the Internal Revenue Code.
iii. The Option granted hereby shall terminate, subject to the provisions of
the Plan, no later than at the close of business on the Termination
Date.
iv. The Optionee shall comply with and be bound by all the terms and
conditions contained in the Plan.
v. Options granted hereby shall not be transferable except by will or the
laws of descent and distribution. During the lifetime of the Optionee,
the Option may be exercised only by the Optionee, the guardian or legal
representative of the Optionee.
vi. The obligation of the Company to sell and deliver any stock under this
Option is specifically subject to all provisions of the Plan and all
applicable laws, rules, regulations and governmental and stockholder
approvals.
vii. Any notice by the Optionee to the Company hereunder shall be in writing
and shall be deemed duly given if mailed to the Company at its
principal offices. Any notice by the Company to the Optionee shall be
in writing and shall be deemed duly given if mailed to the Optionee at
the address last specified to the Company by the Optionee. All notices
sent by mail must be sent by certified mail, return receipt requested.
viii. The validity and construction of this Agreement shall be governed by
the laws of the State of Delaware without reference to such State's
principles of conflicts of law.
3
<PAGE> 4
THE AGREEMENT IS MADE UNDER AND SUBJECT TO THE PROVISIONS OF THE PLAN, AND ALL
OF THE PROVISIONS OF THE PLAN ARE ALSO PROVISIONS OF THE AGREEMENT. IF THERE IS
A DIFFERENCE OR CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT AND THE
PROVISIONS OF THE PLAN, THE PROVISIONS OF THE PLAN WILL GOVERN (EXCEPT AS
EXPRESSLY SET FORTH IN THE PLAN). BY SIGNING THE AGREEMENT, THE OPTIONEE ACCEPTS
AND AGREES TO ALL OF THE FOREGOING TERMS AND PROVISIONS AND TO ALL OF THE TERMS
AND PROVISIONS OF THE PLAN INCORPORATED HEREIN BY REFERENCE AND CONFIRMS THAT HE
HAS RECEIVED A COPY OF THE PLAN.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized representative and the Optionee has hereunto set
his hand as of the Option Grant Date.
NEW WORLD PASTA COMPANY:
By:
Name:
Title:
Optionee
4
<PAGE> 1
EXHIBIT 12.1
New World Pasta
Statement Re: Computation of Ratio of Earnings to Combined Fixed Charges
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro forma
1994 1995 1996 1997 1998 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings before income taxes $30,596 $31,625 $31,144 $41,720 $41,868 $11,494
Interest expense -- -- -- -- -- 28,211
------- ------- ------- ------- ------- -------
30,596 31,625 31,144 41,720 41,868 39,705
======= ======= ======= ======= ======= =======
Interest expense -- -- -- -- -- 28,211
Dividends in preferred stock -- -- -- -- -- 13,618
------- ------- ------- ------- ------- -------
-- -- -- -- -- 41,829
======= ======= ======= ======= ======= =======
Ratio of Earnings to Combined Fixed
Charges N/A* N/A* N/A* N/A* N/A* 0.9(1)
=======
</TABLE>
- ----------------------
* Historically, New World Pasta has not incurred indebtedness or related
interest expense as a division of Hershey.
(1) On a pro forma basis combined fixed charges exceed earnings before income
taxes for 1998 by $2,124,000.
<PAGE> 1
EXHIBIT 22.1
SUBSIDIARIES OF NEW WORLD PASTA COMPANY
Pasta Group, L.L.C.
Winchester Pasta, L.L.C.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 12, 1999 (and to all references to our Firm) included in or made
a part of New World Pasta Company's registration statement on Form S-4.
ARTHUR ANDERSEN LLP
New York, New York
April 21, 1999
<PAGE> 1
EXHIBIT 25.1
================================================================================
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) |__|
================================================================================
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
</TABLE>
= = = = = = = = = = = = = = = = = = = = =
NEW WORLD PASTA COMPANY
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-2006441
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
100 Crystal A Drive
Hershey, Pennsylvania 17033
(Address of principal executive offices) (Zip code)
</TABLE>
= = = = = = = = = = = = = = = = = = = = =
9-1/4% Senior Subordinated Exchange Notes Due 2009
(Title of the indenture securities)
================================================================================
<PAGE> 2
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.
<TABLE>
<CAPTION>
Name ADDRESS
- ---- -------
<S> <C>
SUPERINTENDENT OF BANKS OF THE STATE 2 RECTOR STREET, NEW YORK, N.Y.
OF NEW YORK 10006, AND ALBANY, N.Y. 12203
FEDERAL RESERVE BANK OF NEW YORK 33 LIBERTY PLAZA, NEW YORK, N.Y.
10045
FEDERAL DEPOSIT INSURANCE CORPORATION WASHINGTON, D.C. 20429
NEW YORK CLEARING HOUSE ASSOCIATION NEW YORK, NEW YORK 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 5th day of April, 1999.
THE BANK OF NEW YORK
By: /s/ MICHELE L. RUSSO
Name: MICHELE L. RUSSO
Title: ASSISTANT TREASURER
3
<PAGE> 4
EXHIBIT 7 TO FORM T-1
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business
December 31, 1998, published in accordance with a call made by the
Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
- ------ ------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin..................................... $3,951,273
Interest-bearing balances.......................... 4,134,162
Securities:
Held-to-maturity securities........................ 932,468
Available-for-sale securities...................... 4,279,246
Federal funds sold and Securities
purchased under agreements to resell.................... 3,161,626
Loans and lease financing receivables:
Loans and leases, net of unearned
income............................................. 37,861,802
LESS: Allowance for loan and
lease losses....................................... 619,791
LESS: Allocated transfer risk
reserve............................................ 3,572
Loans and leases, net of unearned
income, allowance, and reserve..................... 37,238,439
Trading Assets....................................... 1,551,556
Premises and fixed assets (including
capitalized leases).................................. 684,181
Other real estate owned.............................. 10,404
Investments in unconsolidated
subsidiaries and associated companies...................... 196,032
Customers' liability to this bank on
acceptances outstanding................................ 895,160
Intangible assets.................................... 1,127,375
Other assets......................................... 1,915,742
-----------
Total assets......................................... $60,077,664
===========
</TABLE>
1
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES
Deposits:
In domestic office................................. $27,020,578
Noninterest-bearing................................ 11,271,304
Interest-bearing................................... 15,749,274
In foreign offices, Edge and
Agreement subsidiaries, and IBFs........................ 17,197,743
Noninterest-bearing................................ 103,007
Interest-bearing................................... 17,094,736
Federal funds purchased and Securities
sold under agreements to repurchase.................. 1,761,170
Demand notes issued to the
U.S.Treasury......................................... 125,423
Trading liabilities 1,625,632
Other borrowed money:
With remaining maturity of one year
or less............................................ 1,903,700
With remaining maturity of more than
one year through three years....................... 0
With remaining maturity of more than
three years........................................ 31,639
Bank's liability on acceptances
executed and outstanding................................ 900,390
Subordinated notes and debentures.................... 1,308,000
Other liabilities.................................... 2,708,852
-----------
Total liabilities.................................... 54,583,127
===========
EQUITY CAPITAL
Common stock......................................... 1,135,284
Surplus.............................................. 764,443
Undivided profits and capital reserves............... 3,542,168
Net unrealized holding gains (losses)
on available-for-sale securities.................... 82,367
Cumulative foreign currency translation
adjustments.......................................... (29,725)
-----------
Total equity capital................................. 5,494,537
-----------
Total liabilities and equity capital................. $60,077,664
===========
</TABLE>
2
<PAGE> 6
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni
Gerald L. Hassell Directors
Alan R. Griffith
3
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
NEW WORLD PASTA COMPANY
OFFER TO EXCHANGE
9 1/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED [ ], 1999,
FOR ALL ISSUED AND OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES DUE 2009
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
[ ], 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Regular or Certified Mail: By Facsimile: By Overnight Courier or Hand:
(Eligible Guarantor
Institutions Only)
The Bank of New York (212) 815-6339 The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, NY 10286 To Confirm by Telephone Corporate Trust Services Window
Attention: Reorganization Section or for Information Call: Ground Level
Marcia Brown New York, NY 10286
(212) 815-3428 Attention: Reorganization
Section
Marcia Brown
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THOSE
LISTED ABOVE, OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF YOUR OLD NOTES.
By signing this Letter of Transmittal, you hereby acknowledge that you have
received and reviewed the Prospectus, dated [ ], 1999, of New World
Pasta Company and this Letter of Transmittal. The Prospectus, together with this
Letter of Transmittal, constitutes New World Pasta Company's offer to exchange
an aggregate principal amount of up to $160,000,000 of our 9 1/4% Senior
Subordinated Exchange Notes due 2009 (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of our issued and outstanding 9 1/4% Senior
Subordinated Notes due 2009 (the "Old Notes"). The Old Notes were issued in
offerings under Rule 144A and Regulation S of the Securities Act that were not
registered under the Securities Act. This Exchange Offer is being extended to
all holders of the Old Notes.
If you decide to tender your Old Notes, and we accept the Old Notes, this
will constitute a binding agreement between you and New World Pasta, subject to
the terms and conditions set forth in the Prospectus and this Letter of
Transmittal. Unless you comply with the procedures described in the Prospectus
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures," you
must do one of the following on or prior to the expiration of the Exchange Offer
to participate in the Exchange Offer:
- tender your Old Notes by sending the certificates for your Old Notes, in
proper form for transfer, a properly completed and duly executed Letter
of Transmittal, with any required signature guarantees, and all other
documents required by this Letter of Transmittal to the Exchange Agent at
one of the addresses listed above; or
<PAGE> 2
- tender your Old Notes by using the book-entry transfer procedures
described in the Prospectus under the caption "The Exchange
Offer -- Book-Entry Transfer," and transmitting this Letter of
Transmittal, with any required signature guarantees, or an Agent's
Message (as defined below) instead of this Letter of Transmittal to the
Exchange Agent.
In order for a book-entry transfer to constitute a valid tender of your Old
Notes in the Exchange Offer, the Exchange Agent must receive a confirmation of
book-entry transfer (a "Book-Entry Confirmation") of your Old Notes into the
Exchange Agent's account at The Depository Trust Company prior to the expiration
of the Exchange Offer. The term "Agent's Message" means a message, transmitted
by The Depository Trust Company and received by the Exchange Agent and forming a
part of the Book-Entry Confirmation, which states that The Depository Trust
Company has received an express acknowledgment from you that you have received
and have agreed to be bound by the terms of this Letter of Transmittal. If you
use this procedure, we may enforce the Letter of Transmittal against you.
DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY'S BOOK-ENTRY TRANSFER
FACILITY WILL NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If you are a holder of Old Notes and wish to tender your Old Notes in the
Exchange Offer, but (1) the Old Notes are not immediately available, (2) time
will not permit your Old Notes or other required documents to reach the Exchange
Agent before the expiration of the Exchange Offer, or (3) the procedure for
book-entry transfer cannot be completed prior to the expiration of the Exchange
Offer, you may tender Old Notes by following the procedures described in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
Only registered holders of Old Notes -- which term, for purposes of this
Letter of Transmittal, includes any participant in The Depository Trust
Company's system whose name appears on a security position listing as the owner
of the Old Notes -- are entitled to tender their Old Notes for exchange in the
Exchange Offer. If you are a beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and you wish to tender your Old Notes in the Exchange Offer, you should promptly
contact the person in whose name the Old Notes are registered and instruct that
person to tender on your behalf. If you wish to tender in the Exchange Offer on
your own behalf, prior to completing and executing this Letter of Transmittal
and delivering the certificates for your Old Notes, you must either make
appropriate arrangements to register ownership of the Old Notes in your name or
obtain a properly completed bond power from the person in whose name the Old
Notes are registered.
YOU MUST COMPLETE THIS LETTER OF TRANSMITTAL IF YOU ARE A REGISTERED HOLDER
OF OLD NOTES -- WHICH TERM, FOR PURPOSES OF THIS LETTER OF TRANSMITTAL, INCLUDES
ANY PARTICIPANT IN THE DEPOSITORY TRUST COMPANY'S SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE OWNER OF THE OLD NOTES -- AND EITHER (1) YOU
WISH TO TENDER THE CERTIFICATES REPRESENTING YOUR OLD NOTES TO THE EXCHANGE
AGENT TOGETHER WITH THIS LETTER OF TRANSMITTAL OR (2) YOU WISH TO TENDER YOUR
OLD NOTES BY BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT THE
DEPOSITORY TRUST COMPANY AND YOU ELECT TO SUBMIT THIS LETTER OF TRANSMITTAL TO
THE EXCHANGE AGENT INSTEAD OF AN AGENT'S MESSAGE.
In order to properly complete this Letter of Transmittal, you must: (1)
complete the box entitled "Description of Old Notes Tendered," (2) if
appropriate, check and complete the boxes relating to book-entry transfer and
guaranteed delivery and the boxes entitled "Special Issuance Instructions" and
"Special Delivery Instructions," (3) sign this Letter of Transmittal by
completing the box entitled "Sign Here" and (4) complete the box entitled
"Substitute Form W-9." By completing the box entitled "Description of Old Notes
Tendered" and signing below, you will have tendered your Old Notes for exchange
on the terms and conditions described in the Prospectus and this Letter of
Transmittal. You should read the detailed instructions below before completing
this Letter of Transmittal.
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX BELOW TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS
OF REGISTERED HOLDER 1 2 3
- ------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL
CERTIFICATE AMOUNT OF AMOUNT
NUMBER(S)* OLD NOTE(S) TENDERED**
-----------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL:
- ------------------------------------------------------------------------------------------------------------
* Need not be completed by holders who tender by book-entry transfer.
** Old Notes tendered by this Letter of Transmittal must be in denominations of $1,000 principal amount and
any integral multiple thereof. Unless otherwise indicated in column 3, a holder will be deemed to have
tendered ALL of the Old Notes represented by the certificate(s) listed in column 1. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
BOXES BELOW TO BE CHECKED AS APPLICABLE
[ ] CHECK HERE IF THE CERTIFICATE(S) REPRESENTING YOUR OLD NOTES IS BEING
TENDERED WITH THIS LETTER OF TRANSMITTAL.
[ ] CHECK HERE IF THE CERTIFICATE(S) REPRESENTING YOUR OLD NOTES HAS BEEN LOST,
DESTROYED OR STOLEN AND YOU REQUIRE ASSISTANCE IN OBTAINING A NEW
CERTIFICATE(S).
Certificate Number(s)
----------------------------------------------------------------------------
Principal Amount(s) Represented
-----------------------------------------------------------------------------
You must contact the Exchange Agent to obtain instructions for replacing
lost, destroyed or stolen certificate(s) representing Old Notes. (See
Instruction 12)
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
TO BE COMPLETED ONLY IF NEW NOTES OR OLD NOTES NOT
TENDERED OR EXCHANGED ARE TO BE ISSUED IN THE NAME OF
SOMEONE OTHER THAN THE REGISTERED HOLDER OF THE OLD
NOTES WHOSE NAME(S) APPEAR BELOW.
[ ] Old Note(s) to:
[ ] New Note(s) to:
Name:-----------------------------------------------
(PLEASE PRINT)
Address:
---------------------------------------------
-----------------------------------------------------
(ZIP CODE)
Telephone Number ( ) -
--------------------------
-----------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE INSTRUCTION 9)
- -------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
TO BE COMPLETED ONLY IF NEW NOTES OR OLD NOTES NOT
TENDERED OR EXCHANGED ARE TO BE DELIVERED TO SOMEONE
OTHER THAN THE REGISTERED HOLDER OF THE OLD NOTES
WHOSE NAME(S) APPEAR(S) BELOW OR TO THE REGISTERED
HOLDER AT AN ADDRESS OTHER THAN THAT SHOWN BELOW.
[ ] Old Note(s) to:
[ ] New Note(s) to:
Name:-----------------------------------------------
(PLEASE PRINT)
Address:
---------------------------------------------
-----------------------------------------------------
(ZIP CODE)
Telephone Number ( ) -
--------------------------
-----------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE INSTRUCTION 9)
- -------------------------------------------------------------
</TABLE>
4
<PAGE> 5
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED UNDER A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
----------------------------------------------------------------------------
Window Ticket Number (if any)
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------------------------------------------
Name of Institution Which Guaranteed Delivery
-------------------------------------------------------------
If delivered by Book-Entry Transfer, complete the following:
Name of Tendering Institution
- --------------------------------------------------------------------------------
Account Number
----------------------------------------------------------------------------
Transaction Code Number
----------------------------------------------------------------------------
BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
- --------------------------------------------------------------------------------
Account Number
----------------------------------------------------------------------------
Transaction Code Number
----------------------------------------------------------------------------
[ ] CHECK HERE IF OLD NOTES THAT ARE NOT TENDERED OR NOT EXCHANGED ARE TO BE
RETURNED BY CREDITING. THE DEPOSITORY TRUST COMPANY ACCOUNT NUMBER
INDICATED ABOVE.
5
<PAGE> 6
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, as
described in the Prospectus and this Letter of Transmittal, I hereby tender to
New World Pasta Company the aggregate principal amount of Old Notes described
above in the box entitled "Description of Old Notes Tendered" in exchange for a
like principal amount of New Notes which have been registered under the
Securities Act.
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered by this Letter of Transmittal in accordance
with the terms and conditions of the Exchange Offer -- including, if the
Exchange Offer is extended or amended, the terms and conditions of any extension
or amendment -- I hereby sell, assign and transfer to, or upon the order of, New
World Pasta all right, title and interest in and to the Old Notes tendered by
this Letter of Transmittal. I hereby irrevocably constitute and appoint the
Exchange Agent as my agent and attorney-in-fact -- with full knowledge that the
Exchange Agent is also acting as the agent of New World Pasta in connection with
the Exchange Offer -- with respect to the tendered Old Notes, with full power of
substitution, such power of attorney being deemed to be an irrevocable power
coupled with an interest, subject only to the right of withdrawal described in
the Prospectus, to (1) deliver certificates for the tendered Old Notes to New
World Pasta together with all accompanying evidences of transfer and
authenticity to, or upon the order of, New World Pasta, upon receipt by the
Exchange Agent, as my agent, of the New Notes to be issued in exchange for the
tendered Old Notes, (2) present certificates for the tendered Old Notes for
transfer, and to transfer the tendered Old Notes on the books of New World
Pasta, and (3) receive for the account of New World Pasta all benefits and
otherwise exercise all rights of ownership of the tendered Old Notes, all in
accordance with the terms and conditions of the Exchange Offer.
I hereby represent and warrant that I have full power and authority to
tender, sell, assign and transfer the Old Notes tendered by this Letter of
Transmittal and that, when the tendered Old Notes are accepted for exchange, New
World Pasta will acquire good, marketable and unencumbered title to the tendered
Old Notes, free and clear of all liens, restrictions, charges and encumbrances,
and that the tendered Old Notes are not subject to any adverse claims or
proxies. I will, upon request, execute and deliver any additional documents
deemed by New World Pasta or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment and transfer of the Old Notes tendered
by this Letter of Transmittal, and I will comply with my obligations under the
Registration Rights Agreement, dated as of February 19, 1999 (the "Registration
Rights Agreement"), among New World Pasta, New World Pasta's wholly owned
subsidiaries, Pasta Group, L.L.C. and Winchester Pasta, L.L.C., and Morgan
Stanley & Co. Incorporated and Scotia Capital Markets (USA) Inc. I have read and
I agree to all of the terms of the Exchange Offer.
The name(s) and address(es) of the registered holder(s) -- which term, for
purposes of this Letter of Transmittal, includes any participant in The
Depository Trust Company's system whose name appears on a security position
listing as the holder of the Old Notes -- of the Old Notes tendered by this
Letter of Transmittal are printed above as they appear on the certificate(s)
representing the Old Notes. The certificate number(s) and the Old Notes that I
wish to tender are indicated in the appropriate boxes above.
Unless I have otherwise indicated by completing the box entitled "Special
Issuance Instructions" above, I hereby direct that the New Notes be issued in
the name(s) of the undersigned or, in the case of a book-entry transfer of Old
Notes, that the New Notes be credited to the account indicated above maintained
with The Depository Trust Company. Similarly, unless I have otherwise indicated
by completing the box entitled "Special Delivery Instructions," I hereby direct
that the New Notes be delivered to the address shown below my signature.
If I have (1) tendered any Old Notes that are not exchanged in the Exchange
Offer for any reason or (2) submitted certificates for more Old Notes than I
wish to tender, unless I have otherwise indicated by completing the boxes
entitled "Special Issuance Instructions" or "Special Delivery Instructions," I
hereby direct that certificates for any Old Notes that are not tendered or not
exchanged should be issued in the name of the undersigned, if applicable, and
delivered to the address shown below my signature or, in the case of a
book-entry transfer of Old Notes, that Old Notes that are not tendered or not
exchanged be credited to the account indicated above maintained with The
Depository Trust Company, in each case, at New World Pasta's expense, promptly
following the expiration or termination of the Exchange Offer.
6
<PAGE> 7
I understand that if I decide to tender Old Notes, and New World Pasta
accepts the Old Notes for exchange, this will constitute a binding agreement
between me and New World Pasta, subject to the terms and conditions set forth in
the Prospectus and this Letter of Transmittal.
I also recognize that, under certain circumstances described in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer," New World Pasta may not be required to accept for exchange any of the
Old Notes tendered by this Letter of Transmittal.
By tendering Old Notes and executing this Letter of Transmittal, or
delivering an Agent's Message instead of this Letter of Transmittal, I hereby
represent and agree that: (1) I am not an "affiliate" (as defined in Rule 405
under the Securities Act) of New World Pasta; (2) any New Notes I receive in the
Exchange Offer are being acquired by me in the ordinary course of my business;
(3) at the time of the commencement of the Exchange Offer, neither I nor, to my
knowledge, anyone receiving New Notes from me, has any arrangement or
understanding with any person to participate in the distribution (as defined in
the Securities Act) of the New Notes in violation of the Securities Act; (4) if
I am not a Participating Broker-Dealer (as defined below), that I am not engaged
in, and do not intend to engage in, the distribution of the New Notes; and (5)
if I am a Participating Broker-Dealer, that I will receive the New Notes for my
own account in exchange for Old Notes that I acquired as a result of my
market-making or other trading activities and that I will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
the New Notes I receive. As used in this Letter of Transmittal, a "Participating
Broker-Dealer" is a broker-dealer that receives New Notes for its own account in
exchange for Old Notes that it acquired as a result of market-making or other
trading activities. If I am a Participating Broker-Dealer, by making the
representation set forth above and delivering a prospectus in connection with
any resale transaction involving the New Notes, I understand that I will not be
deemed to have admitted that I am an "underwriter" within the meaning of the
Securities Act.
New World Pasta has agreed, subject to the terms of the Registration Rights
Agreement, that for a period of not less than 90 nor more than 270 days after
the effectiveness of the Registration Statement of which the Prospectus forms a
part, it will make the Prospectus, as amended or supplemented from time to time,
available to any Participating Broker-Dealer for use in connection with resales
of the New Notes. Each Participating Broker-Dealer, by tendering Old Notes and
executing this Letter of Transmittal, or delivering an Agent's Message instead
of this Letter of Transmittal, agrees that, upon receipt of notice from New
World Pasta of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in the Prospectus
untrue in any material respect or which causes the Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference in the Prospectus, in light of the circumstances under
which they were made, not misleading, the Participating Broker-Dealer will
suspend the sale of New Notes under the Prospectus. Each Participating
Broker-Dealer further agrees that, upon receipt of a notice from New World Pasta
to suspend the sale of New Notes as provided above, the Participating
Broker-Dealer will suspend resales of the New Notes until (1) New World Pasta
has amended or supplemented the Prospectus to correct the misstatement or
omission and has furnished copies of the amended or supplemented Prospectus to
the Participating Broker-Dealer or (2) New World Pasta has given notice that the
sale of the New Notes may be resumed, as the case may be. If New World Pasta
gives notice to suspend the sale of the New Notes as provided above, it will
extend the period referred to above during which Participating Broker-Dealers
are entitled to use the Prospectus in connection with the resale of New Notes by
the number of days during the period from and including the date of the giving
of such notice to and including the date when Participating Broker-Dealers
receive copies of the supplemented or amended Prospectus necessary to permit
resales of the New Notes or to and including the date on which New World Pasta
has given notice that the sale of New Notes may be resumed, as the case may be.
As a result, a Participating Broker-Dealer who intends to use the
Prospectus in connection with resales of New Notes received in exchange for Old
Notes in the Exchange Offer must notify New World Pasta, on or prior to the
expiration of the Exchange Offer, that it is a Participating Broker-Dealer.
Participating Broker-Dealers must send the required written notice to New World
Pasta Company to New World Pasta's executive offices located at 100 Crystal A
Drive, Hershey, PA 17033, Attention: Mark E. Kimmel, Vice President,
7
<PAGE> 8
Administration and Development, and General Counsel, and this notice must be
received by New World Pasta at or prior to the expiration of the Exchange Offer.
Interest on the New Notes will accrue (1) from the later of (a) the last
date to which interest was paid on the Old Notes surrendered in exchange for the
New Notes or (b) if the Old Notes are surrendered for exchange on a date in a
period which includes the record date for an interest payment date to occur on
or after the date of the exchange and as to which interest will be paid, the
date to which interest will be paid on such interest payment date or (2) if no
interest has been paid on the Old Notes, from February 19, 1999.
All authority conferred in or agreed to be conferred in this Letter of
Transmittal will survive my death or incapacity, and any obligation of mine
under this Letter of Transmittal will be binding upon my heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns. Except as stated in the Prospectus,
this tender is irrevocable.
8
<PAGE> 9
SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
This Letter of Transmittal must be signed by (1) the registered
holder(s) -- which term, for purposes of this Letter of Transmittal, includes
any participant in The Depository Trust Company's system whose name appears on a
security position listing as the holder of the Old Notes -- exactly as the
name(s) of the registered holder(s) appear(s) on the certificate(s) for the Old
Notes tendered or on the register of holders maintained by New World Pasta, or
(2) by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted with this Letter of
Transmittal -- including any opinions of counsel, certifications and other
information as may be required by New World Pasta for the Old Notes to comply
with the restrictions on transfer applicable to the Old Notes. If the signature
below is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or another acting in a similar fiduciary or
representative capacity, please set forth the signer's full title. See
Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF NOTEHOLDER(S)
DATED: -------------------------------------------------------------- , 1999
NAME(S)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
CAPACITY
- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ZIP CODE)
TAX IDENTIFICATION OR
SOCIAL SECURITY NO.
- --------------------------------------------------------------------------------
(SEE INSTRUCTION 9)
AREA CODE AND TELEPHONE NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED
(SEE INSTRUCTION 2, IF REQUIRED)
ELIGIBLE GUARANTOR INSTITUTION
- --------------------------------------------------------------------------------
OFFICIAL SIGNATURE
- --------------------------------------------------------------------------------
DATED: -------------------------------------------------------------- , 1999
9
<PAGE> 10
PAYOR'S NAME: THE BANK OF NEW YORK
<TABLE>
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TAXPAYER TIN --------------------------------------
SUBSTITUTE IDENTIFICATION NUMBER ("TIN") IN THE BOX AT (SOCIAL SECURITY NUMBER
FORM W-9 RIGHT AND CERTIFY THAT IT IS CORRECT BY SIGNING OR EMPLOYER IDENTIFICATION NUMBER)
AND DATING BELOW.
------------------------------------------------------------------------------------------------
PART 2 -- CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING UNDER THE PROVISIONS OF
SECTION 340(A)(1)(C) OF THE INTERNAL REVENUE CODE BECAUSE EITHER (1) YOU ARE EXEMPT FROM BACKUP
DEPARTMENT OF THE TREASURY WITHHOLDING, (2) YOU HAVE NOT BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT
INTERNAL REVENUE SERVICE OF FAILURE TO REPORT ALL INTEREST OR DIVIDENDS OR (3) THE INTERNAL REVENUE SERVICE HAS NOTIFIED YOU
THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING. [
]
------------------------------------------------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE PART 3
IDENTIFICATION NUMBER INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE DATE ,1999 AWAITING TIN [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of the
exchange, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------
SIGNATURE DATE
</TABLE>
CERTIFICATE INSTRUCTIONS: You must not check the box in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, then you may check the box in Part 2 above.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY CASH PAYMENTS.
THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING.
PLEASE REVIEW ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
10
<PAGE> 11
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. You must complete this Letter of Transmittal if you are a holder of
Old Notes -- which term, for purposes of this Letter of Transmittal, includes
any participant in The Depository Trust Company's system whose name appears on a
security position listing as the holder of the Old Notes -- and either (1) you
wish to tender the certificates representing your Old Notes to the Exchange
Agent together with this Letter of Transmittal or (2) you wish to tender your
Old Notes by book-entry transfer to the Exchange Agent's account at The
Depository Trust Company and you elect to submit this Letter of Transmittal to
the Exchange Agent instead of an Agent's Message. In order to constitute a valid
tender of your Old Notes, unless you comply with the procedures for Guaranteed
Delivery described below, the Exchange Agent must receive the following
documents at one of the addresses listed above on or prior to the expiration of
the Exchange Offer: (1) certificates for the Old Notes, in proper form for
transfer, or Book-Entry Confirmation of transfer of the Old Notes into the
Exchange Agent's account at The Depository Trust Company, (2) a properly
completed and duly executed Letter of Transmittal, with any required signature
guarantees, or, in the case of a Book-Entry Confirmation, an Agent's Message
instead of this Letter of Transmittal, and (3) all other documents required by
this Letter of Transmittal. Old Notes tendered in the Exchange Offer must be in
denominations of $1,000 principal amount and any integral multiple thereof.
If you are a holder of the Old Notes and wish to tender your Old Notes, but
(1) the certificates for Old Notes are not immediately available, (2) time will
not permit your certificates for Old Notes or other required documents to reach
the Exchange Agent before the expiration of the Exchange Offer, or (3) the
procedure for book-entry transfer cannot be completed prior to the expiration of
the Exchange Offer, you may effect a tender if: (1) the tender is made through
an Eligible Guarantor Institution (as defined below); (2) prior to the
expiration of the Exchange Offer, the Exchange Agent receives from an Eligible
Guarantor Institution a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form we have provided, setting forth
your name and address and the amount of Old Notes you are tendering and stating
that the tender is being made by Notice of Guaranteed Delivery; and (3) the
Exchange Agent receives within three New York Stock Exchange, Inc. ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery:
(a) the certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation of transfer of the Old Notes into the
Exchange Agent's account at The Depository Trust Company, as the case may be,
(b) a properly completed and duly executed Letter of Transmittal, with any
required signature guarantees, or, in the case of a Book-Entry Confirmation, an
Agent's Message instead of the Letter of Transmittal, and (c) all other
documents required by the Letter of Transmittal. The Notice of Guaranteed
Delivery may be sent by overnight courier, hand delivery, registered or
certified mail or facsimile transmission and must include a guarantee by an
Eligible Guarantor Institution in the form set forth in the Notice.
THE METHOD OF DELIVERY OF CERTIFICATES FOR OLD NOTES, LETTERS OF
TRANSMITTAL, AGENT'S MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR
ELECTION. IF YOU DELIVER YOUR OLD NOTES BY MAIL, WE RECOMMEND REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW
SUFFICIENT TIME TO ASSURE TIMELY DELIVERY. DO NOT SEND CERTIFICATES FOR OLD
NOTES, LETTERS OF TRANSMITTAL, AGENT'S MESSAGES OR OTHER REQUIRED DOCUMENTS TO
NEW WORLD PASTA.
New World Pasta will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of this Letter of Transmittal or
delivery of an Agent's Message instead of the Letter of Transmittal, waives any
right to receive any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(a) this Letter of Transmittal is signed by the registered holder -- which
term, for purposes of this Letter of Transmittal, includes any
participant in The Depository Trust Company's system whose name appears
on a security position listing as the owner of the Old Notes -- of Old
Notes tendered
11
<PAGE> 12
with this Letter of Transmittal, unless such holder(s) has completed
either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" above, or
(b) the Old Notes are tendered for the account of a firm that is an
Eligible Guarantor Institution.
In all other cases, an Eligible Guarantor Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
An "Eligible Guarantor Institution" (as defined in Rule 17Ad-15 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
means:
- Banks (as defined in Section 3(a) of the Federal Deposit Insurance Act);
- Brokers, dealers, municipal securities dealers, municipal securities
brokers, government securities dealers and government securities brokers
(as defined in the Exchange Act);
- Credit unions (as defined in Section 19B(1)(A) of the Federal Reserve
Act);
- National securities exchanges, registered securities associations and
clearing agencies (as these terms are defined in the Exchange Act); and
- Savings associations (as defined in Section 3(b) of the Federal Deposit
Insurance Act).
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes Tendered" is inadequate, the certificate number(s)
and/or the principal amount of Old Notes and any other required information
should be listed on a separate signed schedule which is attached to this Letter
of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in denominations of $1,000 principal amount and integral multiples
thereof. If you are tendering less than all of the Old Notes evidenced by any
certificate you are submitting, please fill in the principal amount of Old Notes
which are to be tendered in column 3 ("Principal Amount of Old Notes Tendered")
of the box entitled "Description of Old Notes Tendered." In that case, unless
you have otherwise indicated by completing the boxes entitled "Special Issuance
Instructions" or "Special Delivery Instructions", new certificate(s) for the
remainder of the Old Notes that were evidenced by your old certificate(s) will
be sent to the registered holder of the Old Notes, promptly after the expiration
of the Exchange Offer. All Old Notes represented by certificates delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Except as otherwise provided in this Letter of Transmittal, tenders of Old
Notes may be withdrawn at any time on or prior to the expiration of the Exchange
Offer. For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to the expiration of the Exchange Offer at
one of the addresses listed above. Any notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, identify the Old
Notes to be withdrawn, including the principal amount of the Old Notes, and,
where certificates for Old Notes have been transmitted, specify the name in
which the Old Notes are registered, if different from that of the withdrawing
holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of the
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Guarantor Institution unless the holder is
an Eligible Guarantor Institution. If Old Notes have been tendered using the
procedure for book-entry transfer described in the Prospectus under the caption
"The Exchange Offer -- Book-Entry Transfer," any notice of withdrawal must
specify the name and number of the account at The Depository Trust Company to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of the book-entry transfer facility. All questions as to the validity, form and
eligibility -- including time of receipt -- of these notices will be determined
by New World Pasta. Any such determination will be final and binding. Any Old
Notes so withdrawn will be deemed not to have been validly tendered for exchange
for purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
registered holder without cost to that holder as soon as practicable after
withdrawal, non-acceptance of tender or termination of the Exchange Offer. In
the case of Old Notes tendered
12
<PAGE> 13
using the procedure for book-entry transfer described in the Prospectus under
the caption "The Exchange Offer -- Book-Entry Transfer," the Old Notes will be
credited to the tendering holder's account with The Depository Trust Company.
Properly withdrawn Old Notes may be retendered at any time on or prior to the
expiration of the Exchange Offer by following one of the procedures described in
the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering
Old Notes."
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are registered in the name of two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registered holders.
When this Letter of Transmittal is signed by the registered holder(s) of
the Old Notes listed and transmitted by this Letter of Transmittal, no
endorsement(s) of certificate(s) or separate bond power(s) are required unless
New Notes are to be issued in the name of a person other than the registered
holder(s). Signature(s) on the certificate(s) or bond power(s) must be
guaranteed by an Eligible Guarantor Institution.
If a person or persons other than the registered holder(s) of Old Notes
signs the Letter of Transmittal, certificates for the Old Notes must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered holder(s) that appears on the certificates for the Old Notes
and also must be accompanied by any opinions of counsel, certifications and
other information as New World Pasta may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on certificates
or bond powers must be guaranteed by an Eligible Guarantor Institution.
If you are a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or act in a similar fiduciary or representative
capacity, and wish to sign this Letter of Transmittal or any certificates for
Old Notes or bond powers, you must indicate your status when signing. If you are
acting in any of these capacities, you must submit proper evidence satisfactory
to us of your authority to so act unless we waive this requirement.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be delivered to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained with The Depository Trust Company. See Instruction 4.
7. IRREGULARITIES. All questions as to the validity, form,
eligibility -- including time of receipt -- and acceptance of Old Notes tendered
for exchange will be determined by New World Pasta in its sole discretion. Our
determination will be final and binding. We reserve the absolute right to reject
any and all tenders of Old Notes improperly tendered or to not accept any Old
Notes, the acceptance of which might be unlawful as determined by us or our
counsel. We also reserve the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any Old Notes either
before or after the expiration of the Exchange Offer -- including the right to
waive the ineligibility of any holder who seeks to tender Old Notes in the
Exchange Offer. Our interpretation of the terms and conditions of the Exchange
Offer as to any particular Old Notes either before or after the expiration of
the Exchange Offer -- including the terms and conditions of the Letter of
Transmittal and the accompanying instructions -- will be final and binding.
Unless waived, any defects or irregularities in connection with tenders of Old
Notes for exchange must be cured within a reasonable period of time, as
determined by us. Neither we, the Exchange Agent nor any other person has any
duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor will we have any liability for failure to
give such notification.
13
<PAGE> 14
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at the addresses
and telephone number listed on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal or the Notice of
Guaranteed Delivery may be obtained from the Exchange Agent or from your broker,
dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is required
to provide the Exchange Agent with the holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 above. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service may subject the
holder or other payee to a $50 penalty. In addition, cash payments to such
holders or other payees with respect to Old Notes exchanged in the Exchange
Offer may be subject to 31% backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number above in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain all amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60-day period
will be remitted to the holder and no further amounts will be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within the 60-day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual holder, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders -- including, among others, corporations, financial
institutions and certain foreign persons -- may not be subject to these backup
withholding and reporting requirements. These holders should nevertheless
complete the Substitute Form W-9 above, and check the box in Part 2 of the
Substitute Form W-9, to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed IRS
Form W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If backup withholding results in
an overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. New World Pasta's obligation to complete the
Exchange Offer is subject to the conditions described in the Prospectus under
the caption "The Exchange Offer -- Conditions to the Exchange Offer." These
conditions are for our benefit only and we may assert them regardless of the
circumstances giving rise to any condition. We may also waive any condition in
whole or in part at any time in our sole discretion. Our failure at any time to
exercise any of the foregoing rights will not constitute a waiver of that right
and each right is an ongoing right that we may assert at any time.
11. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering holders of Old Notes, by execution of
this Letter of Transmittal, waive any right to receive notice of the acceptance
of Old Notes for exchange.
14
<PAGE> 15
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
check the box above regarding lost, destroyed or stolen certificates and
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen certificate(s) have been followed.
13. TRANSFER TAXES. You will not be obligated to pay any transfer taxes in
connection with the tender of Old Notes in the Exchange Offer unless you
instruct us to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder. In those cases, you will be responsible
for the payment of any applicable transfer tax. If satisfactory evidence of
payment of these taxes or an exemption from payment is not submitted with this
Letter of Transmittal, no certificates for New Notes will be issued until such
evidence is received by the Exchange Agent.
IMPORTANT: UNLESS YOU COMPLY WITH THE GUARANTEED DELIVERY PROCEDURES
DESCRIBED ABOVE, THIS LETTER OF TRANSMITTAL (OR A FACSIMILE OF THIS LETTER OF
TRANSMITTAL), OR, IN THE CASE OF OLD NOTES TENDERED BY BOOK-ENTRY TRANSFER TO
THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY, AN AGENT'S MESSAGE
INSTEAD OF THIS LETTER OF TRANSMITTAL, AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION OF THE EXCHANGE
OFFER.
15
<PAGE> 1
EXHIBIT 99.2
NEW WORLD PASTA COMPANY
NOTICE OF GUARANTEED DELIVERY
This form or one substantially equivalent to this form must be used to
accept the offer (the "Exchange Offer") of New World Pasta Company ("New World
Pasta") to exchange an aggregate principal amount of up to $160,000,000 of our
9 1/4% Senior Subordinated Exchange Notes due 2009 (the "New Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for a like principal amount of our issued and outstanding 9 1/4% Senior
Subordinated Notes due 2009 (the "Old Notes"), which were issued in offerings
under Rule 144A and Regulation S of the Securities Act that were not registered
under the Securities Act. The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1999, unless extended (as it may be extended, the
"Expiration Date"). As described in the enclosed Prospectus, dated
[ ], 1999 (the "Prospectus"), if you are a registered holder of Old
Notes and wish to tender your Old Notes, but (1) the certificates for Old Notes
are not immediately available, (2) time will not permit your certificates for
Old Notes or other required documents to reach The Bank of New York, as exchange
agent (the "Exchange Agent"), before the Expiration Date or (3) the procedure
for book-entry transfer cannot be completed before the Expiration Date, you may
effect a tender of your Old Notes if (1) the tender is made through an Eligible
Guarantor Institution (as defined in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering Old Notes"); (2) prior to the
Expiration Date, the Exchange Agent receives from an Eligible Guarantor
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in this form, setting forth your name and address, and
the amount of Old Notes you are tendering and stating that the tender is being
made by Notice of Guaranteed Delivery. These documents may be sent by overnight
courier, registered or certified mail or facsimile transmission. If you elect to
use this procedure, you must also guarantee that within three New York Stock
Exchange, Inc. ("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 defined in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering Old
Notes") of transfer of the Old Notes into the Exchange Agent's account at The
Depository Trust Company (including the Agent's Message (as defined in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering Old
Notes") that forms a part of the Book-Entry Confirmation), as the case may be, a
properly completed and duly executed Letter of Transmittal, with any required
signature guarantees, and all other documents required by the Letter of
Transmittal, will be deposited by the Eligible Guarantor Institution with the
Exchange Agent; and (3) the Exchange Agent receives the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation of transfer of the Old Notes into the Exchange Agent's account at
The Depository Trust Company, as the case may be, a properly completed and duly
executed Letter of Transmittal, with any required signature guarantees, and all
other required documents or, in the case of a Book-Entry Confirmation, a
properly completed and duly executed Letter of Transmittal, with any required
signature guarantees, or an Agent's Message instead of the Letter of
Transmittal, in each case, within three NYSE trading days after the date of
execution of this Notice of Guaranteed Delivery.
Delivery to: THE BANK OF NEW YORK, Exchange Agent
<TABLE>
<S> <C> <C>
By Regular or Certified Mail: By Facsimile: By Overnight Courier or Hand:
(Eligible Guarantor Institutions
The Bank of New York Only) The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, NY 10286 (212) 815-6339 Corporate Trust Services
Attention: Reorganization Window
Section To Confirm by Telephone Ground Level
Marcia Brown or for Information Call: New York, NY 10286
Attention: Reorganization
(212) 815-3428 Section
Marcia Brown
</TABLE>
<PAGE> 2
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS OTHER
THAN THE ADDRESS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER
THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER OF TRANSMITTAL OR
AGENT'S MESSAGE.
2
<PAGE> 3
Ladies and Gentlemen:
Subject to the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to New World
Pasta the principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedure described in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures."
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Principal Amount of Old Notes Tendered:* If Old Notes will be delivered by book-entry
transfer to The Depository Trust Company,
$ provide account number.
Certificate Nos. (if available):
Account Number
Total Principal Amount Represented by
Old Notes Certificate(s):
$
- ------------------------------------------------------------------------------------------------------
</TABLE>
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
3
<PAGE> 4
PLEASE SIGN HERE
<TABLE>
<S> <C>
X
Signature(s) of Owner(s) or Authorized Signatory Date
</TABLE>
Area Code and Telephone Number: (___)____________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
<TABLE>
<S> <C>
Name(s):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Capacity:
------------------------------------------------------------
Address(es):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
- ---------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
4
<PAGE> 5
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Guarantor Institution, hereby guarantees that
the certificates representing the principal amount of Old Notes tendered hereby
in proper form for transfer, or timely confirmation of the book-entry transfer
of such Old Notes into the Exchange Agent's account at The Depository Trust
Company pursuant to the procedures set forth in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures," together with any
required signature guarantee and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than three NYSE trading days after the Expiration Date.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- -------------------------------------------- --------------------------------------------
ADDRESS TITLE
- -------------------------------------------- Name:
ZIP CODE --------------------------------------------
Area Code and Tel. No. (PLEASE TYPE OR PRINT)
--------------------------- Dated:
--------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
5
<PAGE> 1
EXHIBIT 99.3
NEW WORLD PASTA COMPANY
OFFER TO EXCHANGE
9 1/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ALL ISSUED AND OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES DUE 2009
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
New World Pasta Company ("New World Pasta") is offering, subject to the
terms and conditions set forth in the Prospectus, dated [ ], 1999
(the "Prospectus"), relating to the offer (the "Exchange Offer") of New World
Pasta to exchange an aggregate principal amount of up to $160,000,000 of our
9 1/4% Senior Subordinated Exchange Notes due 2009 (the "New Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for a like principal amount of our issued and outstanding 9 1/4% Senior
Subordinated Notes due 2009 (the "Old Notes"). The Old Notes were issued on
February 19, 1999 in offerings under Rule 144A and Regulation S of the
Securities Act that were not registered under the Securities Act. The Exchange
Offer is being extended to all holders of the Old Notes in order to satisfy
certain obligations of New World Pasta contained in the Registration Rights
Agreement, dated as of February 19, 1999, among New World Pasta, New World
Pasta's wholly owned subsidiaries, Pasta Group, L.L.C. and Winchester Pasta,
L.L.C., Morgan Stanley & Co. Incorporated and Scotia Capital Markets (USA) Inc.
The New Notes are substantially identical to the Old Notes, except that the
transfer restrictions and registration rights applicable to the Old Notes do not
apply to the New Notes.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated [ ], 1999;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer
if (a) certificates for the Old Notes are not immediately available, (b) time
will not permit the certificates for the Old Notes or other required documents
to reach the Exchange Agent before the expiration of the Exchange Offer or (c)
the procedure for book-entry transfer cannot be completed prior to the
expiration of the Exchange Offer;
4. A form of letter which may be sent to your clients for whose account you
hold Old Notes registered in your name or the name of your nominee, with space
provided for obtaining the clients' instructions with respect to the Exchange
Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Bank of New York, the Exchange Agent
for the Exchange Offer.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON [ ], 1999, UNLESS THE EXCHANGE OFFER IS
EXTENDED (AS IT MAY BE EXTENDED, THE "EXPIRATION DATE"). OLD NOTES TENDERED
PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE
EXPIRATION DATE.
<PAGE> 2
Unless a holder of Old Notes complies with the procedures described in the
Prospectus under the caption "-- Guaranteed Delivery Procedures," the holder
must do one of the following on or prior to the Expiration Date to participate
in the Exchange Offer:
- tender the Old Notes by sending the certificates for the Old Notes, in
proper form for transfer, a properly completed and duly executed Letter
of Transmittal, with any required signature guarantees, and all other
documents required by the Letter of Transmittal, to The Bank of New York,
as Exchange Agent, at one of the addresses listed in the Prospectus under
the caption "-- Exchange Agent"; or
- tender the Old Notes by using the book-entry procedures described in the
Prospectus under the caption "-- Book Entry Transfer" and transmitting a
properly completed and duly executed Letter of Transmittal, with any
required signature guarantees, or an Agent's Message instead of the
Letter of Transmittal, to the Exchange Agent.
In order for a book-entry transfer to constitute a valid tender of Old Notes in
the Exchange Offer, the Exchange Agent must receive a confirmation of book-entry
transfer (a "Book-Entry Confirmation") of the Old Notes into the Exchange
Agent's account at The Depository Trust Company prior to the Expiration date.
The term "Agent's Message" means a message, transmitted by the Depository Trust
Company and received by the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that The Depository Trust Company has received an
express acknowledgment from the tendering holder of Old Notes that the holder
has received and has agreed to be bound by the Letter of Transmittal.
If a registered holder of Old Notes wishes to tender the Old Notes in the
Exchange Offer, but (a) the certificates for the Old Notes are not immediately
available, (b) time will not permit the certificates for the Old Notes or other
required documents to reach the Exchange Agent before the Expiration Date, or
(c) the procedure for book-entry transfer cannot be completed before the
Expiration Date, a tender of Old Notes may be effected by following the
Guaranteed Delivery Procedures described in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures."
New World Pasta will, upon request, reimburse brokers, dealers, commercial
banks, trust companies and other nominees for reasonable and necessary costs and
expenses incurred by them in forwarding the Prospectus and the related documents
to the beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. New World Pasta will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes in the Exchange Offer, except as set
forth in Instruction 13 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to the Bank
of New York, the Exchange Agent for the Exchange Offer, at its address and
telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
NEW WORLD PASTA COMPANY
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF NEW WORLD PASTA OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER
OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE
IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
<PAGE> 1
EXHIBIT 99.4
NEW WORLD PASTA COMPANY
OFFER TO EXCHANGE
9 1/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ALL ISSUED AND OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES DUE 2009
To Our Clients:
Enclosed for your consideration is a Prospectus, dated [ ], 1999
(the "Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of New World Pasta
Company ("New World Pasta") to exchange an aggregate principal amount of up to
$160,000,000 of our 9 1/4% Senior Subordinated Exchange Notes due 2009 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of our issued and
outstanding 9 1/4% Senior Subordinated Notes due 2009 (the "Old Notes"), which
were issued in offerings under Rule 144A and Regulation S of the Securities Act
that were not registered under the Securities Act. The Exchange Offer is being
extended to all holders of the Old Notes in order to satisfy certain obligations
of New World Pasta contained in the Registration Rights Agreement, dated as of
February 19, 1999, among New World Pasta, New World Pasta's wholly owned
subsidiaries, Pasta Group, L.L.C. and Winchester Pasta, L.L.C., Morgan Stanley &
Co. Incorporated and Scotia Capital Markets (USA) Inc. The New Notes are
substantially identical to the Old Notes, except that the transfer restrictions
and registration rights relating to the Old Notes do not apply to the New Notes.
These materials are being forwarded to you as the beneficial owner of the
Old Notes held by us for your account but not registered in your name. A TENDER
OF SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M.,
New York City time, on [ ], 1999, unless the Exchange Offer is
extended. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time before the expiration of the Exchange Offer.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the holder
to New World Pasta will be paid by New World Pasta, except as otherwise provided
in Instruction 13 of the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 P.M., New York City time, on
[ ], 1999, unless the Exchange Offer is extended.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
materials referred to therein relating to the Exchange Offer made by New World
Pasta Company with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, subject to the terms and conditions set forth in the
Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
9 1/4% Senior Subordinated Notes due 2009 $ (Aggregate Principal
Amount of Old Notes)
[ ] Please do not tender any Old Notes held by you for my account.
Dated: , 1999
Signature(s):
- --------------------------------------------------------------------------------
Print Name(s) here:
- --------------------------------------------------------------------------------
(Print Address(es)):
- --------------------------------------------------------------------------------
(Area Code and Telephone Number(s)):
---------------------------------------------------------------------
(Tax Identification or Social Security Number(s)):
----------------------------------------------------------
NONE OF THE OLD NOTES HELD BY US FOR YOUR ACCOUNT WILL BE TENDERED UNLESS
WE RECEIVE WRITTEN INSTRUCTIONS FROM YOU TO DO SO. UNLESS A SPECIFIC CONTRARY
INSTRUCTION IS GIVEN IN THE SPACE PROVIDED, YOUR SIGNATURE(S) HEREON SHALL
CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL THE OLD NOTES HELD BY US FOR YOUR
ACCOUNT.
2
