<PAGE>
As filed with the Securities and Exchange Commission Registration No. 333-
on April 19, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
LUIGINO'S, INC.
(Exact name of registrant as specified in its charter)
Minnesota 2038 59-3015985
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code) Identification
No.)
525 Lake Avenue South
Duluth, Minnesota 55802
(218) 723-5555
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Joel C. Kozlak
Chief Financial Officer
Luigino's, Inc.
525 Lake Avenue South
Duluth, Minnesota 55802
(218) 723-5548
Facsimile: (218) 723-5565
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Frank H. Voigt, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
(612) 340-2781
Facsimile: (612) 340-8738
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================================
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price Aggregate Offering Price(1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% Senior
Subordinated Notes $100,000,000.00 100.0% $100,000,000.00 $27,800.00
due 2006
=================================================================================================================
</TABLE>
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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to completion, dated April 19, 1999
PROSPECTUS
LUIGINO'S, INC.
EXCHANGE OFFER FOR $100,000,000
OF
10% SENIOR SUBORDINATED NOTES DUE 2006
---------------------------------------------
Material Terms of the Exchange Offer:
. We are offering to exchange the Series A notes we sold in a private
offering (the "Old Notes") for new registered Series B notes (the "New
Notes"),
. The exchange offer expires at 5:00 p.m., New York City time, on ________
____________, 1999, unless extended,
. The terms of the New Notes are substantially identical to the Old Notes,
except for the transfer restrictions and registration rights relating to
the Old Notes,
. Tenders of Old Notes may be withdrawn any time prior to 5:00 p.m., New
York City time, on the expiration date of the exchange offer, and
. We will exchange all Old Notes that are properly tendered and not
validly withdrawn.
. No public market exists for the Old Notes or the New Notes. We do not
intend to list the New Notes on any securities exchange or to seek
approval for quotation through any automated quotation system.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 10 OF THIS
PROSPECTUS.
---------------------------------------------
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 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 it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
This prospectus is dated ___________________, 1999
<PAGE>
TABLE OF CONTENTS
Prospectus Summary......................................................... 3
Our Business............................................................ 3
Risk Factors............................................................ 3
Summary of the Terms of the Exchange Offer.............................. 3
Summary Description of the New Notes.................................... 6
Summary Historical and Pro Forma Financial Data......................... 8
Risk Factors............................................................... 10
Use of Proceeds............................................................ 15
Capitalization............................................................. 15
Selected Historical Financial Information.................................. 16
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................. 18
Business................................................................... 24
Management and Directors................................................... 32
Ownership of Common Stock.................................................. 37
Description of Other Indebtedness.......................................... 38
The Exchange Offer......................................................... 39
Description of Notes....................................................... 45
Federal Tax Considerations................................................. 68
Plan of Distribution....................................................... 70
Legal Matters.............................................................. 71
Experts.................................................................... 71
Where You Can Find More Information........................................ 71
Index to Financial Statements..............................................F-1
-2-
<PAGE>
PROSPECTUS SUMMARY
The following summary contains a general discussion of our business, the
exchange offer, the Old Notes and the New Notes (which, where appropriate, are
referred to collectively as the "Notes") and summary financial information
concerning Luigino's, Inc. ("Luigino's"). We encourage you to read this entire
prospectus for a more complete understanding of Luigino's and the exchange
offer.
Except as otherwise specifically indicated, all market size and share data
in this prospectus is calculated in sales unit volumes. U.S. market data is
based upon information gathered and published by Information Resources
Incorporated for the 52-week period ended January 3, 1999. Canadian market
data is based upon information gathered and published by AC Nielsen MarkeTrak
for the 52-week period ended January 2, 1999 and Australian market data is based
upon information gathered and published by AC Nielsen MarkeTrak for the 12-week
period ended December 13, 1998.
We operate on a 52 or 53-week fiscal year, ending on the Sunday closest to
December 31, and a 16-week first fiscal quarter, 12-week second and third
quarter, and a 12 or 13-week fourth quarter. Unless otherwise indicated, all
references to quarters and years are to such fiscal periods.
Our Business
Luigino's is one of the leading producers and marketers of frozen entrees
in North America. Our Michelina's brand is the third most popular brand in the
entire frozen entree category in the United States. It is the U.S. market
leader in sales of non-diet entrees priced below $2.00, with a 36.7% market
share based on unit volume. In Canada, the Michelina's brand is the market
share leader in the frozen entree category, with a 22.9% market share. We
produce over 100 different entrees, which we differentiate from our competition
at all price points based on superior quality, freshness and value.
Our principal executive offices are located at 525 Lake Avenue South,
Duluth, Minnesota 55802, and our telephone number is (218) 723-5555.
Risk Factors
You should consider all of the information in this prospectus before
tendering your Old Notes in the exchange offer. See the "Risk Factors" section
of this prospectus for a discussion of the risks involved in an investment in
our company.
Summary of the Terms of the Exchange Offer
On February 4, 1999, we completed the private offering of $100.0 million
principal amount of our 10% Senior Subordinated Notes due 2006. In connection
with that offering, we agreed, among other things, to deliver to you this
prospectus and to use our best efforts to complete the exchange offer by July 4,
1999.
The Exchange Offer
We are offering to exchange an equal principal amount of our 10% Senior
Subordinated Notes due 2006 which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), for the tendered principal amount of
our outstanding 10% Senior Subordinated Notes due 2006. In order to be
exchanged, an Old Note must be properly tendered and accepted. You may tender
Old Notes only in integral multiples of $1,000.
As of this date, there is $100.0 million principal amount of New Notes
outstanding. The exchange offer is not conditioned on any minimum aggregate
principal amount of Old Notes being tendered for exchange.
-3-
<PAGE>
Expiration Date
The exchange offer will expire at 5:00 p.m., New York City time, ________
_____________, 1999, unless we decide to extend the expiration date.
Procedures for Tendering Old Notes
If you wish to tender your Old Notes for exchange, you must transmit on or
before the expiration date a properly completed and duly executed copy of the
letter of transmittal delivered with this prospectus, or a facsimile of the
letter of transmittal, including all other documents required by the letter of
transmittal, to U.S. Bank Trust National Association, as exchange agent for the
exchange offer; and either:
. a timely confirmation of book-entry transfer of your Old Notes in
accordance with the procedure for book-entry transfers described in
this prospectus in "The Exchange Offer" section under the heading
"Procedures for Tendering Old Notes," or
. certificates for your Old Notes.
If you wish to tender Old Notes that are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, you should
promptly instruct the registered holder to tender on your behalf. If you wish
to tender on your own behalf, you must, before completing the procedures
described above under the heading "Procedures for Tendering Old Notes," either
register ownership of the Old Notes in your name or obtain a properly completed
bond power from the registered holder.
Accrued Interest on the New Notes
If you exchange your Old Notes for New Notes in the exchange offer, you
will receive the same interest payment on the next interest payment date
following the expiration date that you would have received had you not accepted
the exchange offer. The next interest payment date following the expiration
date is expected to be August 1, 1999.
Guaranteed Delivery Procedures
If you wish to tender your Old Notes and, prior to the expiration date of
the exchange offer,
. your Old Notes are not immediately available,
. you cannot deliver your Old Notes, the letter of transmittal or any
other required documents to U.S. Bank Trust National Association, as
exchange agent, or
. you cannot complete the procedures for book-entry transfer,
you may tender your Old Notes by following the guaranteed delivery procedures
described in "The Exchange Offer" section under the heading "Guaranteed Delivery
Procedures."
Withdrawal Rights
You may withdraw the tender of your Old Notes at any time before the close
of business, New York City time, on the expiration date.
-4-
<PAGE>
Certain U.S. Federal Income Tax Consequences
The exchange of New notes for Old Notes in the exchange offer will
generally not be a taxable event for United States federal income tax purposes.
Consequences of Failure to Exchange Old Notes
If you do not exchange your Old Notes for New Notes, you will no longer be
able to require us to register the Old Notes under the Securities Act. In
addition, you will not be able to offer or sell the Old Notes unless:
. they are registered under the Securities Act, or
. you offer or sell them under an exemption from the registration
requirements of the Securities Act.
Use of Proceeds
We will not receive any proceeds from the issuance of New Notes in the
exchange offer.
Summary of Ability to Resell the New Notes
We believe that you may offer for sale, resell or otherwise transfer the
New Notes issued in the exchange offer without complying with the registration
and prospectus delivery provisions of the Securities Act, but only if:
. you acquire the New Notes in the ordinary course of business,
. you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate in a
distribution of the New Notes, and
. you are not an "affiliate" of Luigino's, as the term affiliate is
defined in Rule 405 under the Securities Act and which may include our
executive officers and directors, another person having control over
our operations or management or a person or entity we control.
By executing and delivering the letter of transmittal, you will represent to us
that the foregoing are true. If our belief is inaccurate, or if any of the
conditions stated above are not met, and you transfer any New Note issued to you
in the exchange offer without delivering a prospectus meeting the requirements
of the Securities Act or without an exemption from the registration requirements
of the Securities Act, you may be liable under the Securities Act. We do not
assume or indemnify you against liability under the Securities Act.
Each broker-dealer that is issued New Notes in the exchange offer for its
own account in exchange for Old Notes which were acquired by the broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the New Notes. A broker-dealer may use this
prospectus, as it may be amended or supplemented from time to time, for an offer
to resell, resale or other transfer of the New Notes issued to it in the
exchange offer.
Holders who use the exchange offer to participate in a distribution of New
Notes, including broker-dealers that acquired Old Notes directly from us, but
not as a result of market-making or other trading activities, must comply with
the registration and prospectus delivery requirements of the Securities Act in
the absence of an exemption from these requirements. Failure to comply with the
registration and prospectus delivery requirements may result in these holders
incurring liabilities under the Securities Act for which we will not indemnify
them.
-5-
<PAGE>
Summary Description of the New Notes
Notes Offered
We are offering $100.0 million aggregate principal amount of 10% Senior
Subordinated Notes due 2006. The form and terms of the New Notes will be the
same as the form and terms of the Old Notes except that:
. the New Notes will bear a different CUSIP number from the Old Notes,
. the New Notes will be registered under the Securities Act and,
therefore, will not bear legends restricting their transfer, and
. you will not be entitled to any exchange or registration rights with
respect to the New Notes.
The New Notes will evidence the same debt as the Old Notes, will be entitled to
the benefits of the Indenture entered into by Luigino's and U.S. Bank Trust
National Association, as trustee (the "Indenture"), governing the Old Notes and
will be treated under the Indenture as a single class with the Old Notes.
Issuer
Luigino's, Inc.
Maturity
February 1, 2006.
Interest Payment Dates
We will pay interest on the notes on February 1 and August 1 of each year,
beginning August 1, 1999.
Subsidiary Guarantees
Luigino's does not presently have any subsidiaries. If we acquire
subsidiaries in the future, those subsidiaries may be required to guarantee the
notes.
Ranking
The New Notes will be subordinated to all our senior debt and any
subsidiary guarantees will be subordinated to all debt of the guarantors, except
for any debt that expressly provides that it is not senior to other debt. The
New Notes will rank equally with our outstanding senior subordinated debt and
any of our future senior subordinated indebtedness.
On a pro forma basis, after giving effect to the transactions described
below under the heading "Selected Historical and Pro Forma Financial
Information," on January 3, 1999, the New Notes:
. would have been subordinate to approximately $18.8 million of senior
debt, and
. would have been subordinate to up to $50.0 million of senior debt
available to be incurred (subject to borrowing base limitations) under
our new bank credit facility.
-6-
<PAGE>
Optional Redemption
We may redeem any of the Notes on or after February 1, 2003 at the
redemption prices set forth in the "Description of the Notes" section of this
prospectus under the heading "Optional Redemption."
If we sell any of our common stock to non-affiliates before February 1,
2002 and receive net proceeds aggregating at least $35.0 million, we may redeem
up to 35.0% of the aggregate principal amount of the then-outstanding New Notes
with those net proceeds at 110.0% of their principal amount, plus accrued
interest, so long as the redemption occurs within 45 days of the sale and the
aggregate principal amount of notes remaining outstanding after the redemption
is not less than $65.0 million.
Change of Control
If we experience specific kinds of changes in control, we must offer to
repurchase any then issued notes at 101.0% of their principal amount, plus
accrued and unpaid interest, if any, to the repurchase date.
Covenants
The Indenture governing the notes contains covenants that, among other
things, limit our ability, and the ability of any future subsidiary, to:
. pay dividends or make certain other distributions,
. repurchase our equity interests,
. prepay subordinated indebtedness, incur additional indebtedness and
issue preferred stock,
. incur liens,
. merge or consolidate with any other person,
. sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our assets,
. enter into certain transactions with our affiliates, and
. enter into sale and leaseback transactions.
-7-
<PAGE>
Summary Historical and Pro Forma Financial Data
The summary historical income statement data and balance sheet data
presented below have been derived from our audited financial statements for each
of the three fiscal years ended December 29, 1996, January 4, 1998 and January
3, 1999. The summary pro forma income statement data and other financial data
for the fiscal year ended January 3, 1999 show the effect of those transactions
as if they had occurred on January 5, 1998. The summary pro forma balance sheet
data show the effect of those transactions as if they had occurred on January 3,
1999. This pro forma data is presented for information purposes only and may
not be indicative of the results of operations or financial position of the
Company that would have been obtained had the transactions in fact been
completed as of those dates or to project the results of our operations or
financial condition for any future date or period.
The information set forth below should be read in conjunction with the
discussion in the "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of this prospectus and
the Company's audited financial statements and the notes thereto included in
this prospectus starting on page F-1.
<TABLE>
<CAPTION>
Pro Forma
Fiscal Year Ended Fiscal Year
----------------------------------------------------- Ended
December 29, January 4, January 3, January 3,
1996 1998 1999 1999 (a)
----------------------------------------------------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 199,590 $ 211,405 $ 214,975 $ 214,975
Cost of goods sold 117,636 116,820 118,334 117,338
-------------- -------------- ------------- -------------
Gross profit 81,954 94,585 96,641 97,637
Selling and promotional expenses 55,371 51,582 51,524 51,524
General and administrative expenses 15,479 20,490 21,272 21,272
Reserve for plant impairment (b) -- -- 5,172 5,172
Distribution contract termination 1,675 -- -- --
-------------- -------------- ------------- -------------
Operating income 9,429 22,513 18,673 19,669
Interest expense (6,006) (6,476) (6,509) (11,361)
Interest income 772 786 436 436
Other income (expense) net (156) 180 235 235
-------------- -------------- ------------- -------------
Net income $ 4,039 $ 17,003 $ 12,835 $ 8,979
============== ============== ============= =============
Other Financial Data:
EBITDA (c) $ 15,522 $ 29,404 $ 31,453 $ 33,044
Adjusted EBITDA (d) 26,075 39,961 36,439 36,439
Adjusted EBITDA Margin (e) 13.1% 18.9% 17.0% 17.0%
Depreciation and amortization 5,477 5,925 7,387 7,982
Capital expenditures 2,564 10,202 33,098 39,048
Ratio of Adjusted EBITDA to interest expense 3.2 x
Ratio of total debt to Adjusted EBITDA 3.3 x
<CAPTION>
January 3, 1999
------------------------------
Balance Sheet Data: Actual Pro Forma
------------- ----------
<S> <C> <C>
Total assets $ 124,521 $ 142,788
Total debt 85,534 118,801
Total shareholders' equity (deficit) 10,263 (4,737)
</TABLE>
- -------------------------
-8-
<PAGE>
(a) The selected pro forma income statement data, other pro forma financial data
and pro forma balance sheet data presented reflect adjustments to our
historical financial statements to give effect to (i) the consummation of
the sale of the Old Notes, (ii) the buy-out of $6.0 million of additional
operating leases, and (iii) a distribution of $15.0 million to our
shareholders. See the discussion in the "Use of Proceeds" and
"Capitalization" sections of this prospectus. The pro forma adjustments
impact the period's operating results by reducing cost of goods sold by
$996,000 due to the net effect of the elimination of operating lease
payments of $1,591,000 and an $595,000 increase in depreciation. On a pro
forma basis, interest expense increases $4,852,000 due to the net effect of
the elimination of interest on the previous debt outstanding and interest on
the new and existing debt. See "Capitalization."
(b) Represents a non-cash charge of $4,722,000 and potential future cash
expenditures of $450,000 incurred in connection with the impairment of
assets related to a potential plant facility located in Hibbing, Minnesota.
See Note 6 to our Financial Statements.
(c) "EBITDA" represents the sum of net income (loss), plus interest expense,
plus depreciation and amortization, plus the non-cash portion of the reserve
for plant impairment. Information regarding EBITDA is presented because we
believe that certain investors use EBITDA as one measure of an issuer's
ability to service its debt. EBITDA is not a measure of performance or
financial condition under generally accepted accounting principles, but is
presented to provide additional information related to debt service
capability. EBITDA should not be considered in isolation or as a
substitute for other measures of liquidity or financial performance under
generally accepted accounting principles. While EBITDA is frequently used
as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to the potential inconsistencies in the
method of calculation.
(d) "Adjusted EBITDA" is EBITDA as defined above adjusted to reflect the buyout
of $24.2 million of operating leases during 1998 as if they had been bought
out at the beginning of each period presented as discussed in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" section of this prospectus.
The effect of these transactions on historical EBITDA is as follows for the
periods indicated below.
Pro Forma
Fiscal Year
Fiscal Year Ended Ended (a)
---------------------------------------- ----------
December 29, January 4, January 3, January 3,
1996 1998 1999 1999
---------- ---------- ---------- ----------
(dollars in thousands)
EBITDA $ 15,522 $ 29,404 $ 31,453 $ 33,044
Lease payments 10,553 10,557 4,986 3,395
---------- ---------- ---------- ----------
Adjusted EBITDA $ 26,075 $ 39,961 $ 36,439 $ 36,439
========== ========== ========== ==========
(e) Represents the ratio of Adjusted EBITDA to net sales.
-9-
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to exchange Old Notes for New Notes. Any of
the following risks could have a material adverse effect on our business,
financial condition or results of operations or on the value of the Old and New
Notes.
There may be adverse consequences for holders of the Old Notes who fail to
exchange them for New Notes.
If you do not exchange your Old Notes for New Notes in this exchange offer,
you will continue to be subject to the restrictions on transfer of your Old
Notes set forth in the legend on the Old Notes because the Old Notes have not
been registered under the Securities Act or applicable state securities laws.
In general, you may offer or sell the Old Notes only if they are registered
under the Securities Act and applicable state securities laws, unless you sell
them under an exemption from the Securities Act and state securities laws.
Except under certain limited circumstances, we do not intend to register the Old
Notes under the Securities Act.
If your tender of Old notes in this exchange offer is for the purpose of
participating in a distribution of New Notes, the New Notes that you receive
will be restricted securities, and you will be required to comply with the
registration and prospectus delivery requirements of the Securities Act if you
resell any of the New Notes. To the extent Old Notes are tendered and accepted
in the exchange offer, the trading market, if any, for the Old Notes which are
not tendered, and the price at which the Old Notes may be sold, could be
adversely affected. See "The Exchange Offer."
There is no established trading market for the New Notes, and even if one
develops, you may have difficulty selling them.
There has not been any public market for the Old Notes, and we cannot
assure you that an active public or other market will develop for the New Notes.
If a trading market does not develop or is not maintained, you may experience
difficulty in reselling New Notes, or you may be unable to sell them at all.
We do not intend to list the New Notes on any securities exchange or to
seek their admission to trading in any automated quotation system. First
Chicago Capital Markets, Inc. and U.S. Bancorp Libra, the initial purchasers of
the Old Notes, have advised us that they currently intend to make a market in
the New Notes, but they are not obligated to do so and may discontinue market-
making at any time without notice. In addition, any market-making activity by
the initial purchasers of the Old Notes will be subject to the limits imposed by
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and may be limited during the exchange offer and at other
times.
If a public trading market develops for the New Notes, it may not be liquid
and it may be discontinued at any time. Moreover, future trading prices of the
New Notes would depend on many factors, including, among other things,
prevailing interest rates, our operating results and the market for similar
securities. Depending on prevailing interest rates, the market for similar
securities and other factors, including our financial condition, the New Notes
could trade at a discount from their principal amount.
We have substantial indebtedness other than the Notes, which may affect our
ability to make scheduled payments on the Notes, to redeem them if we are
required to do so, and to pay the principal amounts of the Notes when due.
Luigino's is highly leveraged. On January 3, 1999, after giving pro forma
effect to the sale of the Old Notes, the initial borrowings under our new credit
facility and the application of the proceeds from those transactions, we would
have had total indebtedness of approximately $118.8 million (of which $100.0
million would have consisted of the Old Notes) and a shareholders' deficit of
approximately $4.7 million, and our ratio of earnings to fixed charges would
have been 1.7 for the pro forma fiscal year ended January 3, 1999. In
addition, we will be permitted to incur additional indebtedness in the future.
-10-
<PAGE>
Our ability to make scheduled payments of principal of, or to pay the
interest and any other payments on, or to refinance, our indebtedness (including
the Old or New Notes), or to fund our planned capital expenditures will depend
on our future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Based upon our current level of operations, we believe
that cash flow from operations and available cash, together with available
borrowings under our bank credit facility, will be adequate to meet our
liquidity needs for at least the next several years. We may, however, need to
refinance all or a portion of the principal of the Notes on or before maturity.
There is a risk that our business will not generate sufficient cash flow from
operations, or that we will not have sufficient credit available in the future,
to enable us to service our indebtedness, including the Notes, or to fund our
other liquidity needs. In addition, there is a risk that we will not be able to
refinance our debt on commercially reasonable terms, or at all. These issues are
discussed in more detail in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
section of this prospectus.
The degree to which Luigino's will continue to be leveraged in the future
could have important consequences to holders of the Notes, including, but not
limited to:
. making it more difficult for us to satisfy our obligations with respect
to the Notes,
. increasing our vulnerability to general adverse economic and industry
conditions,
. limiting our ability to obtain additional financing to fund future
working capital, capital expenditures and other general corporate
requirements,
. requiring the dedication of a substantial portion of our cash flow from
operations to the payment of principal of, and interest on, our
indebtedness, thereby reducing the availability of such cash flow to
fund working capital, capital expenditures, research and development or
other general corporate purposes,
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industry, and
. placing us at a competitive disadvantage vis-a-vis less leveraged
competitors.
In addition, the Indenture and our bank credit facility contain financial and
other restrictive covenants that limit our ability to, among other things,
borrow additional funds. If we do not comply with these covenant, we would be in
default, and if the default is not cured or waived, our business could be
adversely affected. In addition, the degree to which we are leveraged could
prevent us from repurchasing all of the Notes tendered to us upon the occurrence
of a change of control of Luigino's. These issues are discussed in more detail
in the "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources," "Description of Notes--
Repurchase at the Option of Holders--Change of Control" and "Description of
Other Indebtedness--Bank Credit Facility" sections of this prospectus.
The Notes are subordinated to certain of our other indebtedness, which also may
affect our ability to make payments on the Notes.
The Notes are and will be subordinated in right of payment to all of our
current and future senior debt. However, the Indenture prohibits us from
incurring or otherwise becoming liable for any indebtedness that is subordinate
or junior in right of payment to any senior debt and senior in right of payment
to the Notes. Upon any distribution to our creditors in a liquidation or
dissolution of Luigino's or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to Luigino's or its property, the
holders of our senior debt will be entitled to be paid in full in cash before
any payment may be made on the Notes. In addition, the subordination provisions
of the Indenture will provide that payments with respect to the Notes will be
blocked in the event of a payment default on our senior debt and may be blocked
for up to 179 days each year in the event of certain nonpayment defaults on that
debt. In the event of a bankruptcy, liquidation or reorganization of Luigino's,
holders of the Notes will participate ratably with all holders of our
subordinated indebtedness that is deemed to be of the same class as the Notes,
and potentially with all of our other general creditors, based upon the
respective
-11-
<PAGE>
amounts owed to each holder or creditor, in the remaining assets of Luigino's.
In any of the foregoing events, there is a risk that there would not be
sufficient assets to pay amounts due on the Notes. As a result, holders of Notes
may receive less, ratably, than the holders of our senior debt.
As of January 3, 1999, on a pro forma basis after giving effect to the sale
of the Old Notes, the initial borrowings under our bank credit facility and the
application of the proceeds from those transactions, the aggregate amount of our
senior debt (including borrowings under the bank credit facility) would have
been approximately $118.8 million, and approximately $50.0 million would have
been available for additional borrowing under the bank credit facility. The
Indenture will permit us to incur substantial additional indebtedness in the
future, including senior debt.
Restrictions imposed under our bank credit facility also may affect our ability
to make payments on the Notes.
Our bank credit facility contains, among other things, financial and other
covenants, including covenants requiring us to maintain certain financial
ratios, restricting our ability to incur indebtedness or to create or suffer to
exist certain liens, and restricting the amount of capital expenditures which we
may incur in any fiscal year. Compliance with these provisions may limit our
ability to expand our business, and our ability to comply with these provisions
and to repay or refinance the bank credit facility may be affected by events
beyond our control. A failure to make any required payment under the bank credit
facility or a failure to comply with any of the financial and operating
covenants included in the bank credit facility would result in an event of
default, permitting the lender to elect to accelerate the maturity of that
indebtedness. Any such acceleration could also result in the acceleration of any
of our other indebtedness. In addition, our ability to make scheduled interest
payments or principal payments, if then due, on the Notes may be prohibited
during the existence of a default under the bank credit facility or our other
indebtedness. These issues are discussed in the "Description of Notes" section
of this prospectus under the headings "Subordination" and "Certain Covenants."
If the lender under the bank credit facility accelerates the maturity of that
indebtedness, there is a risk that we will not have sufficient resources to
satisfy our obligations under the bank credit facility and our other
indebtedness, including the Notes.
Our business is subject to the general risks of the food industry and to
significant competition from larger, well-established companies.
We are subject to the general risks of the food industry, including:
. the risk that a competitor gains a technological advantage;
. evolving consumer preferences;
. limited shelf life of food products;
. nutritional and health-related concerns;
. federal, state and local food processing controls;
. consumer product liability claims;
. the risk of product tampering;
. mislabeling; and
. the availability and expense of insurance.
In addition, the food products business is highly competitive. Numerous brands
and products compete for shelf space and sales, with competition based primarily
on brand recognition and loyalty, price, quality and convenience. We compete
with a number of established brands and companies, including larger and more
diversified companies. A number of these competitors have broader product lines,
substantially greater financial and other resources
-12-
<PAGE>
available to them, lower fixed costs and longer operating histories than
Luigino's. There is a risk that we will not be able to compete successfully with
these other companies. Competitive pressure or other factors could cause our
products to lose market share or result in significant price erosion, which
could have a material adverse effect on our business. These issues are discussed
in the "Business" section of this prospectus under the heading "Competition."
Fluctuations in the cost of our ingredients may adversely affect our business.
We use large quantities of certain ingredients and packaging materials in
our frozen entrees. As a result, we are significantly affected by increases in
the costs of these ingredients and materials. Due to extremely competitive
conditions in the frozen food industry, following increases in ingredient costs,
we may not be in a position to raise the prices of our frozen food entrees
sufficiently to pass all such costs on to the consumer. In some cases, we enter
into long-term supply contracts that fix the price for certain raw materials,
but such contracts do not cover all of our ingredients and we may be exposed to
cost increases after a contract expires. Any future material increase in the
price of ingredients for our entrees could have a material adverse effect on
Luigino's.
Claims made against us based on product liability could have a material adverse
effect on our business.
As a producer and marketer of food products, we are subject to the risk of
claims for product liability. We maintain product liability insurance, but there
is a risk that our coverage will not be sufficient to insure against all claims
which may be brought against us, or that we will not be able to maintain that
coverage or obtain additional insurance covering existing or new products. If a
product liability claim exceeding our insurance coverage were to be successfully
asserted against us, it could have a material adverse effect on our business,
and, even if a product liability claim is not successful, the time, expense and
negative publicity associated with defending against such a claim could also
have a similar effect.
We make our sales through independent food brokers, and our ability to maintain
these relationships is important to our business.
We rely on non-affiliated food brokers to sell our products. The success of
our business depends, in large part, upon the maintenance of a strong
distribution network. Food brokers are granted revocable rights to sell
Luigino's products in exclusive territories and receive as compensation a dollar
amount per case sold. If we were required to obtain additional or alternative
distribution and food brokerage agreements or arrangements in the future, there
can be no assurance we will be able to do so on satisfactory terms or in a
timely manner. Inability to enter into satisfactory brokerage agreements may
inhibit our ability to implement our business plan or to establish markets
necessary to develop our products successfully. No single broker group accounts
for more than 10.0% of our sales. These issues are discussed in the "Business"
section of this prospectus under the heading "Marketing, Sales and
Distribution."
Luigino's is effectively controlled by one shareholder, who can make
substantially all decisions concerning our business.
Jeno F. Paulucci, one of his children and trusts for the benefit of his
wife, all three of his children and their children own all of the outstanding
shares of Luigino's common stock. Of such outstanding shares, Mr. Paulucci owns
the only shares of common stock entitled to vote. Accordingly, Mr. Paulucci
elects the entire Board of Directors and otherwise controls the management of
Luigino's. See the "Ownership of Common Stock" section of this prospectus. In
addition, our shareholders are parties to a Shareholder Control Agreement that
permits Mr. Paulucci to make certain decisions with respect to the management
and affairs of Luigino's that would normally be made by the Board of Directors.
The agreement is discussed in the "Management and Directors" section of this
prospectus under the heading "Shareholder Control Agreement."
Loss of our status as an S corporation for federal income tax purposes could
materially affect our income.
Luigino's has elected to be an S corporation under the Code. Accordingly,
our shareholders are directly subject to tax on their respective proportionate
shares of our taxable income for federal and certain state income tax
-13-
<PAGE>
purposes. While we believe that Luigino's qualifies and will continue to qualify
as an S Corporation, if our status as an S corporation were successfully
challenged, we could be required to pay federal and state income taxes (plus
interest and possibly penalties) on our past and future taxable income. There is
a risk that the payment of any such taxes, interest and penalties will have a
material adverse effect on Luigino's.
We are subject to risks related to Year 2000 issues.
We have analyzed our computer systems for Year 2000 compliance and have
begun installing a state of the art ERP (Enterprise Resource Planning) software
package to replace our current financial accounting package, which is not Year
2000 compliant. We estimate the total cost of conversion, including equipment,
software, consulting and training, at $1.4 million, which is being funded
through operating cash flows. We anticipate having the new system operational by
May 1999. However, it is possible that certain computer systems or software
products of our suppliers and customers may not accept input of, store,
manipulate and output dates before the Year 2000 or thereafter without error or
interruption. We are requesting assurances from our significant suppliers and
customers that their systems are Year 2000 compliant or that they are
identifying and addressing problems in their computer systems to upgrade them
for the Year 2000. There can be no assurance, however, that we will identify all
date-handling problems of our suppliers and customers in advance of their
occurrence, or that we will be able to successfully remedy problems that are
discovered. The expense of our efforts to identify and address such problems, or
the expenses or liabilities to which we may become subject as a result of such
problems, could have a material adverse effect on Luigino's. These issues are
discussed in the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section of this prospectus under the heading "Year
2000 Issue."
This prospectus contains forward-looking statements which are only predictions,
and actual events or results may be materially different.
This prospectus includes forward-looking statements within the meaning of
securities laws, principally in this "Risk Factors" section and in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" sections of this prospectus. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting our business. The words
"believe,""may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" and similar words are intended to identify forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements because of new information, future events or otherwise. In light of
these risks and uncertainties, the forward-looking events and circumstances
discussed in this prospectus might not transpire. Our forward-looking statements
are subject to risks, uncertainties and assumptions including, among other
things:
. general economic and business conditions,
. our expectations and estimates concerning future financial performance,
financing plans and the impact of competition,
. anticipated trends in our industry, and
. other risk factors discussed above.
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<PAGE>
USE OF PROCEEDS
The exchange offer is intended to satisfy obligations we have under the
registration rights agreement we entered into in connection with the February
1999 offering of the Old Notes. We will not receive any cash proceeds from the
issuance of the new notes in the exchange offer.
Our net proceeds from the sale of the Old Notes were approximately $96.8
million, after deduction of estimated fees and expenses of the offering and
sale. We used the net proceeds to:
. pay the outstanding indebtedness under our then-existing credit
facility ($60.6 million as of January 3, 1999);
. pay the outstanding balances on certain operating leases ($6.0 million
as of January 3, 1999);
. pay other outstanding indebtedness ($6.1 million as of January 3,
1999); and
. make the $15.0 million of distributions to the shareholders of
Luigino's.
We will use the balance of the net proceeds (approximately $9.1 million) for
working capital and other general corporate purposes. Pending our use of these
remaining funds, we have invested the net proceeds in short-term, investment
grade, interest-bearing securities.
CAPITALIZATION
The following table sets forth the capitalization of Luigino's as of January
3, 1999 on an actual basis and on a pro forma basis adjusted to reflect the sale
of the Old Notes (after deduction of the estimated fees and expenses of the
offering) and the use of the net proceeds from the sale described in the "Use of
Proceeds" section of this prospectus.
January 3, 1999
----------------------
Actual Pro Forma
---------- -----------
Cash and cash equivalents $ 1,193 $ 10,260
========== ===========
Long-term debt (including current maturities):
Existing credit facility $ 60,600 $ --
New credit facility (1) -- --
Ohio debt (2) 10,967 10,967
Other debt 13,967 7,834
The Notes -- 100,000
---------- -----------
Total long-term debt 85,534 118,801
Shareholders' equity (deficit) (3) 10,263 (4,737)
---------- -----------
Total capitalization $ 95,797 $ 114,064
========== ===========
- ----------------------------
(1) Our new credit agreement provides for borrowings up to $50.0 million, as
discussed in the "Description of Other Indebtedness" section of this
prospectus under the heading "New Credit Agreement."
(2) Represents industrial revenue bonds issued to finance our plant in Jackson,
Ohio, as discussed in the "Description of Other Indebtedness" section of
this prospectus under the heading "Ohio Debt."
(3) Adjusted on a pro forma basis for $15.0 million of distributions to our
shareholders.
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<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial information should be read in
conjunction with our financial statements and the notes thereto appearing
elsewhere in this prospectus, and the section of this prospectus captioned
"Management's Discussion of Financial Condition and Results of Operations." The
income statement data and balance sheet data presented below as of and for the
fiscal years ended January 1, 1995, December 31, 1995, December 29, 1996,
January 4, 1998 and January 3, 1999 have been derived from our financial
statements, which have been audited by Arthur Andersen LLP, independent public
accountants.
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------------------
January 1, December 31, December 29, January 4, January 3,
1995 1995 1996 1998 1999
------------ ------------- ------------ ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 169,181 $ 189,139 $ 199,590 $ 211,405 $ 214,975
Costs of goods sold 98,399 118,213 117,636 116,820 118,334
------------ ------------- ------------ ----------- -----------
Gross profit 70,782 70,926 81,954 94,585 96,641
Selling and promotional expenses 43,903 57,257 55,371 51,582 51,524
General and administrative expenses 13,325 16,033 15,479 20,490 21,272
Reserve for plant impairment (a) -- -- -- -- 5,172
Distribution contract termination -- -- 1,675 -- --
------------ ------------- ------------ ----------- -----------
Total operating expenses 57,228 73,290 72,525 72,072 77,968
------------ ------------- ------------ ----------- -----------
Operating income (loss) 13,554 (2,364) 9,429 22,513 18,673
Interest expense (4,457) (6,217) (6,006) (6,476) (6,509)
Interest income 550 742 772 786 436
Other income (expense), net 328 387 (156) 180 235
------------ ------------- ------------ ----------- -----------
Net income (loss) $ 9,975 $ (7,452) $ 4,039 $ 17,003 $ 12,835
============ ============= ============ =========== ===========
Other Financial Data:
EBITDA (b) $ 16,620 $ 2,494 $ 15,522 $ 29,404 $ 31,453
Adjusted EBITDA (c) 21,175 12,192 26,075 39,961 36,439
Adjusted EBITDA Margin (d) 12.5% 6.4% 13.1% 18.9% 17.0%
Depreciation and amortization 2,188 3,729 5,477 5,925 7,387
Capital expenditures 16,846 21,233 2,564 10,202 33,098
Ratio of earnings to fixed charges (e) 2.6 x 1.4 x 2.8 x 2.6 x
Balance Sheet Data:
Working capital $ 4,465 $ (8,470) $ (1,418) $ 5,604 $ (493)
Total assets 87,971 93,358 93,331 101,377 124,521
Total debt 50,918 66,989 68,913 66,764 85,534
Shareholders' equity (deficit) 3,145 (6,967) (2,928) 10,627 10,263
</TABLE>
- ----------------------------------
(a) Represents a non-cash charge of $4,722,000 and potential future cash
expenditures of $450,000 incurred in connection with the impairment of
assets related to a potential plant facility located in Hibbing, Minnesota,
as discussed in Note 6 to our financial statements.
(b) "EBITDA" represents the sum of net income (loss), plus interest expense,
plus depreciation and amortization, plus the non-cash portion of the reserve
for plant impairment. Information regarding EBITDA is presented because we
believe that certain investors use EBITDA as one measure of an issuer's
ability to service its debt. EBITDA is not a measure of performance or
financial condition under generally accepted accounting principles, but is
presented to provide additional information related to debt service
capability. EBITDA should not be considered in isolation or as a substitute
for other measures of liquidity or financial performance
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<PAGE>
under generally accepted accounting principles. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to the potential inconsistencies in the
method of calculation.
(c) "Adjusted EBITDA" is EBITDA as defined above adjusted to reflect the buyout
of $24.2 million of operating leases during 1998 as if they had been bought
out at the beginning of each period presented as discussed in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" section of this prospectus.
The effect of these transactions on historical EBITDA for the periods
indicated is set forth below.
<TABLE>
<CAPTION>
Pro Forma
Fiscal Year
Fiscal Year Ended Ended (a)
----------------------------------------------------------------------------
January 1, December 31, December 29, January 4, January 3, January 3,
1995 1995 1996 1998 1999 1999
----------- ----------- ----------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
EBITDA $16,620 $ 2,494 $15,522 $29,404 $31,453 $33,044
Lease payments 4,555 9,698 10,553 10,557 4,986 3,395
------- ------- ------- ------- ------- -------
Adjusted EBITDA $21,175 $12,192 $26,075 $39,961 $36,439 $36,439
======= ======= ======= ======= ======= =======
</TABLE>
(d) Represents the ratio of Adjusted EBITDA to net sales.
(e) For purposes of computing the ratio of earnings to fixed charges, "earnings"
are defined as net income before fixed charges. Fixed charges are defined as
interest expense, amortization of deferred financing costs, and the portion
of rent expense representing interest. Earnings were inadequate to cover
fixed charges by $7.5 million for the year ended December 31, 1995.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto appearing elsewhere in this prospectus. Luigino's
operates on a 52 or 53-week fiscal year, ending on the Sunday closest to
December 31, and a 16-week first fiscal quarter, 12-week second and third
quarters, and a 12 or 13-week fourth quarter.
Overview
We are one of the leading producers and marketers in the $2.8 billion U.S.
market for frozen food entrees. We produce over 100 different entrees, which we
differentiate from our competition at all price points based on superior
quality, freshness and value. Our products are sold in the U.S. to retail
grocery accounts through a national broker sales network of approximately 40
independent broker groups, who act as the direct link between Luigino's and the
retail trade. The broker network is managed by an experienced internal sales
force. We market and distribute our products in the United States, Canada,
Australia, the United Kingdom, Europe, the Pacific Rim and several countries in
South America.
The U.S. frozen entree category is generally divided into three segments:
Healthy (36.7%), Popular (31.4%) and Premium (23.8%); the remaining (8.1%) is
made up of various small regional and private label brands. The Healthy segment
is comprised of all products at all price points that are low-fat or reduced-
calorie, most of which are priced over $2.00. The Popular segment is comprised
of traditional, non-diet products priced below $2.00. The Premium segment is
comprised of traditional non-diet entrees priced above $2.00. We have
historically marketed our Michelina's products under four distinct "Labels" or
product lines, each with unique attributes and retail price points. Our Green,
Black and Blue Label products are generally priced at $1.25 to $1.59, and our
Red Label products are generally priced below $1.00. Green Label products are
comprised of a variety of popular recipes, and contributed 52.9% to Luigino's
net sales in the fiscal year ended January 3, 1999. Red Label products,
comprised generally of pasta and sauce entrees, and Black Label products,
comprised of Oriental entrees marketed under the Yu Sing sub-brand, each
contributed 16.1% and 12.9%, respectively, to our net sales in the same period.
Blue Label products, marketed in the Healthy segment under the brand name
Michelina's Lean 'N Tasty, contributed 14.0% to our net sales for the period and
is the only major brand in the Healthy segment that is priced below $2.00. We
recently introduced our Michelina's Signature product line, generally priced in
the $2.00 range. The balance of Luigino's net sales are derived from our frozen
pizza and snacks business, which serves the frozen appetizer/snack rolls and
frozen pizza categories. We currently produce egg rolls, Pizza Snack Rolls,
Pizza Bagels, single serve pizza and pizza snacks, and are developing and test
marketing additional snack products.
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<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the major
components of Luigino's statements of income expressed as a percentage of net
sales.
Fiscal Year
----------------------
1996 1997 1998
------ ------ ------
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 58.9 55.3 55.0
------ ------ ------
Gross profit 41.1 44.7 45.0
Selling and promotional expenses 27.8 24.4 24.0
General and administrative expenses 7.8 9.7 9.9
Reserve for plant impairment -- -- 2.4
Distribution contract termination 0.8 -- --
------ ------ ------
Operating income 4.7 10.6 8.7
Interest expense (3.0) (3.1) (3.0)
Interest income 0.4 0.4 0.2
Other income (expense) (0.1) 0.1 0.1
------ ------ ------
Net income 2.0% 8.0% 6.0%
====== ====== ======
Fiscal Year 1998 compared to Fiscal Year 1997
Net Sales. Total net sales for 1998 increased 1.7% or $3.6 million, to
$215.0 million from $211.4 million in 1997. Excluding our co-pack agreement
with Pillsbury for the manufacture of pizza rolls, net sales for 1998 increased
5.4%, or $11.0 million to $214.0 million from $203.0 million in 1997. This co-
pack agreement expired in the first quarter of 1998 and we are now producing
Pizza Snack Rolls under the Michelina's brand.
The following table sets forth Luigino's net sales by product line and the
percentage change from the prior year.
Fiscal Year
------------------------ Percentage
1997 1998 Change
----------- ----------- ----------
(dollars in thousands)
Green Label .............. $ 104,512 $ 113,645 8.7%
Red Label ................ 29,597 34,638 17.0
Blue Label ............... 31,208 29,990 (3.9)
Black Label .............. 28,598 27,726 (3.0)
Snacks ................... 9,096 7,970 (12.4)
Co-pack .................. 8,394 1,006 (88.0)
----------- ----------- ----------
Total Net Sales .... $ 211,405 $ 214,975 1.7%
=========== =========== ==========
Green and Red Label net sales increased $9.1 and $5.0 million,
respectively, offset by a decrease in co-pack and Snack sales and small
decreases in Blue Label and Black Label. Green and Red label product sales
increased due to product line expansion. The decrease in co-pack net sales
resulted from the expiration of our co-pack agreement with Pillsbury.
Gross Profit. Gross profit in 1998 increased 2.2% or $2.1 million from
$94.6 million in 1997. The increase in gross profit is a result of the increase
in overall sales levels. The gross margin in 1998 increased to 45.0% of net
sales from 44.7% in 1997. The increase resulted from the decrease in co-pack
volume as a percentage of total sales.
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<PAGE>
Selling and Promotional Expenses. Selling and promotional expenses for 1998
decreased 0.1%, or $0.1 million, to $51.5 million from $51.6 million in 1997.
The decrease resulted from a $4.8 million decrease in slotting spending compared
to 1997 offset by a $4.7 million increase in trade promotion and advertising
expenses.
General and Administrative Expenses. General and administrative expenses
for 1998 increased 3.8%, or $0.8 million, to $21.3 million from $20.5 million in
1997. The increase was a result of additional personnel in sales and marketing
and management information services ("MIS"), increased consulting and other
professional fees, and increased bonus accruals. The expanded sales and
marketing departments have resulted in better control over, and a reduction in,
external selling expenses, particularly in spending related to new product
introductions. Increased MIS spending was used to upgrade our computer hardware,
to install a company-wide computer network, and to begin installation of
Enterprise Resource Planning ("ERP") software to replace our current financial
software.
Reserve for Plant Impairment. We recorded a $5.2 million charge for the
impairment of assets incurred in connection with a potential plant facility in
Hibbing, Minnesota. The total reserve of $5.2 million represented a non-cash
charge of $4.7 million for asset impairment and $0.5 million for potential
future liquidated damages and other costs. There was no similar expense in 1997.
These matters are discussed in Note 6 to our financial statements.
Operating Income. Operating income for 1998 decreased 17.1% or $3.8
million, to $18.7 million from $22.5 million in 1997. As a percentage of net
sales, operating income decreased to 8.7% of net sales in 1998 compared to 10.6%
in 1997. The decrease resulted from the $5.2 million charge for plant
impairment, and the $0.7 million increase in selling and general administrative
expenses, partially offset by the $2.1 million increase in gross profit.
Interest Expense. Interest expense was $6.5 million for 1998 and 1997.
Interest Income. Interest income for 1998 decreased 44.5%, or $0.4 million,
to $0.4 million from $0.8 million in 1997. Substantially all interest income
resulted from notes receivable from shareholders, which bear interest at short
term applicable federal rates. The decrease resulted from a $2.6 million
decrease in outstanding balances in August 1997 and lower interest rates in
1998.
Other Income (Expense). Other income was $0.2 million for 1998 and 1997.
Other income resulted from cash discounts earned from vendors offset by
miscellaneous state franchise and Canadian taxes.
Net Income. For the reasons stated above, net income for 1998 decreased
24.5%, or $4.2 million, to $12.8 million from $17.0 million in 1997. As a
percentage of net sales, net income decreased to 6.0% of net sales in 1998
compared to 8.0% in 1997.
Fiscal Year 1997 compared to Fiscal Year 1996
Net Sales. Net sales for 1997 increased 5.9%, or $11.8 million, to $211.4
million from $199.6 million in 1996.
The following table sets forth Luigino's net sales by product line and the
percentage change from the prior year.
Fiscal Year
-------------------------
1996 1997 Percent Change
----------- ------------ --------------
(dollars in thousands)
Green Label .......... $ 98,122 $ 104,512 6.5%
Red Label ............ 26,762 29,597 10.6
Blue Label ........... 18,743 31,208 66.5
Black Label .......... 33,564 28,598 (14.8)
Snacks ............... 14,050 9,096 (35.3)
Co-pack .............. 8,349 8,394 0.5
----------- ------------ -----------
Net Sales .... $ 199,590 $ 211,405 5.9%
=========== ============ ===========
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<PAGE>
Green, Red and Blue Label product sales increased $6.4, $2.8 and $12.5
million, respectively, partially offset by decreases in Black Label and snacks
of $5.0 million each. Green and Red Label sales increased due to expansion of
the product lines. The increase in Blue Label sales resulted from a full year
of sales in 1997 following our entry into the Healthy segment in March 1996.
Black Label sales decreased as a result of discontinuing a higher price point
"restaurant style" product, and snack sales decreased due to difficulty in
keeping shelf space for single serve pizza because of a lack of complementary
snack products.
Gross Profit. Gross profit in 1997 increased 15.4% or $12.6 million to
$94.6 million from $82.0 million in 1996. The increase in gross profit is a
result of overall higher sales levels. The gross margin in 1997 increased to
44.7% of net sales compared to 41.1% of net sales in 1996. The increase in
gross margin is a result of increases in prices for Green, Blue and Black Label
products.
Selling and Promotional Expenses. Selling and promotional expenses for
1997 decreased 6.8%, or $3.8 million, to $51.6 million from $55.4 million in
1996. The decrease included a $6.3 million decrease in trade promotion
spending, which was partially offset by increased slotting.
General and Administrative Expenses. General and administrative expenses
for 1997 increased 32.4%, or $5.0 million, to $20.5 million from $15.5 million
in 1996. The increase was primarily a result of additional personnel in sales
and marketing, sales audit, and MIS, and increased bonus accruals due to the
increase in net income. The expanded sales and marketing departments have
resulted in better control over, and a reduction in, external selling expenses,
particularly in spending related to new product introductions. We increased MIS
spending in the second half of 1997 to upgrade our computer hardware, to install
a company-wide computer network and to arrange for the installation of ERP
software to replace our current financial software, which is not Year 2000
compliant.
Distribution Contract Termination. We incurred a $1.7 million contract
termination fee in 1996 as a result of the termination of our Canadian sales and
distribution agreement with Maple Leaf Foods of Canada. Simultaneously with the
contract cancellation, we entered into a substantially similar sales and
distribution agent agreement with J.M. Schneider Corporation in Canada. There
was no similar expense in 1997.
Operating Income. Operating income for 1997 increased 138.8%, or $13.1
million, to $22.5 million from $9.4 million in 1996. As a percentage of net
sales, operating income increased to 10.6% of net sales in 1997 compared to 4.7%
in 1996. The increase resulted from higher sales and gross profit, lower
selling expenses, and elimination of the non-recurring distribution contract
termination that occurred in 1996, partially offset by increased general and
administrative expenses.
Interest Expense. Interest expense for 1997 increased 7.8%, or $0.5
million, to $6.5 million from $6.0 million in 1996.
Interest Income. Interest income was $0.8 million in 1997 and 1996.
Substantially all interest income results from notes receivable from
shareholders which bear interest at short term applicable federal rates.
Other Income (Expense). Other income (expense) consisted of income of $0.2
million in 1997 compared to an expense of $0.2 million in 1996.
Net Income. For the reasons stated above, net income for 1997 increased
321.0%, or $13.0 million, to $17.0 million from $4.0 million in 1996. As a
percentage of net sales, net income increased to 8.0% of net sales in 1997
compared to 2.0% in 1996.
Liquidity and Capital Resources
Luigino's has traditionally financed its working capital needs through a
combination of cash from operations and borrowings under its credit facilities.
On February 4, 1999, the Company amended and restated its existing senior credit
facility with The First National Bank of Chicago to provide for a $50.0 million
revolving line
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<PAGE>
of credit due January 31, 2004, and issued $100.0 million 10.0% Senior
Subordinated Notes due February 1, 2006. See the "Description of Other
Indebtedness" section of this prospectus under the heading "New Credit
Agreement."
Fiscal Year 1998 compared to 1997. We generated $24.5 million of cash from
operating activities during 1998, compared to $25.9 million in 1997. The
decrease resulted from increased working capital requirements in 1998.
Investing activities used $34.2 million of cash in 1998 and $14.9 million
in 1997. Fiscal year 1998 included $24.2 million in buyouts of equipment under
operating leases.
Financing activities generated $5.8 million in 1998 compared to using $6.1
million of cash in 1997. The difference is due to $20.9 million in increased
borrowings to finance the equipment lease buyouts, offset by a $2.2 million
reduction in shareholder notes receivable collections and a $7.1 million
increase in distributions to shareholders primarily related to Subchapters tax
liabilities.
Fiscal Year 1997 compared to Fiscal Year 1996. We generated $25.9 million
of cash from operating activities in 1997, increased from $2.7 million of cash
in 1996. The difference is primarily due to increased earnings and improved
working capital levels in fiscal year 1997.
Investing activities used $14.9 million of cash in 1997 compared to $4.2
million in 1996. The 1997 increase was a result of additional production lines
for snacks and a new storage freezer.
Financing activities required $6.1 million of cash in 1997 while providing
$1.6 million of cash in 1996. The difference primarily relates to shareholder
distributions for Subchapter S related tax liabilities in 1997.
1999 Planned Expenditures and Buyout of Operating Leases. As a part of our
strategic growth plan, we are budgeting approximately $12.0 million in
advertising to build brand awareness. Our management has discretion on the
amount and timing of these expenditures and whether to continue them. We are
also budgeting $5.0 million in incremental slotting expenses in 1999 to
introduce new products and increase product penetration. We intend to finance
these expenditures through internally generated funds and proceeds of the sale
of the Old Notes.
We estimate that our overall capital expenditures in 1999 will be
approximately $17.0 million, of which $11.0 million relates to continued
investment in plant and equipment and $6.0 million relates to continuation of an
existing program to buy out operating leases. At the beginning of 1998, we had
operating leases on production equipment with an original cost of $52.0 million.
The leases had initial term expiration dates from 1998 through 2002. We began
a program of buying out such operating leases, and through January 3, 1999,
leases relating to equipment with an original cost of $42.9 million were bought
out for $24.2 million. At January 3, 1999, we had operating leases remaining
with U.S. Bank Leasing & Financial. We have agreements to buy out the U.S. Bank
Leasing & Financial lease for approximately $6.0 million with a portion of the
proceeds from the sale of the Old Notes.
We expect to report a loss for the first fiscal quarter of 1999. We
anticipate that the loss will be a result of the significant expenditures
related to the introduction of the Signature and Snack product lines.
We anticipate continuing to elect Subchapter S treatment under the U.S.
Internal Revenue Code. Consequently, we will continue to make quarterly
distributions to our shareholders based upon their estimated tax liabilities as
discussed in the "Management and Directors" section of this prospectus under
the heading "Certain Relationships and Related Transactions."
Luigino's ability to make scheduled payments of principal of, or to pay the
interest or premiums, if any, on, or to refinance, its indebtedness (including
the Notes), or to fund planned capital expenditures will depend on our future
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control. Based upon the current level of operations, we believe that
cash flow from operations and available cash, together with available borrowings
under our New Credit Agreement, will be adequate to meet our future liquidity
needs for at least the next several years. We may, however, need to refinance
all or a portion of the principal of the Notes on or before maturity. There can
be no assurance that our
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<PAGE>
business will generate sufficient cash flow from operations, or that future
borrowings will be available under the New Credit Agreement in an amount
sufficient to enable us to service our indebtedness, including the Notes, or to
fund our other liquidity needs. In addition, there can be no assurance that we
will be able to effect any such refinancing on commercially reasonable terms or
at all.
Inflation
We believe that the relatively moderate rate of inflation over the past
few years has not had a significant impact on our sales or profitability.
Market Risk Considerations
Credit Risk. Financial instruments which potentially subject Luigino's to
significant concentrations of credit risk consist primarily of cash and trade
accounts receivable. We maintain cash and cash equivalents and other financial
instruments with various financial institutions. Our policy is to limit exposure
to any one institution. When we formulate our investment strategy we consider
our periodic evaluations of the relative credit standing of these financial
institutions. Our concentrations of credit risk for trade accounts receivable
are limited due to the large number of entities comprising our customer base. As
of January 3, 1999, we had an exclusive distributor in Canada which accounted
for 11.2% of our net sales in fiscal 1998. We do not currently foresee a credit
risk with this distributor.
Interest Rate Swap. Interest rate swaps are entered into as a hedge of
underlying debt instruments to effectively change the characteristics of the
interest rate without actually changing the debt instrument. Our exposure to
market risk for change in interest rates relates primarily to our long-term debt
obligations. At January 3, 1999, the total notional amount of our interest rate
swap agreement was $25 million.
Year 2000 Issues
State of Readiness. Luigino's has a Year 2000 project team comprised of
key members of our management information systems department and key management
personnel. The project team has analyzed our computer systems for Year 2000
compliance, and as a result of that analysis, we have begun installing a state
of the art Enterprise Resource Planning ("ERP") software package to replace our
current financial accounting package, which is not Year 2000 compliant. The new
software will also provide us with integration of capabilities currently
available on our system but not in an integrated package, including production
planning and manufacturing control, materials management, logistics and
distribution, plant maintenance, and treasury management and international
accounting capabilities. We anticipate having the new system operational by May
1999.
We also have initiated communications with our significant suppliers and
customers to determine their status with respect to the Year 2000 issue. It is
possible that certain computer systems or software products of our suppliers and
customers may not accept input of, store, manipulate and output dates before the
Year 2000 or thereafter without error or interruption. We are requesting
assurances from our significant suppliers and customers that their systems are
Year 2000 compliant or that they are identifying and addressing problems in
their computer systems to upgrade them for the Year 2000.
Costs Associated with Year 2000 Compliance. We estimate the total cost of
conversion to the new ERP system, including equipment, software, consulting and
training, at $1.4 million, which is being funded through operating cash flows.
The expenses and liabilities to which we may become subject as a result of date-
handling problems of our suppliers and customers, and remedying problems that
are discovered, cannot be estimated at this time to any degree of accuracy.
Risks Associated with Year 2000 Issues. We believe our exposure with
respect to Year 2000 issues of our suppliers and customers is minimal. There
can be no assurance, however, that we will identify all date-handling problems
of our suppliers and customers in advance of their occurrence, or that we will
be able to successfully remedy problems that are discovered, and our efforts to
identify and address such problems, or the expenses or liabilities to which we
may become subject as a result of such problems, could have a material adverse
effect on Luigino's.
Contingency Plans. We anticipate having our new ERP system operational by
May 1999. Our contingency plan is to upgrade our existing software package with
the current release, which is Year 2000 compliant. That upgrade could be
accomplished in approximately two months at significantly lower cost than the
new software package. We intend to work with non-compliant current vendors and
suppliers as necessary to prevent interruption of our business, and to identify
alternate vendors and service providers where necessary.
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<PAGE>
BUSINESS
General
Luigino's is one of the leading producers and marketers of frozen entrees
in North America. Our Michelina's brand is the third most popular brand in the
entire frozen entree category in the United States. We are the U.S. market
leader in sales of non-diet entrees priced below $2.00, with a 36.7% market
share based on unit volume. In Canada, our Michelina's brand is the market
share leader in the frozen entree category, with a 22.9% market share. We
produce over 100 different entrees, which we differentiate from our competition
at all price points based on superior quality, freshness and value.
The frozen entree category is a $2.8 billion U.S. market and is one of the
largest product categories in the U.S. frozen prepared food industry. Since
1993, sales revenue in the frozen entree category have grown at an annual
compounded rate of 5.8%. For the 52 weeks ended January 3, 1999, total U.S.
frozen entree unit sales increased 5.7% and sales revenues increased 11.5%
compared to the same period in the prior year. We believe that such growth will
continue, based on the relatively low current level of penetration of frozen
entrees in U.S. consumer households and trends in U.S. lifestyle toward two-
earner households and emphasis on leisure time, with a resulting need for value
and convenience in meal solutions.
The U.S. frozen entree category is generally divided into three segments:
Healthy (36.7%), Popular (31.4%) and Premium (23.8%); the remaining 8.1% is made
up of various small regional and private label brands. The Healthy segment is
comprised of all products at all price points that are low-fat or reduced-
calorie, most of which are priced over $2.00. The Popular segment is comprised
of traditional, non-diet products priced below $2.00. The Premium segment is
comprised of traditional, non-diet products priced over $2.00.
Luigino's has historically marketed its Michelina's brand products under
four distinct "Labels" or product lines, each with unique attributes and retail
price points, as set forth below:
<TABLE>
<CAPTION>
% of Net Sales
Fiscal Year Ended
Label Brand Price Point Recipe January 3, 1999)
- ----- ------ ----------- ------ ----------------
<S> <C> <C> <C> <C>
Green Michelina's $1.25 - $1.59 Traditional 52.9%
Red Michelina's Below $1.00 Pasta & sauce 16.1%
Blue Michelina's Lean 'N Tasty $1.25 - $1.59 Healthy, low-fat 14.0%
Black Michelina's Yu Sing $1.25 - $1.59 Oriental 12.9%
</TABLE>
The balance of Luigino's net sales are derived from our frozen pizza and
snacks business, which serves the frozen appetizer/snack rolls and frozen pizza
categories. We currently produce egg rolls, Pizza Snack Rolls, Pizza Bagels,
single serve pizza and pizza snacks, and are developing and test marketing
additional snack products. Sales in our frozen pizza and snacks business
contributed 3.7% to our net sales in the fiscal year ended January 3, 1999.
Since its incorporation in 1990, Luigino's has elected to be taxed as a
corporation under Subchapter S of the Internal Revenue Code of 1986, as amended
(the "Code"). We have made, and intend to continue to make, distributions to
our shareholders to pay their income tax obligations as a result of our status
as an S corporation.
Competitive Strengths
Leading Market Positions. Luigino's primarily competes in the Popular
price segment of the U.S. frozen entree market, where it is the market share
leader with a 36.7% share based on unit volume. We have a 13.5% market share,
based on unit volume, of the overall U.S. frozen entree market. We produced 29
of the top 200 frozen entrees measured on total unit volume, and were an
industry leader based on sales per point of distribution with 52 of the 200
best selling entrees for the 12 weeks ending January 3, 1999. In 1992, we
entered the Canadian market, where we had the top 25 and 34 of the
top 50 best selling frozen entrees for the 12-week period ended January 30,
1999.
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<PAGE>
High Quality Products. Our production process focuses on quality by
starting with the freshest ingredients and by preparing our sauces from scratch
based on our own recipes. Quality is continuously monitored by employee and
management samplings, and employees are empowered to stop production if product
quality is not being maintained. Our highly flexible production lines enable us
to quickly shift production among different products, essentially producing
products to customer orders, which eliminates the need for substantial
inventories, shortens the time between manufacture and consumption, and promotes
higher quality product at the retail point of sale. In addition, product
quality is enhanced by a freezing process which operates under lower
temperatures than most similar facilities.
Efficient Operations. We believe that we currently have among the lowest
per-unit production costs in the frozen entree category, and our Adjusted EBITDA
margin, on a pro forma basis, for the fiscal year ended January 3, 1999 was
17.0%. Our frozen entrees are produced at a state-of-the-art food processing
plant located in Jackson, Ohio, where labor costs are relatively low. The
Jackson plant operates 14 highly efficient and flexible production lines,
manufacturing approximately one million entrees per day. The plant has
sufficient production capacity to allow further significant growth without an
increase in capital investment. Our practices of manufacturing product in line
with customer orders and shipping primarily in truckload quantities also
contribute to the efficiency of our operations.
Strategic Distribution. The location of our Jackson, Ohio plant is key to
our distribution system, since approximately 50.0% of the U.S. population lives
within a 500 mile radius of Jackson. This enables us to quickly and cost
effectively distribute our products. The strategic location of the plant also
enables us to distribute products without outside warehousing, which eliminates
expenses from spoilage and boosts inventory turnover. We are able to turn our
finished goods inventory an average of 15 times per year. Our products are sold
in the U.S. to retail grocery accounts through a national broker sales network
of approximately 40 independent broker groups, who act as the direct link
between Luigino's and the retail trade. The broker network is managed by an
experienced internal sales force.
Experienced and Motivated Management Team. Luigino's was founded in 1990
by Jeno F. Paulucci, a well known food industry executive with over 50 years of
experience. Mr. Paulucci has founded several successful food companies,
including Chun King Corporation (sold in 1967 to R.J. Reynolds Food Company) and
Jeno's Inc. (sold in 1985 to The Pillsbury Co.). Mr. Paulucci was the first
Chairman of the Board of R.J. Reynolds Food Company (now RJR Nabisco, Inc.).
Ron Bubar, President and Chief Operating Officer, has managed production of
Luigino's products since its inception, is a veteran with more than 30 years in
the food industry, and has held senior management positions at The Pillsbury Co.
and Jeno's, Inc. A portion of senior management incentive compensation is
linked to growth in EBITDA. Under management's stewardship, we have grown
substantially since Luigino's was founded in 1990. Net sales and Adjusted
EBITDA have grown from $124.2 million and $18.1 million, respectively, in the
fiscal year ended January 2, 1994 to $215.0 million and $36.4 million,
respectively, in the fiscal year ended January 3, 1999, with compound annual
growth rates of 11.6% and 15.0%, respectively.
Business Strategy
Build Brand Awareness. Luigino's has developed a formal strategy to build
awareness of the Michelina's brand name which incorporates media spending, tie-
ins with merchandising events and overall category management. Historically, we
have been able to gain significant market share in the frozen entree business,
despite relatively low brand awareness, based on high repeat purchases by a
loyal customer following. We believe, based on our recent experience in
marketing the Michelina's brand in Canada, that our new strategy can result in
significant increases in U.S. sales. The Michelina's brand awareness in Canada
increased from 18.0% to 45.0% as a result of the media advertising campaign
conducted in mid 1997 and early 1998, and our unit sales increased 60.4% in the
fiscal year ended January 3, 1999, as compared to 21.0% growth for the 52 weeks
ended January 2, 1999 for the entire market. We anticipate launching similar
efforts in select U.S. markets in 1999.
Increased Product Penetration. We have a broad-based national presence,
with Michelina's products selling in approximately 75.0% of the U.S.
supermarkets with annual sales exceeding $2.0 million. Nevertheless, the
average all commodity volume ("ACV"), which measures the percentage penetration
of a single entree sold in those supermarkets, is relatively low for many of
Luigino's best selling entrees. For example, the average ACVs for
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<PAGE>
our top eight Blue label products and top 13 Green Label products are 29.5% and
51.5%, respectively. Once our products are in the marketplace, however, the
Michelina's brand has very high sales per point of distribution. Accordingly, we
believe we can significantly increase sales simply by increasing the penetration
levels of our Michelina's "best sellers." We are implementing this strategy by
focusing our "slotting" expenditures on increasing penetration of these best
selling items. Slotting expenditures are paid to retailers to obtain shelf space
for additional items. In addition, we intend to expand our sales to include club
stores, which we believe will be a receptive market for multi-entree packaging
of our new family-size entrees.
Introduce New Products Lines. We have a proven ability to successfully
identify new market segments and create products and line extensions to fill
these niches. Introduced in March 1996, our Blue Label expanded the healthy
category below the $2.00 price point. The Blue Label has successfully grown to
generate net sales of approximately $30.0 million during 1998, approximately
14.0% of our total sales. Currently, we have introduced the Michelina's
Signature brand, which will compete in the $2.00 price range between the Popular
and Premium segments. The Signature product line was developed as a value-priced
alternative in the Premium market. Based on our experience from preliminary
meetings with the retail trade in the introduction of Michelina's Signature
brand, we have experienced favorable acceptance of the product line. We have
also introduced a new category extension of family-sized entrees. We also
selectively evaluate strategic acquisitions in the ongoing course of our
business.
Develop Pizza and Snacks Business. We recently began marketing products in
two of the fastest growing categories of the frozen prepared food industry--
frozen appetizer/snack rolls and frozen pizza. Jeno Paulucci, Luigino's founder
and Chief Executive Officer, was a pioneer of the frozen hot snacks concept, and
his company, Jeno's, Inc., was a market share leader in the frozen pizza
category and manufactured and marketed the pizza roll, which is still the
leading single product in the appetizers and snack roll category. We have
developed and applied for a patent on a unique crisp microwavable pizza crust
concept and are developing and test marketing several lines of pizza snacks and
snack rolls. Our Jackson, Ohio facility is fully equipped to manufacture frozen
pizza and snack products.
Expand International Sales. We have successfully utilized joint marketing
arrangements in Canada and Australia in connection with a strategy to increase
international sales while reducing the time and risk associated with entering
international markets. The joint marketing arrangement in Canada is with J.M.
Schneider, Inc., one of the largest and most prominent Canadian food producers.
We also have a significant sales presence in Australia with the Watties Co., a
subsidiary of H.J. Heinz, under the co-brand Watties. As a result of the great
success in Australia where we have a market share of 10.2% since product
introduction in February 1998, this joint marketing arrangement is now being
expanded to include New Zealand, where products are currently being launched.
We also market and distribute our products in the United Kingdom, Europe, the
Pacific Rim and several countries in South America. We plan to continue
expanding internationally and are currently actively pursuing arrangements in
Europe and Mexico.
Industry Overview
The U.S. food industry is relatively stable with growth based on modest
price and population increases. Over the last ten years, there has been industry
consolidation and food companies have been divesting non-core business lines and
making strategic acquisitions.
The frozen entree category is one of the largest product categories in the
U.S. frozen prepared food industry. The frozen entree market is a $2.8 billion
market. Entrees are defined as all precooked, frozen, single dishes packaged on
a plate, on a tray, or in a boil-in-bag designed to be the main dish of a meal.
Luigino's primarily competes in the Popular segment of the U.S. frozen entree
market.
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<PAGE>
Products
Entrees. Luigino's historically has marketed its Michelina's brand frozen
entree products under four distinct "Labels" or product lines.
The Green Label products contributed approximately 52.9% of our net sales
for the fiscal year ended January 3, 1999. These products are priced between
$1.25 and $1.59, placing them in the Popular segment. The products are
comprised of a variety of popular recipes using high-quality pasta and sauce and
are usually accompanied by beef, chicken or seafood. The Green Label is
targeted at quality-oriented, value-conscious consumers. The following is a
listing of typical Green Label products available in the United States:
<TABLE>
<S> <C>
.Lasagna with Meat Sauce .Cheese Ravioli with Alfredo & Broccoli Sauce
.Fettuccine Alfredo .Four-Cheese Lasagna
.Swedish Meatball & Egg Noodles .Meat Ravioli with Pomodoro Sauce
.Spaghetti Bolognese .Penne Primavera
.Penne Pollo .Fettuccine Primavera with Chicken
.Lasagna Alfredo .Lasagna Pollo
.Salisbury Steak & Rice .Chicken a la King with Noodles
.Linguini with Clams & Sauce .Pasta with Tomato Parmesan Sauce
.Pepper Steak & Rice .Chicken Cacciatore
.Noodles Stroganoff .Chicken Italiano with Parmesan Cheese
.Fettuccine Alfredo with Broccoli & Cheese .Italian-Style Meatballs & Vegetables in Wine Sauce
.Lasagna with Vegetables .Chicken Tetrazzini with Fettuccine
.Meatloaf & Gravy, Potatoes .Turkey in Gravy with Dressing
.Spaghetti with Meatballs .Risotto Parmigiano
.Noodles with Chicken, Peas & Carrots
</TABLE>
The Red Label products contributed approximately 16.1% of Luigino's net
sales for the fiscal year ended January 3, 1999. These products are priced
below $1.00, placing them in the Popular segment. The products are generally
comprised of pasta and sauce entrees. The Red Label is targeted to working
singles and children. The following is a listing of typical Red Label products
available in the United States:
<TABLE>
<S> <C>
.Macaroni & Cheese .Lasagna Primavera
.Chili-Mac .Shell & Cheese with Jalapeno Peppers
.Spaghetti Marinara .Penne Pasta with Mushroom Sauce
.Wheels & Cheese .Spicy Tomato Sauce with Spirals
.Macaroni & Beef .Fettuccine Carbonara
.Rigatoni Pomodoro Italiano .Italian Sausage & Peppers
.Spaghetti with Tomato & Basil Sauce
</TABLE>
The Black Label products contributed approximately 12.9% of Luigino's net
sales for the fiscal year ended January 3, 1999. These products are priced
between $1.25 and $1.59, placing them in the Popular segment. The products are
Oriental entrees marketed under the Yu Sing sub-brand. The following is a
listing of typical Black Label products available in the United States:
<TABLE>
<S> <C>
.Sweet & Sour Chicken with Rice .Penne Pasta with Mushrooms
.Oriental Beef & Peppers with Rice .Chicken and Almonds with Rice
.Chicken Fried Rice .Pork Chop Suey with Rice
.Shrimp Fried Rice .Chicken Chow Mein with Rice
.Pork and Shrimp Fried Rice .Shrimp Lo Mein
.Chicken Lo Mein
</TABLE>
The Blue Label products contributed approximately 14.0% of Luigino's net
sales for the fiscal year ended January 3, 1999. These products are low-fat
entrees priced between $1.25 and $1.59, in the Healthy segment. The products
are comprised of a variety of recipes with less than six grams of fat per
entree. The Blue Label is targeted
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<PAGE>
at the health-conscious consumer concerned
with superior quality and taste. The following is a listing of typical Blue
Label products available in the United States:
<TABLE>
<S> <C>
.Macaroni & Cheese .Penne Pasta with Mushrooms
.Fettuccine with Creamy Pesto Sauce & Vegetables .Spaghetti & Meatballs with Tomato Sauce
.Black Bean Chili with Rice .Spicy Chicken with Rice
.Chicken Primavera with Spirals .Teriyaki Chicken with Rice
.Glazed Chicken with Rice .Lasagna with Vegetables & Chicken
.Gravy with Egg Noodles and Swedish Meatballs .Rigatoni & Pomodoro Sauce, Broccoli & Olives
.Chicken Pesto with Penne .Spaghetti with Onions, Green Peppers & Mushrooms
.Southwestern Brand Sauce with Chicken & Pasta .Cantonese Chow Mein with Noodles
.Mac & Beef .Mesquite-Style Sauce with Chicken & Rice
.Honey BBQ Sauce with Chicken & Rice .Linguini with Seafood Sauce
.Penne Arrabiata
.Rigatoni Pesto Pomodoro
</TABLE>
We recently introduced our Michelina's Signature product line, generally
priced in the $2.00 range. The Signature product line is designed to be a
value-priced, premium product. These products are restaurant-style recipes.
The following is a list of typical Signature products available in the United
States:
<TABLE>
<S> <C>
.Glazed Chicken Fillets .Sirloin Beef Peppercorn
.Chicken Parmesan .Beef Pot Roast with Potatoes
.Chicken Cacciatore .Beef Burgundy with Potatoes
.Chicken Marsala .Roasted Sirloin Supreme
.Chicken Piccata .Jumbo Cheese Ravioli
.Chicken Sorrentino .Cheddar Broccoli Potatoes
.Chicken Milanese .Veal Parmigiano with Spaghetti
.Layered Vegetarian Lasagna with White Sauce .Layered Vegetarian Lasagna with Red Sauce
.Layered Lasagna with Meat Sauce .Shrimp Alfredo with Fettuccine
</TABLE>
Snacks. We currently produce egg rolls, Pizza Snack Rolls, Pizza Bagels,
single serve pizza and pizza snacks, and are developing and test marketing
additional snack products. Sales in our frozen pizza and snacks business
contributed 3.7% to our net sales for the fiscal year ended January 3, 1999.
Marketing, Sales and Distribution
United States. Luigino's markets its products through a national network
of approximately 40 independent broker groups managed by an internal sales force
organized by regional territories. The brokers are responsible for local
execution of trade promotions and on-shelf merchandising. Our territory
managers are responsible for working with the broker network to develop trade
promotion and merchandising strategies and are individually responsible for
tracking product penetration, sales growth and performance of the promotion and
merchandising strategies.
We have a broad-based national presence, with our Michelina's products
selling in approximately 75.0% of the U.S. supermarkets with annual sales
exceeding $2.0 million. We market our products to national and regional
supermarket chains, which operate their own warehouses and distribution
facilities as well as retail outlets. Our products are also sold to
wholesalers, which warehouse the products and sell them to retailers and also
offer a full line of services such as accounting and in-store merchandising for
their retail customers. In addition, we sell our products to U.S. military
commissaries. Shipments are generally made to customers directly from our
production facilities through public carriers.
One of our new marketing initiatives is the increase of "slotting" payments
to retailers to obtain additional shelf space for our best selling products. In
connection with the introduction of our Signature, snack and family product
lines, we are budgeting incremental slotting expenses in 1999. In addition, we
from time to time institute
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<PAGE>
various promotional programs which provide price reductions from normal
suggested retail prices to retail stores. These programs are for specific time
periods and may be limited to certain geographic areas and products. They are
often coupled with local and cooperative advertising campaigns to stimulate
volume. Historically, we have not conducted any significant advertising in the
United States. However, in Canada, where we have conducted significant
advertising, the Michelina's brand awareness increased from 18.0% to 45.0% as a
result of the media advertising campaign conducted in mid 1997 and early 1998
and our unit sales increased 60.4% in the fiscal year ended January 3, 1999, as
compared to 21.0% growth for the 52 weeks ended January 2, 1999 for the entire
market. We anticipate launching similar efforts in select U.S. markets in 1999.
International Marketing. We have successfully utilized joint marketing
arrangements in Canada and Australia in connection with a strategy to reduce the
time and risk associated with entering international markets. The joint
marketing arrangement in Canada is with J.M. Schneider, Inc., one of the largest
and most prominent Canadian food producers. We also have a significant sales
presence in Australia, where our products are marketed under the co-brand
Watties pursuant to a joint marketing arrangement and exclusive distribution
agreement with H.J. Heinz Company-Australia Limited ("Heinz Australia"),
pursuant to which we supply products to Heinz Australia at cost plus adjustments
for administration, production variance and freight costs.
We are evaluating the possibility of expanding into other international
markets. We believe we can use these joint marketing arrangements as a model
for the expansion of our international distribution system. As a result of the
great success in Australia, where we have a market share of 10.2%, this joint
marketing arrangement is now being expanded to include New Zealand, where
products are currently being launched. We are currently actively pursuing these
arrangements in Europe and Mexico. We also market and distribute our products
in the United Kingdom, Europe, the Pacific Rim and several countries in South
America.
Competition
The frozen food industry is highly competitive. Within the U.S. frozen
food entree market, there are a number of established brands, many of which are
produced and distributed by very large and diversified companies. Our principal
competitors are Conagra, Inc. (Healthy Choice and Banquet), Nestle Holdings,
Inc. (Stouffer's and Lean Cuisine) and H.J. Heinz Co. (Weight Watchers and
Budget Gourmet). Certain of these companies have introduced and may continue to
introduce products and pricing strategies intended to compete directly with
Luigino's. Other companies in the frozen food manufacturing industry may
compete with Luigino's in the future.
We primarily compete in the Popular price segment of the frozen entree
market, where our Michelina's brand is the market share leader with a 36.6%
share based on unit volume. We have a 13.5% market share of the overall frozen
entree market while competing with much larger companies, such as Nestle, H.J.
Heinz and ConAgra.
Raw Materials
We use large quantities of certain ingredients in our frozen entrees,
including principally beef and chicken, cheese, tomatoes and flour, which are
generally sourced from the U.S. commodity market. We also produce meatballs and
pasta and grow bean sprouts for certain of our entrees. In some cases, we
enter into one to three year supply contracts that fix the price for certain raw
materials, but such contracts do not cover all of our ingredients. We manage the
cost of production by growing and producing some of our own ingredients, by
entering into long-term contracts and also by the customization of certain of
our shipments in order to reduce warehousing time and space. We also utilize
significant quantities of plastic and cardboard for our packaging requirements.
Supplies of raw materials and packaging requirements are readily available from
a number of sources.
Trademarks and Patents
Luigino's registered trademarks include Michelina's(R), Signature(R) and Yu
Sing(R). We have several other trademarks in connection with our various
product lines. The registrations for our trademarks expire from time to time
and we renew them in the ordinary course of business before the expiration
dates. We have registered patents for certain of the processes used in our
production lines.
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We consider our trademarks and patents to be of significant importance in
our business. Although we are not aware of any circumstances that would
negatively impact our intellectual property, there is a risk that future
litigation by Luigino's will be necessary to enforce our trademark or patent
rights or to defend Luigino's against claimed infringement of the rights of
others. Adverse determinations in any of these proceedings could have a
material adverse effect on our business.
Employees
Luigino's has approximately 1,219 employees, of whom 156 are engaged in
production and distribution in Duluth, 847 are engaged in production and
distribution in Jackson, and 216 are involved in management, administration and
field support. As of January 3, 1999, approximately 1,003 of Luigino's
employees at our Duluth, Minnesota and Jackson, Ohio facilities were represented
by collective bargaining agreements with the United Food and Commercial Workers
Union. The Duluth agreement expires in September 1999, and the Jackson
agreement expires in November 2002. Although we consider our employee relations
generally to be good and have not experienced any strikes or work stoppages in
the past, a prolonged work stoppage or strike at any facility with union
employees could have a material adverse effect on our business. In addition,
there is a risk that when the existing collective bargaining agreements expire,
new agreements will be reached without union action or that any such new
agreements will be on terms not satisfactory to us.
Production
The flow chart below highlights the major steps in the manufacturing process
of Luigino's products:
[flow chart]
Facilities
Luigino's maintains corporate offices in approximately 29,607 square feet
of leased space in Duluth, Minnesota and approximately 6,000 square feet of
leased space in Sanford, Florida. We operate production facilities in Jackson,
Ohio and Duluth, Minnesota.
The Jackson facility, which is leased from the Jackson Community
Improvement Corporation, has a total of approximately 375,000 square feet of
space, all of which are devoted to production operations, raw material and
finished goods storage, office space and employee welfare facilities. The
plant's current capacity utilization rate is approximately 69.0% based on a
five-day week, which will allow for significant growth without an increase in
capital expenditures. The lease for the facility expires in September 2008.
The Duluth facility, purchased in 1990, has 80,000 square feet of space,
20,000 of which are devoted to production and the balance of which are devoted
to frozen and dry storage, coolers and office space. We also own a public
warehousing facility in Duluth where supplies of Luigino's food ingredients and
completed goods are stored on a short-term basis. The facility has 35,000
square feet of space, approximately 60.0% of which are devoted to 0 Fahrenheit
cold storage and the balance of which are devoted to dry storage. Space not
used by Luigino's is leased to unrelated parties.
Governmental Regulation
Luigino's production facilities and products are subject to extensive
regulation regarding, among other things, the processing, packaging, storage,
distribution, advertising and labeling of our products, and environmental
compliance. The material regulations to which we are subject include
regulations promulgated under the Federal Food, Drug and Cosmetic Act, the
Nutrition Labeling and Education Act, the Federal Trade Commission Act and the
Occupational Safety and Health Act, each as amended. Our manufacturing
facilities and products are subject to periodic inspection by federal, state and
local authorities. Compliance with existing federal, state and local laws and
regulations is not expected to have a material adverse effect on Luigino's.
However, we cannot predict the effect, if any, of laws and regulations that may
be enacted in the future, or of changes in the enforcement of existing laws and
regulations that are subject to extensive regulatory discretion. There is also
a risk that we will incur expenses or liabilities to comply with these laws and
regulations in the future, including those resulting from changes in health
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laws and regulations, that may have a material adverse effect on Luigino's. As
required by law, U.S. Department of Agriculture employees are stationed at our
Duluth and Jackson facilities to inspect all meat and poultry products processed
by Luigino's. The Duluth and Jackson facilities are also subject to federal,
state and local regulation regarding work place health and safety. Difficulties
with or failures to obtain any governmental approval of our products or our
plant working conditions could have a material adverse effect on Luigino's.
Environmental Matters
Our ownership and operation of real property are subject to extensive and
changing regulation by various federal, state and local authorities. As a
result, we may be involved from time to time in administrative and judicial
proceedings and inquiries relating to environmental matters. We cannot predict
what environmental legislation or regulations will be enacted in the future, how
existing or future laws or regulations will be administered or interpreted or
what environmental conditions may be found to exist. Compliance with more
stringent laws or regulations, stricter interpretation of existing laws or
discovery of unknown conditions may require additional expenditures by
Luigino's, some of which may be material. We believe that we are currently in
material compliance with all known material and applicable environmental
regulations, but there is a risk that additional environmental issues relating
to presently known matters or identified sites or to other matters or sites will
require additional, currently unanticipated investigation, assessment, or
expenditures.
Legal Proceedings
In November 1997, Luigino's commenced an action against The Stouffer
Corporation ("Stouffer") in the United States District Court, District of
Minnesota seeking a judgment declaring that our Michelina's Lean 'n Tasty
trademark does not infringe or dilute Stouffer's LEAN CUISINE trademark.
Stouffer counterclaimed, alleging willful and bad faith infringement and
dilution of its trademark and seeking damages, including an accounting for
profits resulting to Luigino's from any illegal use. In March 1998, the District
Court granted summary judgment in favor of Luigino's on all claims and Stouffer
appealed the matter to the United States Court of Appeals for the Eighth
Circuit. In March 1999, the Court of Appeals affirmed the decision of the
District Court in favor of Luigino's on all claims and counterclaims.
In the ordinary course of our business we are involved in various other
legal proceedings. We do not believe the outcome of any such proceedings will
have a material adverse effect on our financial position or results of
operation.
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MANAGEMENT AND DIRECTORS
Executive Management
Luigino's success is highly dependent on the efforts and abilities of our
senior management team. Our business could be materially and adversely affected
if we lose the services of one or more of these senior executives.
The following table provides certain information with respect to Luigino's
directors and executive officers.
Name Age Title
---- --- -----
Jeno F. Paulucci......... 80 Chairman of the Board, Chief Executive
Officer and Director
Ronald O. Bubar.......... 57 President and Chief Operating Officer
Joel C. Kozlak........... 39 Chief Financial Officer
Joel Conner.............. 47 Senior Executive Vice President of
Marketing and International Sales
Vice President--National Sales & Sales
David Webber............. 52 Programming
Robert L. Peterson....... 66 Director
Anthony Luiso............ 55 Director
Jack Helms............... 45 Director
Lois M. Paulucci......... 76 Director
Larry W. Nelson.......... 48 Director
William H. Hippee, Jr. .. 52 Director
Jeno F. Paulucci is the founder of Luigino's. He has been our Chairman of
the Board and Chief Executive Officer since Luigino's inception in April 1990,
and was the President of Luigino's from 1990 until 1996. Mr. Paulucci is a well
known food industry executive who, over the past 50 years, has founded several
successful food companies, including Chun King Corporation and Jeno's, Inc. He
was the former Chairman of the Board of Cornelius Company, a producer and
marketer of food and beverage equipment, and was the first Chairman of the Board
of R.J. Reynolds Food Company, now RJR Nabisco, Inc.
Ronald O. Bubar has been the President and Chief Operating Officer of
Luigino's since 1996. Mr. Bubar served as our Executive Vice President of
Operations from 1991 to 1996. From 1990 to 1991, Mr. Bubar provided consulting
services to Luigino's. Before 1990, Mr. Bubar was Vice President of Operations
of The Pillsbury Company from 1986 to 1990 and Director of Manufacturing of
Pillsbury from 1985 to 1986. Mr. Bubar served as Executive Vice President of
Operations of Jeno's, Inc. from 1980 to 1985.
Joel C. Kozlak has served as the Chief Financial Officer of Luigino's since
April 1996. From 1993 to 1996, he was a Vice President and relationship manager
with First Bank National Association, and from 1986 to 1993 he was employed by
Citicorp North America in various divisions, including the World Corporate Group
and Private Banking.
Joel Conner joined Luigino's in 1990 and has served in various positions of
increasing responsibility, currently serving as Senior Executive Vice President
of Marketing and International Sales. Before joining Luigino's, Mr. Conner
founded and operated Conner Management Corporation and Cornell Associates,
companies that provided management and consulting services to the hospitality
industry worldwide. From 1982 to 1990, he was Vice President of Marketing for
ServiceMaster Industries.
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David Webber joined Luigino's in July 1997 as Executive Vice President of
Sales--East Region and has been Vice President--National Sales & Sales
Programming since December 1998. Before joining Luigino's, Mr. Webber was Vice
President of Sales and Marketing for The Vegetable Company, Green Bay,
Wisconsin, a division of Dean Foods, from 1992 to 1997. From 1981 to 1992, he
was employed in various capacities with The Pillsbury Company, including Group
Marketing Manager--Canada, Director of Marketing--Green Giant Division, Director
of Marketing--Desserts Division and Vice President, Pizza Division.
Robert L. Peterson has been a director of Luigino's since January 1999.
Mr. Peterson is Chairman of the Board and Chief Executive Officer of IBP, Inc.
("IBP"). He was named President and Chief Operating Officer of IBP in July 1977
and assumed the duties of Chairman of the Board and Chief Executive Officer in
March 1980. Mr. Peterson has over 40 years of experience in the livestock and
meat processing industry.
Anthony Luiso has been a director of Luigino's since January 1999. Since
1996, Mr. Luiso has been an independent consultant, and provides consulting
services to Luigino's. Mr. Luiso was Chairman, President and Chief Executive
Officer of International Multifoods Corporation from 1989 to 1996.
Jack Helms has been a director of Luigino's since January 1999. Mr. Helms
joined Goldsmith, Agio, Helms and Company in 1987 and has served as President
and Chief Operating Officer since 1992. He also serves on the Board of
Directors of Applebees International, Inc., Goldsmith, Agio, Helms Securities
Co. and Agio Capital Mgmt. LLC.
Lois M. Paulucci has been a director of Luigino's since January 1999. She
is an independent investor and is the wife of Jeno Paulucci.
Larry W. Nelson has been a director of Luigino's since January 1999. He
has been the President of Paulucci International, Ltd., Inc. since 1988. Mr.
Nelson is a trustee of certain trusts that are the beneficial owners of certain
shares of the Common Stock of Luigino's, as indicated in the "Ownership of
Common Stock" section of this prospectus.
William H. Hippee, Jr. has been a director of Luigino's since January 1999.
He has been a partner in the Minneapolis law firm of Dorsey & Whitney LLP since
1978. Mr. Hippee is a trustee of certain trusts that are the beneficial owners
of certain shares of the common stock of Luigino's, as indicated in the
"Ownership of Common Stock" section of this prospectus.
Shareholder Control Agreement
The holders of the common stock of Luigino's have executed a Shareholder
Control Agreement which removes from the Board of Directors of Luigino's, and
vests in the holders of its voting common stock (presently, Mr. Paulucci) the
sole power to make certain decisions with respect to the management and affairs
of Luigino's that would normally be made by the Board of Directors. Such
decisions include matters such as the incurrence of debt, the issuance of equity
securities and sales of any material portion of Luigino's assets. The agreement
does not remove from the Board of Directors its authority to accept or reject
any agreements between Luigino's and any of its shareholders and other
affiliates that are not entered into on arms-length terms.
Limitation of Liability
Luigino's Restated Articles of Incorporation limit the liability of our
directors, in their capacities as directors, to Luigino's or its shareholders
to the full extent permitted by Minnesota law. Minnesota law provides that a
director shall not be liable to Luigino's or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for
. any breach of the director's duty of loyalty to Luigino's or its
shareholders,
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
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. dividends, stock repurchases and other distributions made in violation
of Minnesota law or for violations of the Minnesota securities laws,
. any transaction from which the director derived an improper personal
benefit or
. any act or omission occurring before the effective date of the
provision in Luigino's Restated Articles of Incorporation limiting such
liability.
These provisions do not affect the availability of equitable remedies, such as
an action to enjoin or rescind a transaction involving a breach of fiduciary
duty, although, as a practical matter, equitable relief may not be available.
The above provisions also do not limit liability of the directors for violations
of, or relieve them from the necessity of complying with, the federal securities
law.
Executive Compensation
The following table sets forth the cash compensation paid in the last three
fiscal years to or accrued for the Chief Executive Officer and the four highest
paid executive officers of Luigino's whose salary and bonus earned in 1998
exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------------------------
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation
- ----------------------------- ---- --------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Jeno F. Paulucci Chairman $ (1) $ (1) $ (1) $ (1)
and Chief Executive
Officer
Ronald O. Bubar 1998 300,000 300,000 4,800(2) 1,000,000(3)
President and Chief 1997 292,789 985,000 8,784 760,000
Operating Officer 1996 218,270 168,192 -- --
Joel C. Kozlak 1998 190,385 150,000 4,800(2) --
Chief Financial Officer 1997 151,923 100,000 4,558 --
1996 68,846 -- -- --
Joel Conner 1998 165,385 150,000 4,800(2) --
Senior Executive Vice 1997 124,385 122,500 3,731 --
President of Marketing 1996 104,000 60,800 -- --
and International Sales
David Webber 1998 174,423 50,000 5,233(2) --
Vice President--National 1997 72,116 -- -- --
Sales & Sales 1996 -- -- -- --
Programming
</TABLE>
- -----------------
(1) The discussion below under the heading "Consulting and Employment
Agreements" and "Certain Relationships and Related Transactions" describes
payments made in 1998, 1997 and 1996 to Mr. Paulucci or Paulucci
International Ltd., Inc., a Subchapter S corporation wholly owned by Mr.
Paulucci.
(2) Includes compensation paid by Luigino's pursuant to its matching 401(k)
plan.
(3) Payments under Luigino's phantom stock plan, as discussed in Note 6 to our
financial statements.
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<PAGE>
Consulting and Employment Agreements
Luigino's and Paulucci International Ltd., Inc. ("Paulucci International"),
a corporation wholly owned by Jeno F. Paulucci, are parties to a Consulting
Agreement, dated January 1, 1999 (the "Consulting Agreement"), pursuant to which
Paulucci International provides certain consulting services to Luigino's
relating to the frozen entree and frozen snack food businesses. Under the terms
of the Consulting agreement, Paulucci International is paid an annual fee of
$3.0 million and is reimbursed for its actual out-of-pocket expenses incurred in
rendering such services. The Consulting Agreement has a seven year term, but
may be terminated by either party after two years upon 90 days notice. If the
Consulting Agreement is terminated by Luigino's, a termination fee is payable to
Paulucci International equal to the prior twelve month's consulting fee if
termination is in the third or fourth year of the agreement, 75.0% of such
amount in the fifth year and 50.0% of such amount in the sixth year.
Mr. Bubar serves as Chief Operating Officer of Luigino's pursuant to an
employment agreement with Luigino's in effect until December 1999, subject to
early termination or extensions thereunder. Mr. Bubar receives an annual base
salary of $300,000 during the term of the agreement and receives a bonus in the
amount of 75.0% to 100.0% of his base salary based on certain earnings criteria.
The employment agreement provides for an 18 month non-competition covenant upon
termination of the agreement. In addition, Mr. Bubar is paid compensation under
Luigino's phantom stock plan, as described in Note 6 to our financial
statements. The other officers of Luigino's are also party to incentive
agreements that link a portion of their future compensation to EBITDA.
Certain Relationships and Related Transactions
Luigino's has advanced an aggregate of $14.2 million (of which a $9.1
million was outstanding at January 3, 1999) to Jeno F. Paulucci under a
promissory note dated November 2, 1997 (the "Shareholder Note") from Mr.
Paulucci, which matures January 15, 2001. Amounts due under the Shareholder
Note bear interest at the minimum rate necessary to avoid original issue
discount or the imputation of interest for federal income tax purposes (4.5% at
January 3, 1999) payable quarterly with annual amortization of a portion of
principal. Luigino's is not obligated to make additional advances under the
Shareholder Note.
Luigino's leases its executive offices in Duluth, Minnesota from Etor
Properties Limited Partnership ("Etor Properties"). The general partners of
Etor Properties are Jeno F. Paulucci and Michael J. Paulucci, and the limited
partners are Michael J. Paulucci, Cynthia J. Soderstrom and Gina J. Paulucci,
and trusts for their respective benefit. Michael J. Paulucci, Cynthia J.
Soderstrom and Gina J. Paulucci are the children of Jeno F. Paulucci. When the
interests of each of these children are aggregated with their respective trust
interests, the ownership interests of the partners in Etor Properties are
divided as follows: Michael J. Paulucci, approximately 60.0%; Cynthia J.
Soderstrom, approximately 20.0%; and Gina J. Paulucci, approximately 20.0%. Jeno
F. Paulucci has less than a 1.0% ownership interest in Etor Properties. The
lease under which the Duluth office facility is currently occupied became
effective on December 30, 1996 for a three year initial term. Luigino's has an
option to extend the lease for an additional two years, provided that Luigino's
is not in default upon expiration of the initial term. The annual rent payments
under the lease were $204,392 in 1997 and $219,195 in 1998, and will be $239,999
in 1999, payable in monthly installments. If the lease is extended at Luigino's
option, the initial rental rate will be adjusted by the percentage change in the
consumer price index from the effective date of the lease to a date 90 days
before the expiration date of the initial lease term. Before January 1, 1997,
Luigino's leased these offices from Etor Properties under a prior lease
agreement which was canceled and superseded by the lease agreement described
above. Luigino's paid Etor Properties $109,200 under the prior lease agreement
in 1996.
As described above under the heading "Consulting and Employment
Agreements," during fiscal 1998, 1997 and 1996 Jeno F. Paulucci and Paulucci
International Ltd., Inc., ("Paulucci International"), a corporation wholly owned
by Jeno F. Paulucci, provided Luigino's various consulting and administrative
support services. The combined payments by Luigino's to Mr. Paulucci and
Paulucci International for such services in fiscal 1998, 1997 and 1996, were
$2,558,085, $2,422,392 and $2,027,171 respectively.
Mr. Paulucci and his wife, Lois Paulucci, have personally guaranteed the
payment of certain of our debt, of which a balance of $11.0 million was
outstanding as of January 3, 1999. These guarantees continue in force until all
of our indebtedness to the various creditors has been paid in full. Mr. and Mrs.
Paulucci received no
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consideration from Luigino's for these guarantees. The guaranteed indebtedness
is described in the "Description of Other Indebtedness" section of this
prospectus under the heading "Ohio Debt."
From time to time Luigino's makes use, for business entertainment purposes,
of certain Canadian hunting and fishing lodge facilities owned by Mr. Paulucci,
for which it pays Mr. Paulucci. Luigino's paid Mr. Paulucci $210,000, $210,000
and $132,000 for such use in fiscal 1998, 1997 and 1996, respectively.
From time to time Goldsmith, Agio, Helms and Company, of which Jack Helms
is a principal, has been retained by Luigino's to perform investment banking and
related services for Luigino's.
We have entered into a Tax Distribution Agreement with each of our
shareholders relating to certain federal and state income tax matters involving
Luigino's and its shareholders. This agreement generally provides that for so
long as Luigino's is an S corporation or a substantially similar pass-through
entity for federal income tax purposes, we may make quarterly distributions to
the shareholders for their income tax obligations resulting from income of
Luigino's being subject to tax at the shareholder level.
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OWNERSHIP OF COMMON STOCK
Luigino's has 1,500 authorized shares of common stock, of which 600 are
entitled to vote and 900 are non-voting. The 100 shares of voting stock
currently issued and outstanding are beneficially owned by Jeno F. Paulucci, the
founder, Chairman of the Board and Chief Executive Officer of Luigino's. The
900 shares of non-voting stock, all of which are issued and outstanding, are
beneficially owned by Mr. Paulucci, one of his adult children, and trusts
established for the benefit of such adult children and their children.
Beneficial ownership is determined in accordance with rules of the Securities
and Exchange Commission, and includes generally voting power and investment
power with respect to securities. Except as indicated by footnote, the persons
named in the table below have sole investment power with respect to all shares
of our common stock shown as beneficially owned by them. The shares shown in the
table are non-voting shares. The individuals and entities who beneficially own
more than 5.0% of the outstanding non-voting shares are as follows:
Non-voting Shares
Beneficially Owned
------------------
Shareholders Number Percent
------------ -------- --------
Jeno F. Paulucci.................................... 300 33
Trusts for the benefit of........................... 120 13
Mr. and Mrs. Paulucci and their adult children (1)
Michael J. Paulucci (2)............................. 80 9
Trusts for the benefit of........................... 80 9
Michael Paulucci and his children (1) (2)
c/o MJP Management
525 Lake Avenue South
Duluth, Minnesota 55802
Trusts for the benefit of........................... 160 18
Cynthia J. Soderstrom and her children (1)
c/o Paulucci International, Inc.
201 West First Street
Sanford, Florida 32771
Trusts for the benefit of........................... 160 18
Gina J. Paulucci (1)
c/o Paulucci International, Inc.
201 West First Street
Sanford, Florida 32771
- ---------------
(1) The trustees of each of these trusts share investment power.
(2) Michael Paulucci has pledged all of his and certain of the trusts' shares of
Common Stock of Luigino's to Jeno F. Paulucci, U.S. Bank National
Association-Minneapolis, U.S. Bank National Association-Duluth and the Bank
of Boston in connection with various debt obligations unrelated to
Luigino's.
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DESCRIPTION OF OTHER INDEBTEDNESS
New Credit Agreement
General. On February 4, 1999, Luigino's entered into an Amended and
Restated Credit Agreement (the "New Credit Agreement") with The First National
Bank of Chicago (the "Bank"), as agent for a group of lenders. The New Credit
Agreement amended and restated our previous credit facility and provides a
revolving credit facility for Luigino's of $50.0 million, including letters of
credit, to fund working capital needs and for general corporate purposes. The
following is a summary of the terms of the New Credit Agreement.
Security Interests. We have secured our obligations under the New Credit
Agreement with a first perfected security interest in substantially all of our
assets. The security for the New Credit Agreement includes a pledge of all
shares owned by Luigino's of any subsidiary that we may create in the future (we
currently have no subsidiaries), and our obligations under the New Credit
Agreement will be guaranteed by any such subsidiary, which guarantees will be
secured by substantially all of the assets of such subsidiaries.
Interest and Commitment Fees. Interest on the New Credit Agreement accrues
at an annual rate equal to, at our option,
. the higher of a federal funds rate plus a margin and the corporate base
rate of the lead lending bank the "Floating Rate") plus, in either
case, an applicable margin (depending upon Luigino's cash flow leverage
ratio), or
. at a London interbank offer rate (adjusted) for a specified interest
period (the "Eurodollar Rate") plus an applicable margin (depending
upon Luigino's cash flow leverage ratio).
Interest on all borrowings under the New Credit Agreement bearing interest at
the Floating Rate will be payable monthly, and interest on all borrowings at the
Eurodollar Rate will be payable at the end of the interest period pertaining to
such borrowings, unless the interest period is longer than three months, in
which case interest will be payable quarterly.
Luigino's will also pay a commitment fee on the unused portion amount of
the New Credit Agreement, depending upon our cash flow leverage ratio. The
aggregate commitment under the New Credit Agreement may be reduced by Luigino's
from time to time in increments of $1.0 million.
Luigino's "cash flow leverage ratio" for purposes of determining the
applicable margins and the commitment fee referred to above will be determined
based on Luigino's net total debt to trailing four quarter adjusted EBITDA.
Maturities and Prepayments. All borrowings under the New Credit Agreement
will mature in February 2004. All borrowings under the New Credit Agreement may
be prepaid by Luigino's at any time without premium or penalty, except that any
prepayment of a loan bearing interest at the Eurodollar Rate that is made before
the end of the applicable interest period will be subject reimbursement of
breakage costs.
Covenants. The New Credit Agreement contains customary covenants,
including:
. reporting and other affirmative covenants;
. financial covenants, including requirements that Luigino's maintain
specified fixed charge coverage ratios, specified interest coverage
ratios and a specified ratio of net total debt to adjusted EBITDA; and
. negative covenants, including restrictions on incurring other
indebtedness, payment of cash dividends and other distributions,
retirements of common stock, existence of liens, making investments,
loans and acquisitions, affiliate transactions, issuing guarantees or
making advances to others, modifications
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in the terms of the Notes and related documents, sales of assets not in
the ordinary course of business, mergers and acquisitions, and entering
into agreements inconsistent with the New Credit Agreement.
Events of Default. The New Credit Agreement contains customary events of
default, including nonpayment of principal, interest or fees; violations of
covenants; inaccuracy of representations or warranties; judgments; ERISA
violations; cross defaults to other indebtedness; change of control; and
bankruptcy.
Ohio Debt
Series 1991-10 Bonds. In 1991, the Department of Development of the State
of Ohio issued State Economic Revenue Bonds, for a term of 10 years, in the
amount of $6.7 million in order to assist Luigino's in the acquisition of
equipment for use in the Jackson, Ohio facility. The bonds are payable from
pledged receipts of Luigino's. Luigino's, and Jeno Paulucci personally, are the
guarantors of Luigino's obligations in connection with such bonds. As of January
3, 1999, the balance of Luigino's bond commitment was $1.8 million.
Series 1993-5 Bonds. In 1993, the Department of Development of the State
of Ohio issued State Economic Revenue Bonds, for a term of 20 years, in the
amount of $8.1 million in order to assist Foremost Management, Inc. in the
construction of a food processing plant leased by Luigino's in Jackson, Ohio.
Luigino's, and Jeno and Lois Paulucci personally, are the guarantors of the
sublease payments. Luigino's is subject to certain financial covenants,
including restrictions on our debt to equity ratio, net worth and dividends. As
of January 3, 1999, the balance of Luigino's bond commitment was $7.1 million.
We did not comply with the minimum net worth covenant under the Ohio Bonds and
obtained a waiver of such default for fiscal year 1998. This net worth covenant
has been amended for fiscal year 1999 and we believe we will be in compliance
with the amended covenant.
November 14, 1991 Loan. In 1991, Luigino's entered into a loan agreement
with the Department of Development of the State of Ohio for $0.8 million to
finance part of Luigino's plant in Ohio. The loan was funded August 17, 1994
and is personally guaranteed by Jeno Paulucci. As of January 3, 1999, the
outstanding loan balance was $0.5 million.
September 21, 1993 Loan. In 1993, Luigino's and Foremost Management, Inc.
entered into a loan agreement with the Department of Development of the State of
Ohio for a $2.0 million loan supplementing the Series 1995 Bonds for the
processing plant leased by Luigino's from Foremost Management, Inc. The loan is
personally guaranteed by Jeno and Lois Paulucci. As of January 3, 1999, the
outstanding loan balance was $1.6 million.
THE EXCHANGE OFFER
Terms of the Exchange Offer, Period for Tendering Old Notes
Luigino's sold the Old Notes on February 4, 1999 to the Initial Purchasers
pursuant to a Purchase Agreement, dated January 29, 1999 entered into by and
among Luigino's and the Initial Purchasers. Upon the terms and subject to the
conditions in this prospectus and in the letter of transmittal (which together
constitute the Exchange Offer), Luigino's will accept for exchange Old Notes
which are properly tendered on or before the Expiration Date and not withdrawn
as permitted below. The term "Expiration Date" means 5:00 p.m., New York City
time, on ____________, 1999. As of the date of this prospectus, $100,000,000
aggregate principal amount of the Old Notes was outstanding. This prospectus,
together with the letter of transmittal, is first being sent on or about
_____________, 1999, to all holders of Old Notes known to Luigino's.
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You may tender Old Notes only in integral multiples of $1,000.
Any Old Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder as soon as practicable after the
expiration or termination of the Exchange Offer. Luigino's will give oral or
written notice of any extension, amendment, non-acceptance or termination to the
holders of the Old Notes as soon as practicable.
Procedures for Tendering Old Notes
The tender to Luigino's of Old Notes by a holder as set forth below and the
acceptance by Luigino's will constitute a binding agreement between the
tendering holder and Luigino's upon the terms and subject to the conditions set
forth in this prospectus and in the accompanying letter of transmittal. Except
described forth below, a holder who wishes to tender Old Notes for exchange
pursuant to the Exchange Offer must transmit either:
(1)a properly completed and duly executed letter of transmittal, including
all other documents required by such letter of transmittal, to U.S. Bank
Trust National Association, as Exchange Agent, at the address listed below
under "--Exchange Agent" on or before the Expiration Date, or
(2)if the Old Notes are tendered pursuant to the procedures for book-entry
transfer described below, a holder tendering Old Notes may transmit an
agent's message (as defined below) to the Exchange Agent in lieu of the
letter of transmittal on or before the Expiration Date.
In addition, before the Expiration Date:
. the Exchange Agent must receive certificates for the Old Notes, along
with the letter of transmittal, or
. the Exchange Agent must receive a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of the Old Notes, if such
procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant
to the procedure for book-entry transfer described below, along with
the letter of transmittal or an Agent's Message, as the case may, or
. the holder must comply with the guaranteed delivery procedures
described below.
The term "agent's message" means a message, transmitted to the Book-Entry
Transfer Facility and received by the Exchange Agent and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the tendering Participant (as defined
herein) that the Participant has received and agrees to be bound by the letter
of transmittal and Luigino's may enforce the letter of transmittal against the
Participant.
The method of delivery of Old Notes, letters of transmittal or agent's
message and all other required documents is at the election and risk of the
holders. If delivery is by mail, we recommend that the holder use registered
mail, properly insured, with return receipt requested, be used. In all cases,
the holder should allow sufficient time to assure timely delivery. Do not send
letters of transmittal or Old Notes to Luigino's.
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Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes are tendered:
. by a registered holder of the Old Notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal, or
. for the account of an Eligible Institution (as defined below).
In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by a firm which is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the United
States (collectively, "Eligible Institutions"). If Old Notes are registered in
the name of a person other than a signer of the letter of transmittal, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by Luigino's in its sole discretion, duly executed by, the
registered holder with the signature guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
Luigino's in its sole discretion. The determination made by Luigino's shall be
final and binding. Luigino's reserves the absolute right to reject any and all
tenders of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of Luigino's or its
counsel, be unlawful. Luigino's also reserves the absolute right to waive any
defects or irregularities or conditions of the Exchange Offer as to any
particular 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). The 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 letter of transmittal and its instructions) by
Luigino's shall be final and binding on all parties. Unless waived, any defects
or irregularities in the tenders of Old Notes for exchange must be cured within
a reasonable period of time as determined by Luigino's. Neither Luigino's, the
Exchange Agent nor any other person shall be under any duty to notify a holder
of any defect or irregularity in any tender of Old Notes for exchange, nor shall
any of them incur any liability for failure to notify a holder.
If the letter of transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the Old
Notes.
If the letter of transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, these persons should indicate this when signing, and, unless waived by
Luigino's, they should submit proper evidence of their authority satisfactory to
Luigino's. If you wish to tender Old Notes that are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, you should
promptly instruct the registered holder to tender on your behalf. If you wish to
tender on your behalf, you must, before completing the procedures for tendering
Old Notes, either register ownership of the Old Notes in your name or obtain a
properly completed bond power from the registered holder.
By tendering, each holder will represent to Luigino's, among other things:
. that the person obtaining the New Notes, whether or not that person
is the holder, is acquiring them in the ordinary course of business,
and
. that neither the holder the person acquiring the New Notes has any
arrangement or understanding with any person to participate in the
distribution of the New Notes.
In the case of a holder that is not a broker-dealer, each such holder, by
tendering, will also represent to Luigino's that such holder is not engaged in,
or intends to engage in, a distribution of the New Notes. If any holder or any
such other person is an "affiliate," as defined under Rule 144 of the Securities
Act, of Luigino's, or is engaged in or intends to engage in or has an
arrangement or understanding with any person to participate in a distribution of
such New Notes to be acquired pursuant to the Exchange Offer, such holder or any
such other person (1) could 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 any resale transaction. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-
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dealer as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." The letter of transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
Acceptance of Old Notes for Exchange; Delivery of New Notes
When all the conditions to the Exchange Offer are satisfied, Luigino's 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. For
purposes of the Exchange Offer, Luigino's shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if Luigino's has given
oral or written notice to the Exchange Agent, with written confirmation of any
oral notice to be given promptly thereafter.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. If you exchange your Old Notes for New Notes in the
exchange offer, you will receive the same interest payment on the next interest
payment date following the Expiration Date that you would have received had you
not accepted the Exchange Offer. The next interest payment date following the
Expiration Date is expected to be August 1, 1999.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility, a properly completed and duly executed letter of
transmittal and all other required documents or, in the case of a Book-Entry
Confirmation, an agent's message in lieu thereof. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desired to exchange, the unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering holder (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with the Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
In addition, Luigino's will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any Old Notes, if at such time
any stop order shall be threatened or in effect with respect to the Registration
Statement of which this prospectus constitutes a part.
Book-Entry Transfer
The Exchange Agent will request that an account be established for the Old
Notes at the Book-Entry Transfer Facility for the Exchange Offer within two
business days after the date of this prospectus, and any financial institution
that is a participant in the Book-Entry Transfer Facility's systems may make
book-entry delivery of Old Notes by causing the Book-Entry Transfer Facility to
transfer the Old Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Old Notes may be effected
through book-entry transfer at the Book-Entry Transfer Facility, the letter of
transmittal (or facsimile), with any required signature guarantees, or an
agent's message in lieu of a letter of transmittal, and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address listed below under "--Exchange Agent" on or before the
Expiration Date or the holder must comply with the guaranteed delivery
procedures described below.
Guaranteed Delivery Procedures
If a registered holder of the Old Notes wishes to tender Old Notes and the
Old Notes are not immediately available, or there is not enough time to permit
the holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
. the tender is made through an Eligible Institution, or
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. before the Expiration Date, the Exchange Agent received from the
Eligible Institution a properly completed and duly executed letter of
transmittal (or facsimile) and Notice of Guaranteed Delivery,
substantially in the form provided by Luigino's (by telegram, telex,
facsimile transmission, mail or hand delivery), (1) listing the name
and address of the holder of Old Notes and the amount of Old Notes
tendered, (2) stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the letter of transmittal
will be deposited by the Eligible Institution with the Exchange Agent,
and
. the certificates for all physically tendered Old Notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be,
and all other documents required by the letter of transmittal, are
received by the Exchange Agent within three NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery.
Withdrawal Rights
You may withdraw your tender of Old Notes at any time before the Expiration
Date.
For a withdrawal to be effective, the Exchange Agent must receive a written
notice of withdrawal at the address listed below under "--Exchange Agent." The
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 such Old Notes), and
. specify the name in which such Old Notes are registered (if
certificates for Old Notes have been transmitted) if different from
that of the withdrawing holder.
If the holder has delivered or otherwise identified to the Exchange Agent the
certificates for Old Notes, then, before the release of the certificates the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and signed notice of withdrawal with signatures
guaranteed by an Eligible Institution (unless the holder is an Eligible
Institution). If Old Notes have been tendered by book-entry transfer procedure
as described above, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by Luigino's. The determination of
Luigino's shall be final and binding on all parties. Any Old Notes which are
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
holder without cost (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, the Old Notes
will be credited to an account maintained with the Book-Entry Transfer Facility
for the Old Notes) as soon as practicable after withdrawal, rejection of tender
or termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Old Notes" above at any time on or after the Expiration Date.
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Exchange Agent
U.S. Bank Trust National Association is the Exchange Agent for the Exchange
Offer. All executed letters of transmittal should be directed to the Exchange
Agent at the address listed below. Questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for Notices of Guaranteed Delivery should be directed
to the Exchange Agent addressed as follows:
Delivery To: U.S. Bank Trust National Association, Exchange Agent
U.S. Bank Trust National Association
U.S. Bank Trust Center
180 East 5th Street
St. Paul, Minnesota 55101
Attn: Specialized Finance
By Facsimile:
(651) 244-1537
Delivery of the letter of transmittal to an address other than as listed above
or transmission of instructions via facsimile other than as listed above does
not constitute a valid delivery of the letter of transmittal.
Fees and Expenses
Luigino's will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. Holders of Old Notes will not be
charged a service fee for the exchange of their notes, but Luigino's may require
that holders pay a sum sufficient to cover any applicable transfer or similar
government tax. Luigino's will pay the expenses of the Exchange Offer.
Transfer Taxes
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes, except that holders who instruct Luigino's 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 will be responsible for the payment of any applicable transfer
taxes.
Consequences of Failure to Exchange Old Notes
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture for transfer and exchange of the Old Notes and the restrictions on
transfer of the Old Notes as described in their legends as a consequence of the
issuance of the Old Notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, the Old Notes may not be offered or sold,
unless registered
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under the Securities Act, except if there is an exemption from registration, or
in a transaction not subject to, the Securities Act and applicable state
securities, laws. Luigino's does not currently anticipate that it will register
Old Notes under the Securities Act. Based on interpretations by the staff of the
Commission, as set forth in no-action letters issued to third parties, Luigino's
believes that New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than any such holder which is an "affiliate" of Luigino's within
the meaning of Rule 144 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of the holders' business
and the holders have no arrangement or understanding with any person to
participate in the distribution of such New Notes. However, there can be no
assurance that the staff of the Commission would make a similar determination on
the Exchange Offer as in such other circumstances. 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 any holder is an
affiliate of Luigino's, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, the holder
. could not rely on the applicable interpretations of the staff of the
Commission and
. must comply with the registration and prospectus delivery
requirements of the Securities Act in any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution." In addition, to comply with the state securities
laws, the New Notes may not be offered or sold in any state unless they have
been registered or qualified for sale in such 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 such term is
defined under Rule 144A of the Securities Act) is generally exempt from
registration or qualification under the state securities laws. Luigino's
currently does not intend 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.
DESCRIPTION OF NOTES
You can find the definitions of certain capitalized terms used in this
description below under the heading "Certain Definitions." In this description,
the words "Luigino's," "we" and "our" refer only to Luigino's Inc., which does
not presently have any subsidiaries.
The Old Notes were issued, and Luigino's will issue the New Notes, under
the Indenture, which was entered into by Luigino's and U.S. Bank Trust National
Association as trustee (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 (the "Trust Indenture Act").
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. We urge you to
read the Indenture, because it, and not this description, defines your rights as
holders of the Notes. We have filed a copy of the Indenture as an exhibit to
the registration statement which includes this prospectus.
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Brief Description of the Notes
The Notes. The Notes:
. are general obligations of Luigino's;
. are unsecured;
. are subordinated in right of payment to all existing and future Senior
Debt of Luigino's;
. are senior in right of payment to any future subordinated Indebtedness
of Luigino's; and
. will be unconditionally guaranteed by any Guarantors (there presently
are none).
As of January 3, 1999, on a pro forma basis giving effect to the sale of the Old
Notes, we would have had Senior Debt of approximately $118.8 million. The
Indenture will permit the incurrence of additional Senior Debt in the future.
Guarantees. Luigino's presently has no Subsidiaries. However, in the event
that we acquire or create a Subsidiary in the future, the newly acquired or
created Subsidiary will execute and deliver a supplemental indenture to the
Indenture and unconditionally guarantee on an unsecured, senior subordinated
basis the obligations of Luigino's pursuant to the terms of the covenant
described below under the heading "Covenants" and the subheading "Subsidiary
Guarantees."
Any Guarantees of the Notes will be:
. general obligations of each Guarantor;
. subordinated in right of payment to all existing and future Senior
Debt of each Guarantor; and
. senior in right of payment to any future subordinated Indebtedness of
each Guarantor.
Principal, Maturity and Interest
Luigino's issued Old Notes with an aggregate principal amount of $100.0
million. We will issue New Notes up to a similar aggregate amount, in
denominations of $ 1,000 and integral multiples of $ 1,000. The Notes will
mature on February 1, 2006.
Interest on the Notes will accrue at the rate of 10.0% per annum and will
be payable semi-annually in arrears on February 1 and August 1, commencing on
August 1, 1999. We will make each interest payment to the Holders of record of
the Notes on the immediately preceding January 15 and July 15.
Interest on the Notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve 30-
day months.
If a Holder has given wire transfer instructions to Luigino's, we will make
all principal, premium and interest payments on those Notes in accordance with
those instructions. All other payments on the Notes will be made at the office
or agency of the Paying Agent and Registrar within the City and State of New
York unless we elect to make interest payments by check mailed to the Holders at
their address set forth in the register of Holders.
Paying Agent and Registrar for the Notes
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The Trustee will initially act as Paying Agent and Registrar. Luigino's
may change the Paying Agent or Registrar without prior notice to the Holders of
the Notes, and we or any of our Subsidiaries may act as Paying Agent or
Registrar.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and we may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
We are not required to transfer or exchange any Note selected for redemption.
Also, we are not required to transfer or exchange any Note for a period of 15
days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
Subordination
The payment of principal, premium and interest, if any, on the Notes will
be subordinated to the prior payment in full of all Senior Debt of Luigino's.
The holders of Senior Debt will be entitled to receive payment in full of
all Obligations due in respect of Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt) before the Holders of Notes will be entitled to receive any payment
with respect to the Notes (except that Holders of Notes may receive and retain
Permitted Junior Securities and payments made from the trust described below
under the heading "Legal Defeasance and Covenant Defeasance"), in the event of
any distribution to creditors of Luigino's:
. in a liquidation or dissolution of Luigino's;
. in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Luigino's or its property;
. in an assignment for the benefit of our creditors; or
. in any marshalling of Luigino's assets and liabilities.
Luigino's also may not make any payment in respect of the Notes (except in
Permitted Junior Securities or from the trust described under below under the
heading "Legal Defeasance and Covenant Defeasance") if:
. a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or
. any other default occurs and is continuing on Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from Luigino's or the holders of any Designated
Senior Debt.
Payments on the Notes may and will be resumed:
. in the case of a payment default, upon the date on which such default
is cured or waived; and
. in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
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. 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice; and
. all scheduled payments of principal, premium and interest on the Notes
that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 180 days.
Luigino's must promptly notify holders of Senior Debt if payment of the
Notes is accelerated because of an Event of Default.
As discussed in the "Risk Factors" section of this prospectus, as a result
of the subordination provisions described above, in the event of a bankruptcy,
liquidation or reorganization of Luigino's, Holders of the Notes may recover
less ratably than creditors of Luigino's who are holders of Senior Debt.
Optional Redemption
At any time before February 1, 2002, Luigino's may on any one or more
occasions redeem up to 35.0% of the aggregate principal amount of Notes
originally issued under the Indenture at a redemption price of 110.0% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date, with the net cash proceeds of one or more sales of our Common Stock to
anyone that is not an Affiliate of Luigino's, so long as:
. the aggregate net proceeds from the sales equals or exceeds $35.0
million;
. at least $65.0 million in aggregate principal amount of Notes remains
outstanding immediately after the redemption; and
. the redemption occurs within 45 days of the date of the last sale
meeting the $35.0 million test.
Except pursuant to the preceding paragraph, the Notes will not be
redeemable at Luigino's option before February 1, 2003.
After February 1, 2003, we may redeem all or a part of the Notes upon not
less than 30 nor more than 60 days' notice, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable redemption date, if redeemed during
the twelve-month period beginning on February 1 of the years indicated below:
Year Percentage
---- ----------
2003................................................. 105.0%
2004................................................. 102.5%
2005 and thereafter.................................. 100.0 %
Repurchase at the Option of Holders
Change of Control. If a Change of Control occurs, each Holder of Notes
will have the right to require Luigino's to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of that Holder's Notes pursuant to the
"Change of Control Offer." In the Change of Control Offer, we will offer a
"Change of Control Payment" in cash equal to 101.0% of the aggregate principal
amount of Notes repurchased plus accrued and unpaid interest thereon, if any, to
the date of purchase. Within ten days following any Change of Control, we will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the "Change
of Control Payment Date" specified in the notice, pursuant to the procedures
required by the Indenture and described in the notice. We will comply with the
requirements of Rule 14e-1 under
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the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, Luigino's will, to the extent
lawful:
. accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
. deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so
tendered; and
. deliver or cause to be delivered to the Trustee the Notes so accepted
together with a certificate of its executive officers (an "Officers'
Certificate) stating the aggregate principal amount of Notes or
portions thereof being purchased by Luigino's.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any, provided that each such new Note will be in a principal
amount of $ 1,000 or an integral multiple thereof.
Before complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control,
Luigino's will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by this covenant. We will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The provisions described above that require us to make a Change of Control
Offer following a Change of Control will be applicable regardless of whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that Luigino's
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
Luigino's outstanding Senior Debt currently prohibits us from purchasing
any Notes, and also provides that certain change of control events with respect
to Luigino's would constitute a default under the agreements governing the
Senior Debt. Any future credit agreements or other agreements relating to
Senior Debt to which we become a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when we are
prohibited from purchasing Notes, we could seek the consent of our senior
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If we do not obtain such a consent or repay such
borrowings, we will remain prohibited from purchasing Notes. In such case, our
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a default under our Senior Debt.
In these circumstances, the subordination provisions in the Indenture would
likely restrict payments to the Holders of Notes.
We will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by Luigino's and
purchases all Notes validly tendered and not withdrawn under that Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Luigino's and its Subsidiaries taken as a whole. Although there
is a limited body of case law interpreting the phrase "substantially all," there
is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require us to repurchase any
Notes as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of the assets of Luigino's and its Subsidiaries taken as a whole
to another Person or group may be uncertain.
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Asset Sales. Luigino's will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless:
. we (or the Restricted Subsidiary, as the case may be) receive
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
. such fair market value is determined by our Board of Directors and
evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee; and
. at least 85.0% of the consideration therefor received by Luigino's or
such Restricted Subsidiary is in the form of cash.
For purposes of this provision, each of the following shall be deemed to be
cash:
. any liabilities (as shown on our or our Subsidiary's most recent
balance sheet) of Luigino's or the Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the
Notes or any Subsidiary Guarantee) that are assumed by the transferee
of any assets sold pursuant to a customary novation agreement that
releases Luigino's or such Subsidiary from further liability; and
. any securities, notes or other obligations received by Luigino's or the
Subsidiary from the transferee that are contemporaneously (subject to
ordinary settlement periods) converted by Luigino's or the Subsidiary
into cash (to the extent of the cash received in that conversion).
Within 180 days after the receipt of any Net Proceeds from an Asset Sale,
we may apply the Net Proceeds, at our option:
. to repay Senior Debt (and to correspondingly reduce our commitment with
respect to any revolving borrowings);
. to acquire all or substantially all of the assets of, or a majority of
the Voting Stock of, another Person engaged in the same or a similar
line of business as we were engaged in on the date of the Indenture (a
"Permitted Business");
. to make a capital expenditure in a Permitted Business; or
. to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of the Net Proceeds of any Asset Sale, we may
temporarily reduce revolving credit borrowings or otherwise invest the Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $7.5 million, we will make an "Asset
Sale Offer" to all Holders of Notes, and all holders of other Indebtedness that
is equal in ranking with the Notes and contains provisions similar to those set
forth in the Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets, to purchase the maximum principal amount of Notes
and such other Indebtedness that may be purchased out of the Excess Proceeds.
The offer price in any Asset Sale Offer will be equal to 100.0% of principal
amount plus accrued and unpaid interest, if any, to the date of purchase, and
will be payable in cash. If any Excess Proceeds remain after consummation of an
Asset Sale Offer, we may use them for any purpose not otherwise prohibited by
the Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into the Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee will select the Notes and such other Indebtedness to be
purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds will be reset at zero.
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Mandatory Redemption. Except as described above, we are not required to
make mandatory redemption of, or sinking fund payments with respect to, the
Notes.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, the Trustee
will select Notes for redemption as follows:
. if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed;
or
. if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate.
No Notes of $1,000 or less will be redeemed in part. Notices of redemption
will 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. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note will state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion of
the original Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of Notes called for redemption.
Certain Covenants
Restricted Payments. Luigino's will not, and will not permit any of its
Subsidiaries to, directly or indirectly:
. declare or pay any dividend or make any other payment or distribution
on account of our or any of our Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any
merger or consolidation involving Luigino's or any of our Subsidiaries)
or to the direct or indirect holders of Luigino's or any of our
Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of Luigino's or to Luigino's or a Subsidiary of
Luigino's);
. purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving Luigino's) any Equity Interests of Luigino's or any direct or
indirect parent of Luigino's or any Subsidiary of Luigino's (other than
any such Equity Interests owned by Luigino's or any Subsidiary of
Luigino's);
. make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is of equal
ranking with or subordinated to the Notes or any Subsidiary Guarantees
(other than the Notes or any Subsidiary Guarantees), except a payment
of interest or principal at the Stated Maturity thereof; or
. make any Restricted Investment (all such payments and other actions set
forth above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
. no Default or Event of Default has occurred and is continuing or would
occur as a consequence of the Restricted Payment; and
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. Luigino's would, at the time of the Restricted Payment and after giving
pro forma effect thereto as if the Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under the heading caption
"Incurrence of Indebtedness and Issuance of Preferred Stock"; and
. the Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by Luigino's and its Subsidiaries after the
date of the Indenture (excluding Restricted Payments permitted by the
first and second clauses of the next paragraph below), is less than the
sum, without duplication, of
(a) the Consolidated Net Income of Luigino's for the period (taken as
one accounting period) from the beginning of the first fiscal
quarter commencing after the date of the Indenture to the end of
Luigino's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100.0% of such deficit), plus
(b) 100.0% of the aggregate net cash proceeds received by Luigino's
since the date of the Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of
Luigino's (other than Disqualified Stock) or from the issue or
sale of Disqualified Stock or debt securities of Luigino's that
have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of Luigino's and other than
Disqualified Stock or convertible securities that have been
converted into Disqualified Stock), plus
(c) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (i) the cash return
of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (ii) the initial amount of such
Restricted Investment, less
(d) 100.0% of the amounts permitted to be paid under the Tax
Distribution Agreement accrued since the date of the Indenture.
The preceding provisions will not prohibit:
. the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
. the redemption, repurchase, retirement, defeasance or other
acquisition of any equal ranking or subordinated Indebtedness of
Luigino's or any Guarantor or of any Equity Interests of Luigino's or
any Restricted Subsidiary in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a
Subsidiary of Luigino's) of, Equity Interests of Luigino's (other than
Disqualified Stock), provided that the amount of any net cash proceeds
that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition will be excluded from subclause (b) of
the third clause of the preceding paragraph;
. the defeasance, redemption, repurchase or other acquisition of equal
ranking or subordinated Indebtedness of Luigino's or any Guarantor
with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness;
. the payment of any dividend by a Subsidiary of Luigino's to the
holders of its common Equity Interests on a pro rata basis;
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. so long as no Default or Event of Default has occurred and is
continuing, payments by Luigino's or any of its Subsidiaries, directly
or indirectly, to Luigino's shareholders in accordance with the Tax
Distribution Agreement as in effect on the date of the Indenture; and
. the payment on or after the date of the Indenture of dividends in
respect of Luigino's Common Stock in an aggregate amount not to exceed
$15.0 million as described in the "Use of Proceeds" section of this
prospectus.
The amount of all Restricted Payments other than cash will be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Luigino's or the Subsidiary, as the case
may be, pursuant to the Restricted Payment. The fair market value of any assets
or securities that are required to be valued by this covenant will be determined
by the Board of Directors, whose resolution with respect thereto will be
delivered to the Trustee. The Board of Directors' determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $1.0 million.
Not later than the date of making any Restricted Payment, Luigino's will deliver
to the Trustee an Officers' Certificate stating that the Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this "Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock. Luigino's will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and Luigino's will not
issue any Disqualified Stock and will not permit any of its Subsidiaries to
issue any shares of preferred stock, provided, however, that we and any
Guarantor may incur Indebtedness (including Acquired Debt), and we may issue
Disqualified Stock, if the Fixed Charge Coverage Ratio for Luigino's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1.0 if such incurrence or issuance occurs on or before February 1,
2001, and at least 2.25 to 1.0 if such incurrence or issuance occurs at any time
thereafter, in each case determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The provisions of this covenant will not prohibit the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
. the incurrence by Luigino's of any Indebtedness (including letters of
credit) under any Credit Facility (including our New Credit
Agreement), provided that the aggregate principal amount of all
Indebtedness of Luigino's and any of its Subsidiaries outstanding
under all Credit Facilities (with letters of credit being deemed to
have a principal amount equal to the maximum liability of Luigino's
and its Subsidiaries thereunder) incurred pursuant to this clause,
after giving effect to such incurrence, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause, does not exceed an
amount equal to $50.0 million less the aggregate amount of all Net
Proceeds from Asset Sales applied to permanently reduce Indebtedness
under the Credit Facilities;
. the incurrence by Luigino's and its Subsidiaries of Existing
Indebtedness;
. the incurrence of Indebtedness represented by the Notes and any
Subsidiary Guarantees;
. the incurrence by Luigino's of Indebtedness represented by Capital
Lease Obligations, mortgage financings or purchase money obligations,
in each case incurred for the purpose of financing all or any part of
the purchase price or cost of construction or improvement of property,
plant or equipment used in the business of Luigino's, in an aggregate
principal amount, including all
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Permitted Refinancing Indebtedness incurred to refund, refinance or
replace Indebtedness incurred pursuant to this clause, not to exceed
$5.0 million at any time outstanding;
. the incurrence by Luigino's of Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are used to refund,
refinance or replace, Indebtedness (other than intercompany
Indebtedness) that was permitted by the Indenture to be incurred;
. the incurrence by Luigino's or any of its Subsidiaries of intercompany
Indebtedness between or among Luigino's and any of its Wholly Owned
Subsidiaries, provided, however, that:
(a) if Luigino's is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the Senior Debt
and the Notes, in the case of Luigino's, or the Subsidiary
Guarantee of such Guarantor, in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
Luigino's or a Wholly Owned Subsidiary thereof and (ii) any sale
or other transfer of any such Indebtedness to a Person that is not
either Luigino's or a Wholly Owned Subsidiary of Luigino's, shall
be deemed, in each case, to constitute an incurrence of such
Indebtedness by Luigino's or such Subsidiary, as the case may be,
that was not permitted by this clause;
. the incurrence by Luigino's or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that
is permitted by the terms of this Indenture to be outstanding;
. (a) the guarantee by Luigino's or any of its Subsidiaries of
Indebtedness of Luigino's or a Subsidiary of Luigino's that was
permitted to be incurred by another provision of this covenant and (b)
the guarantee by a Subsidiary of Luigino's that is not a Guarantor of
Indebtedness of another Subsidiary that is not a guarantor that was
permitted to be incurred by any other provision of this covenant;
. the incurrence by Luigino's or any of its Subsidiaries of additional
Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause, not to exceed $5.0
million.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, Luigino's will, in its sole
discretion, classify such item of Indebtedness in any manner that complies with
this covenant, and any item so classified will be treated as having been
incurred pursuant to only one of the clauses of this covenant or pursuant to the
first paragraph of this covenant. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness will
not be deemed to be the incurrence of Indebtedness for the purposes of this
covenant.
Subsidiary Guarantees. If Luigino's or any of its Subsidiaries acquires or
creates another Subsidiary after the date of the Indenture, then that newly
acquired or created Subsidiary must become a Guarantor, execute a supplemental
indenture satisfactory to the Trustee (a "Supplemental Indenture"), and deliver
an opinion of counsel to the Trustee that the Supplemental Indenture has been
duly executed and delivered (an "Opinion of Counsel").
In addition, Luigino's will not permit any of its Subsidiaries that is not
a Guarantor to incur, guarantee or secure through the granting of Liens the
payment of any Indebtedness of Luigino's or a Guarantor, and will not and will
not permit any of its Subsidiaries that are not Guarantors to pledge any
intercompany notes representing obligations of any such Subsidiaries, to secure
the payment of any Indebtedness of the Company or a Guarantor, in
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each case unless the Subsidiary, Luigino's and the Trustee execute and deliver a
Supplemental Indenture and Luigino's delivers to the Trustee an Opinion of
Counsel.
Merger, Consolidation or Sale of Assets. Luigino's may not consolidate or
merge with or into another Person (whether or not Luigino's is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
. either Luigino's is the surviving corporation or the Person formed by
or surviving any such consolidation or merger (if other than
Luigino's) or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
. the Person formed by or surviving any such consolidation or merger
(if other than Luigino's) or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been
made assumes all the obligations of Luigino's under the Notes, the
Indenture and the Pledge Agreement pursuant to agreements reasonably
satisfactory to the Trustee;
. immediately after the transaction no Default or Event of Default
exists; and
. except in the case of a merger of Luigino's with or into a Wholly
Owned Subsidiary of Luigino's, Luigino's or the Person formed by or
surviving any such consolidation or merger (if other than Luigino's):
(a) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of Luigino's
immediately preceding the transaction; and
(b) will, on the date of the transaction, after giving pro forma
effect thereto as if the same had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the
covenant described above under the heading "Incurrence of
Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates. Luigino's will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
. such Affiliate Transaction is on terms that are no less favorable to
Luigino's or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by Luigino's or such
Restricted Subsidiary with an unrelated Person; and
. Luigino's delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
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The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the preceding paragraph:
. any employment agreement entered into by Luigino's or any of its
Subsidiaries in the ordinary course of business and consistent with
the past practice of Luigino's or the Subsidiary with an officer of
Luigino's who is not otherwise an Affiliate of Luigino's;
. transactions between or among Luigino's and/or its Subsidiaries; and
. Restricted Payments that are permitted by the provisions of the
Indenture described above under the heading "Restricted Payments."
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Subsidiaries. Luigino's will not, and will not permit any of its Subsidiaries
to, transfer, convey, sell, lease or otherwise dispose of any Equity Interests
in any Wholly Owned Subsidiary of Luigino's to any Person (other than Luigino's
or a Wholly Owned Subsidiary of Luigino's), unless:
. such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in such Wholly Owned Restricted Subsidiary; and
. the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant
described above under the subheading "Asset Sales."
In addition, Luigino's will not permit any Wholly Owned Subsidiary of Luigino's
to issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to Luigino's or a Wholly Owned Subsidiary of Luigino's.
Business Activities. Luigino's will not, and will not permit any Subsidiary
to, engage in any business other than Permitted Businesses, except to such
extent as would not be material to Luigino's and its Subsidiaries, taken as a
whole.
Payments for Consent. Luigino's will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Reports. Whether or not required by the Securities and Exchange Commission
(the "Commission"), so long as any Notes are outstanding, Luigino's will furnish
to the Holders of Notes, within the time periods specified in the Commission's
rules and regulations:
. 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 Luigino's 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 Luigino's
certified independent accountants; and
. all current reports that would be required to be filed with the
Commission on Form 8-K if Luigino's were required to file such
reports.
In addition, whether or not required by the Commission, Luigino's will file
a copy of all of the information and reports referred to 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. Luigino's will also, for so long
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as any Notes remain outstanding, 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 and Remedies
Each of the following is an Event of Default:
. default for 30 days in the payment when due of interest on the Notes,
whether or not prohibited by the subordination provisions of the
Indenture;
. default in payment when due of the principal of or premium, if any,
on the Notes, whether or not prohibited by the subordination
provisions of the Indenture;
. failure by Luigino's or any of its Subsidiaries to comply with the
provisions described above under the subheadings "Change of Control,"
"Asset Sales," "Restricted Payments" or "Incurrence of Indebtedness
and Issuance of Preferred Stock";
. failure by Luigino's for 60 days after notice to comply with any of
the other agreements in the Indenture;
. default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Luigino's or any of its
Subsidiaries (or the payment of which is guaranteed by Luigino's or
any of its Subsidiaries) whether such Indebtedness or guarantee now
exists or is created after the date of the Indenture, if that default
(a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness before the expiration of
the grace period provided in such Indebtedness on the date of
such default (a "Payment Default"), or
(b) results in the acceleration of such Indebtedness before its
express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more;
. failure by Luigino's or any of its Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
. except as permitted by the Indenture, the termination of any
Subsidiary Guarantee, or the denial by any Guarantor or any Person
acting on behalf of any Guarantor, of its obligations under its
Subsidiary Guarantee; and
. certain events of bankruptcy or insolvency with respect to Luigino's
or any of its Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to Luigino's or any Subsidiary, all
outstanding Notes will become due and payable immediately without further action
or notice. If any other Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25.0% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable by delivering an
"Acceleration Notice" to Luigino's specifying the Event of Default, in which
case the Notes will
. become due and payable immediately, or
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. if there are any amounts outstanding under the New Credit Agreement,
will become due and payable upon the first to occur of an acceleration
under the New Credit Agreement or five business days after receipt by
Luigino's and the representative of the lenders under the New Credit
Agreement of the Acceleration Notice.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of Luigino's with the
intention of avoiding payment of the premium that Luigino's would have had to
pay if Luigino's then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs before February 1,
2003, by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of Luigino's with the intention of avoiding the prohibition on
redemption of the Notes before February 1, 2003, then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
Luigino's is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, Luigino's is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Luigino's,
as such, shall have any liability for any obligations of Luigino's under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
Luigino's may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for:
. the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below;
. Luigino's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment
and money for security payments held in trust;
. the rights, powers, trusts, duties and immunities of the Trustee, and
Luigino's obligations in connection therewith; and
. the Legal Defeasance provisions of the Indenture.
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In addition, Luigino's may, at its option and at any time, elect to have
the obligations of Luigino's and the Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described above under the
heading "Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
. Luigino's must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in U.S. dollars, non-
callable Government Securities, or a combination thereof, in amounts
sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if
any, and interest on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and Luigino's
must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
. in the case of Legal Defeasance, Luigino's must deliver to the
Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that
(a) Luigino's has received from, or there has been published by, the
Internal Revenue Service a ruling, or
(b) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm
that, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result
of the Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as
would have been the case if the Legal Defeasance had not
occurred;
. in the case of Covenant Defeasance, Luigino's must deliver to the
Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a
result of the 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 the Covenant Defeasance had not
occurred;
. no Default or Event of Default can have occurred and be continuing
either:
(a) on the date of deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to the
deposit); or
(b) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the
91st day after the date of deposit;
. the Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which Luigino's
or any of its Subsidiaries is a party or by which Luigino's or any of
its Subsidiaries is bound;
. Luigino's must deliver to the Trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
. Luigino's must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by Luigino's with the intent of
preferring the Holders of Notes over the other creditors of
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Luigino's with the intent of defeating, hindering, delaying or
defrauding creditors of Luigino's or others; and
. Luigino's must deliver to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Amendment, Supplement and Waiver
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
. reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
. reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above under
the heading "Repurchase at the Option of Holders");
. reduce the rate of or change the time for payment of interest on any
Note;
. waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
. make any Note payable in money other than that stated in the Notes;
. make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
. waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the
heading "Repurchase at the Option of Holders"); or
. make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
Indenture relating to subordination or the security interests created by the
Pledge Agreement that adversely affects the rights of the Holders of the Notes
will require the consent of the Holders of at least 75.0% in aggregate principal
amount of Notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of Notes,
Luigino's and the Trustee may amend or supplement the Indenture or the Notes:
. to cure any ambiguity, defect or inconsistency;
. to provide for uncertificated Notes in addition to or in place of
certificated Notes;
. to provide for the assumption of Luigino's obligations to Holders of
Notes in the case of a merger or consolidation or sale of all or
substantially all of Luigino's assets;
. to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder; or
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. to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act.
Concerning the Trustee
If the Trustee becomes a creditor of Luigino's or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time the other Person is merged
with or into or became a Subsidiary of the specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
the other Person merging with or into or becoming a Subsidiary of the specified
Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired
by the specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of that Person, whether through the
ownership of voting securities, by agreement or otherwise, provided that
beneficial ownership of 10.0% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of Luigino's and its
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the heading "Change of Control" and/or the
provisions described above under the heading "Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by Luigino's or any of its Subsidiaries of Equity Interests of any
of Luigino's Subsidiaries, in the case of either clause (i) or (ii), whether in
a single transaction or a series of related transactions that have a fair market
value in excess of $1.0 million, or for net proceeds in excess of $1.0 million.
Notwithstanding the foregoing, a transfer of assets by Luigino's to a Wholly
Owned Subsidiary or by a Wholly Owned Subsidiary to Luigino's or to another
Wholly Owned Subsidiary, an issuance of Equity Interests by a Wholly Owned
Subsidiary to Luigino's or to another Wholly Owned Subsidiary, and a Restricted
Payment that is permitted by the covenant described above under the heading
"Restricted Payments" will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in the sale and
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leaseback transaction (including any period for which the lease has been
extended or may, at the option of the lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Agreement or with any domestic commercial bank having capital and surplus
in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group and in each case maturing within six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of Luigino's and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than to the Principal or his Related Parties (as defined below), (ii)
the adoption of a plan relating to the liquidation or dissolution of Luigino's,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than the Principal and his Related Parties, becomes the
"beneficial owner" (as that term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that the person has the right to acquire, whether
the right is currently exercisable or is exercisable only upon the occurrence of
a subsequent condition), directly or indirectly, of more than 50.0% of the
Voting Stock of Luigino's (measured by voting power rather than number of
shares), (iv) the first day on which a majority of the members of the Board of
Directors of Luigino's are not Continuing Directors or (v) Luigino's
consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, Luigino's, in any such event pursuant
to a transaction in which any of the outstanding Voting Stock of Luigino's is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the Voting Stock of Luigino's outstanding immediately
before the transaction is converted into or exchanged for Voting Stock (other
than Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of the surviving or
transferee Person (immediately after giving effect to the issuance).
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of that Person for the period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent the losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of that Person and its Subsidiaries for such period, to the extent that
the provision for taxes was included in computing the Consolidated Net Income,
plus (iii) consolidated interest expense of that Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with a
Capital Lease Obligation, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was
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deducted in computing the Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of that Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing the Consolidated Net Income, minus (v) non-cash items increasing the
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of that Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net Income of any
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period before the date of the acquisition shall be
excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of that Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on that Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless suthech dividends may be
declared and paid only out of net earnings in respect of the year of the
declaration and payment, but only to the extent of any cash received by that
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by that Person or a consolidated Subsidiary of that Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
that date, all of the foregoing determined in accordance with GAAP.
"Consulting Agreement" means that certain Consulting Agreement dated as of
January 1, 1999 among Paulucci International Ltd., Inc. and Luigino's, as in
effect on the date of the Indenture.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Luigino's who (i) was a member of the Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to the Board of Directors with the approval of a majority of the
Continuing Directors (described in clause (i) or clause (ii) of this definition)
who were members of the Board of Directors at the time of such nomination or
election.
"Credit Facilities" means, with respect to Luigino's, one or more debt
facilities (including, without limitation, the New Credit Agreement) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to the lenders or to special purpose entities formed to
borrow from the lenders against the receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness incurred under Credit
Facilities in existence on the date of the Indenture shall be deemed to have
been incurred on that date in reliance on, and shall be permitted by, the
exception provided by clause (i) of the second paragraph of the covenant
described under the heading "Incurrence of Indebtedness and Issuance of
Preferred Stock."
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"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Senior Debt outstanding under the
New Credit Agreement and (ii) any other Senior Debt permitted under the
Indenture the principal amount of which is $20.0 million or more and that has
been designated by Luigino's (with, so long as the New Credit Agreement is in
effect, the consent of the Representative thereunder) as "Designated Senior
Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or before the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of Luigino's and its
Subsidiaries (other than Indebtedness under the New Credit Agreement) in
existence on the date of the Indenture, until those amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of that Person and
its 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, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of that Person and its Subsidiaries that was capitalized during
such period, and (iii) any interest expense on Indebtedness of another Person
that is Guaranteed by that Person or one of its Subsidiaries or secured by a
Lien on assets of that Person or one of its Subsidiaries (whether or not the
Guarantee or Lien is called upon) and (iv) the product of (a) all cash dividend
payments or other distributions (and non-cash dividend payments in the case of a
Person that is a Subsidiary) on any series of preferred equity of that Person
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 that Person (or in the case of a Person that is an "S Corporation" or
other pass-through entity for federal income tax purposes, the highest combined
federal and state income tax rate of a shareholder of that S Corporation or
other pass-through entity for federal income tax purposes), expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of that Person for such period
to the Fixed Charges of that Person for such period. In the event that Luigino's
or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but before the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to the incurrence, assumption, Guarantee or redemption of Indebtedness, or the
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by Luigino's or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to the reference period and on or
before the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for the reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of before the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of before the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to the Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
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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 any other statements by that
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means any Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture, and its respective successors
and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
that Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect that Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of that
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of that
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of that Person (whether or not the indebtedness
is assumed by that Person) and, to the extent not otherwise included, the
Guarantee by that Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by that
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If Luigino's or any Subsidiary of Luigino's sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of Luigino's such that,
after giving effect to any such sale or disposition, that Person is no longer a
Subsidiary of Luigino's, Luigino's shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Equity Interests of that Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of the asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person for any period, (i) the net
income (loss) of that Person for such period, determined in accordance with GAAP
and before any reduction in respect of preferred interests or dividends,
excluding, however, (a) any gain (but not loss), together with any related
provision for taxes on the gain (but not loss), realized in connection with (1)
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (2) the disposition of any securities by that Person
or any of its Subsidiaries or the extinguishment of any Indebtedness of that
Person or any of its Subsidiaries and (b) any extraordinary or
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nonrecurring gain (but not loss), together with any related provision for taxes
on the extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Luigino's or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
the Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Senior Debt) secured by a Lien on the asset or assets that were the
subject of the Asset Sale and any reserve for adjustment in respect of the sale
price of the asset or assets established in accordance with GAAP.
"New Credit Agreement" means that certain Amended and Restated Credit
Agreement, dated as of February 4, 1999, by and among Luigino's, The First
National Bank of Chicago, as Agent, U.S. Bank National Association (formerly
known as First Bank National Association) as Co-Agent, and the lenders party
thereto, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced (directly or
indirectly) in whole or in part from time to time.
"Obligations" means any principal, interest (including interest accruing
after the commencement of any bankruptcy, reorganization, insolvency or similar
proceeding relating to Luigino's or any of its Subsidiaries, whether or not
allowed as a claim in that proceeding), penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Permitted Business" means the business conducted by Luigino's on the date
of the Indenture and businesses reasonably related thereto.
"Permitted Investments" means (a) any Investment in Luigino's or in a
Wholly Owned Subsidiary of Luigino's; (b) any Investment in Cash Equivalents;
(c) any Investment by Luigino's or any Subsidiary of Luigino's in a Person, if
as a result of the Investment (i) that Person becomes a Wholly Owned Subsidiary
of Luigino's or (ii) that Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, Luigino's or a Wholly Owned Subsidiary of Luigino's; (d) any
Restricted Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales"; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of Luigino's; and (f) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (f) that are at the time outstanding, not to exceed $5.0 million.
"Permitted Junior Securities" means Equity Interests in Luigino's or debt
securities that are subordinated to all Senior Debt (and any debt or equity
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
pursuant to the Indenture.
"Permitted Liens" means (i) Liens on assets of Luigino's and the Guarantors
securing Senior Debt that was permitted by the terms of the Indenture to be
incurred; (ii) Liens in favor of Luigino's; (iii) Liens on property of a Person
existing at the time that Person is merged into or consolidated with Luigino's
or any Subsidiary of Luigino's, provided that the Liens were in existence
before the contemplation of the merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with
Luigino's; (iv) Liens on property existing at the time of acquisition thereof by
Luigino's or any Subsidiary of Luigino's, provided that the Liens were in
existence before the contemplation of the acquisition; (v) Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering
only the assets acquired with the Indebtedness; (vii) Liens existing on the date
of the Indenture; (viii) Liens
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for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens incurred in the ordinary course of business of
Luigino's or any Subsidiary of Luigino's with respect to obligations that do not
exceed $5.0 million at any one time outstanding; and (x) Liens on assets of one
or more Subsidiaries that are not Guarantors securing Indebtedness not to exceed
$5.0 million.
"Permitted Refinancing Indebtedness" means any Indebtedness of Luigino's or
any of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of Luigino's or any of its Subsidiaries; provided that: (i) the principal amount
(or accreted value, if applicable) of the Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) the Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, the Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) the Indebtedness
is incurred either by Luigino's or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or any other entity.
"Principal" means Mr. Jeno Paulucci.
"Related Party" means (i) any immediate family member of the Principal and
(ii) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80.0% or more
controlling interest of which consist of the Principal and/or such other Persons
referred to in clause (i) of this definition.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt, provided that if and
for so long as any Designated Senior Debt lacks a representative, then the
Representative for that Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of that Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Senior Debt" means (i) all Indebtedness now or hereafter outstanding under
Credit Facilities and all Hedging Obligations with respect thereto, (ii) any
other Indebtedness permitted to be incurred by Luigino's or a Guarantor under
the terms of the Indenture, unless the instrument under which the Indebtedness
is incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes or the Guarantee of that Guarantor, as the case
may be, and (iii) all Obligations with respect to the foregoing. Notwithstanding
anything to the contrary in the foregoing, Senior Debt will not include (w) any
liability for federal, state, local or other taxes owed or owing by Luigino's,
(x) any Indebtedness of Luigino's to any of its Subsidiaries or other
Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of the Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing the Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal before the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50.0% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned
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or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is that Person or a Subsidiary of that Person or (b) the only general
partners of which are that Person or of one or more Subsidiaries of that Person
(or any combination thereof).
"Subsidiary Guarantee" means a Guarantee by a Subsidiary on a senior
subordinated basis of Luigino's payment obligations under the Notes and the
Indenture in the form attached as an exhibit to the Indenture.
"Tax Distribution Agreement" means the agreement dated the Issue Date among
Luigino's shareholders and Luigino's, as in effect on the date of the Indenture.
"Voting Stock" of any Person as of any date means the Capital Stock of that
Person that is at the time entitled to vote in the election of the board of
directors of that Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
that date and the making of that payment, by (ii) the then outstanding principal
amount of that Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of that Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by that
Person or by one or more Wholly Owned Subsidiaries of that Person and one or
more Wholly Owned Subsidiaries of that Person.
FEDERAL TAX CONSIDERATIONS
The following discussion is a summary of certain United States federal
income tax consequences of the ownership and disposition of the Notes by a
Foreign Person (as defined below), based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), judicial decisions, and
administrative interpretations, all of which are subject to change at any time
by legislative, judicial or administrative action. Any such changes may be
applied retroactively in a manner that could adversely affect a holder of the
Notes. There can be no assurance that the Internal Revenue Service (the "IRS")
will not challenge the conclusions stated below, and no ruling from the IRS has
been or will be sought on any of the matters discussed below.
The following discussion does not purport to be a complete analysis of all
the potential federal income tax effects relating to the ownership and
disposition of the Notes by Foreign Persons or any other person, and, without
limiting the generality of the foregoing, this summary does not address the
effect of any special rules applicable to certain types of purchasers (including
dealers in securities, insurance companies, financial institutions, tax-exempt
entities, and persons who hold Notes as part of a straddle, hedge, or conversion
transaction). This discussion is limited to Foreign Persons other than certain
former United States citizens or former residents of the United States and is
limited to Foreign Persons who hold the Notes as capital assets within the
meaning of Section 1221 of the Code. This discussion does not address the effect
of any state, local, or foreign tax laws. Holders of Notes who are Foreign
Persons are urged to consult their own tax advisors regarding the specific tax
consequences to them of owning and disposing of Notes.
Certain U.S. Federal Income Tax Consequences to Foreign Persons
For purposes of this discussion, the term "U.S. Person" means (i) an
individual who is a citizen or resident of the United States, (ii) a corporation
or partnership created or organized in or under the laws of the United States or
any state thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. The term "Foreign
Person" means a person other than a U.S. Person.
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Any interest earned on a Note by a holder who is a Foreign Person will be
considered "portfolio interest" and will not be subject to United States federal
income tax, and will not be subject to United States tax withholding (except for
"backup withholding" in the circumstances described below), if:
. the Foreign Person is neither (i) a "controlled foreign corporation"
that is related to Luigino's as described in Section 881(c)(3)(C) of
the Code, (ii) a bank that has purchased Notes pursuant to an
extension of credit made in the ordinary course of its trade or
business, nor (iii) a person who owns, actually or constructively,
10.0% or more of the voting power in Luigino's;
. the person who would otherwise be required to withhold tax from
payments of such interest (the "withholding agent") is furnished an
IRS Form W-8 (or an acceptable substitute form), signed under
penalties of perjury, identifying the beneficial owner of the Note and
stating that the beneficial owner of the Note is a Foreign Person; and
. the interest is not effectively connected with the conduct of a trade
or business within the United States by the Foreign Person.
Any interest (other than "portfolio interest") earned on a Note by a
Foreign Person will be subject to United States federal income tax and
withholding at a rate of 30.0% (or at a lower rate under an applicable tax
treaty) if that interest is not effectively connected with the conduct of a
trade or business within the United States by that Foreign Person.
Any interest earned on a Note, and any gain realized on a sale or exchange
(including a redemption) of a Note, that is effectively connected with the
conduct of a trade or business within the United States by the Foreign Person
(and if certain tax treaties apply, is attributable to a United States permanent
establishment maintained by the Foreign Person) will be subject to United States
federal income tax at regular graduated rates (and, if the Foreign Person is a
corporation, may also be subject to a United States branch profits tax equal to
30.0%, or any lower rate provided by an applicable tax treaty, of its
effectively connected earnings and profit for the taxable year, subject to
certain adjustments). Such income will not be subject to United States income
tax withholding, however, if the Foreign Person furnishes the proper certificate
to the withholding agent.
Any gain realized by a Foreign Person on a sale or exchange (including a
redemption) of a Note will not be subject to United States federal income tax or
withholding if (i) the gain is not effectively connected with the conduct of a
trade or business within the United States by the Foreign Person (and if certain
tax treaties apply, is not attributable to a United States permanent
establishment maintained by the Foreign Person), and (ii) in the case of a
Foreign Person who is an individual, that individual is not present in the
United States for 183 days or more in the taxable year of the sale or exchange,
or the individual does not have a "tax home" in the United States and the gain
is not attributable to an office or other fixed place of business maintained in
the United States by the individual.
For United States estate tax purposes, the gross estate of an individual
who is not a United States citizen or resident (as specially defined for United
States federal estate tax purposes) and who holds a Note at the time of his
death is not deemed to include that Note if the interest thereon constitutes
"portfolio interest" (without regard to whether the "portfolio interest"
certification requirements are satisfied).
Backup Withholding and Information Reporting
Information reporting on IRS Form 1099 and backup withholding will not
apply to payments made by Luigino's or any agent thereof to a holder of a Note
if the holder has furnished a certification under penalties of perjury that it
is a Foreign Person, or has otherwise demonstrated that it qualifies for an
applicable exemption, provided that neither Luigino's nor the agent has actual
knowledge to the contrary.
If a Foreign Person sells a Note through a United States office of a
broker, the broker is required to file an information report and is required to
withhold 31.0% of the sale proceeds unless the Foreign Person certifies under
penalties of perjury its non-United States status (and the payor does not have
actual knowledge to the contrary) or otherwise establishes an exemption. If a
Foreign Person sells a Note through a foreign office of a broker, backup
withholding is not required; but information reporting is required if the broker
does not have documentary evidence
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that the holder is a Foreign Person and if the broker is a U.S. Person, is a
"controlled foreign corporation" for United States federal income tax purposes,
or derives 50.0% or more of its gross income for a specified three year period
from the conduct of a trade or business in the United States.
Any amount withheld from payment to a holder under the backup withholding
rules will generally be allowed as a credit against the holder's United States
federal income tax liability, if any, and may entitle the holder to a refund,
provided that the required information is furnished to the IRS.
Consequences of the Exchange Offer to Exchanging and Non-exchanging Holders
The exchange of a Note for an Exchange Note pursuant to the Exchange Offer
will not be taxable to an exchanging holder for federal income tax purposes. As
a result
. an exchanging holder will not recognize any gain or loss on the
exchange;
. the holding period for the Exchange Note will include the holding
period for the Note; and
. the basis of the Exchange Note will be the same as the basis for the
Note.
The Exchange Offer will not result in any federal income tax consequences
to a non-exchanging holder of Notes.
New Final Regulations
The United States Treasury Department has promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not significantly alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. Special rules
apply which permit the shifting of primary responsibility for withholding to
certain financial intermediaries acting on behalf of beneficial owners. The
final regulations are generally effective for payments made after December 31,
1999, subject to certain transition rules. Foreign Persons are urged to consult
their own tax advisors with respect to these final regulations.
PLAN OF DISTRIBUTION
Each broker-dealer participating in the exchange that receives New Notes
for its own account pursuant to the exchange offer must deliver a prospectus in
connection with any resale of those New Notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by the participating
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where those Old Notes were acquired as a result of market-making
activities or other trading activities. Luigino's has agreed that, for a period
of 120 days after the date of this prospectus, it will make this prospectus, as
amended or supplemented, available to any participating broker-dealer for use in
connection with any such resale. In addition, for a period of 90 days after the
date of this prospectus, all dealers effecting transactions in the New Notes may
be required to deliver a prospectus.
Luigino's will not receive any proceeds from any sales of New Notes by
broker- dealers participating in the exchange. New Notes received by
participating broker-dealers for their own account pursuant to the exchange
offer may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the New Notes or a combination of these methods of resale, at market prices
prevailing at the time of resale, at prices related to those prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any participating broker-dealer
and/or the purchasers of any New Notes sold by them. Any participating broker-
dealer that resells the New Notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of those New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any resale of New Notes and any
commissions or concessions received by any persons making the sales may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that, by acknowledging that it
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will deliver and by delivering a prospectus, a participating broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 120 days after the expiration date of the exchange offer,
Luigino's will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer participating in
the exchange that requests those documents in its letter of transmittal.
LEGAL MATTERS
The validity of the New Notes will be passed upon for Luigino's by Dorsey &
Whitney LLP, Minneapolis, Minnesota. William H. Hippee, Jr., a partner in Dorsey
& Whitney LLP, is a director of Luigino's and a trustee of certain of the trusts
that are the beneficial owners of certain shares of the Common Stock of
Luigino's. See the "Ownership of Common Stock" section of this prospectus.
EXPERTS
The financial statements included in this prospectus and elsewhere in the
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 experts in giving
said report.
WHERE YOU CAN FIND MORE INFORMATION
Luigino's is not currently subject to the information reporting requirements
of the Exchange Act. However, according to the Indenture, we have agreed to file
with the Commission and to provide to holders of the Old Notes and the New
Notes, as applicable, copies of the financial and other information that would
be contained in the annual reports and quarterly reports that Luigino's would be
required to file with the Commission if we were subject to those requirements of
the Exchange Act. Luigino's will also make these reports available to
prospective purchasers of the New Notes, and to securities analysts and broker-
dealers upon request. In addition, Luigino's has agreed to furnish to holders of
the Old Notes, and prospective purchasers of the New Notes, upon request, the
information required to be delivered pursuant to Rule 144A (d)(4) under the
Securities Act until Luigino's has exchanged the Old Notes for the New Notes or
the Commission has declared effective the Registration Statement of which this
prospectus is a part.
This prospectus does not contain all the information in the Registration
Statement and its exhibits which Luigino's filed with the Commission under the
Securities Act and to which we refer in this prospectus. You can inspect and
copy the other information Luigino's filed with the Commission at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and CitiCorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You can copy these materials at 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 which contains this information. You can visit this site at
http://www.sec.gov.
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LUIGINO'S, INC.
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants.....................................F-2
Balance Sheets as of January 4, 1998 and January 3, 1999.....................F-3
Statements of Income for the Fiscal Years Ended December 29, 1996,
January 4, 1998 and January 3, 1999.........................................F-4
Statements of Stockholders' Equity (Deficit) for the Fiscal Years
Ended December 29, 1996, January 4, 1998 and January 3, 1999................F-5
Statements of Cash Flows for the Fiscal Years Ended, December 29,
1996, January 4, 1998 and January 3, 1999...................................F-6
Notes to Financial Statements................................................F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Luigino's, Inc.:
We have audited the accompanying balance sheets of Luigino's, Inc. (a Minnesota
corporation) as of January 4, 1998 and January 3, 1999, and the related
statements of income, stockholders' equity (deficit) and cash flows for each of
the three years in the period ended January 3, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Luigino's, Inc. as of January
4, 1998 and January 3, 1999, and the results of its operations and its cash
flows for each of the three years in the period ended January 3, 1999, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Minneapolis, Minnesota,
March 5, 1999
F-2
<PAGE>
LUIGINO'S, INC.
Balance Sheets
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
January 4, January 3,
1998 1999
---------- ----------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents............................. $ 5,157 $ 1,193
Receivables, net of allowance for doubtful accounts
of $282 and $150, respectively....................... 18,570 19,709
Inventories........................................... 11,420 15,548
Prepaid expenses and other............................ 1,045 1,179
-------- --------
Total current assets................................ 36,192 37,629
-------- --------
Property, Plant and Equipment:
Land.................................................. 22 22
Buildings and improvements............................ 16,506 16,720
Machinery and equipment............................... 42,539 77,510
Office equipment and leasehold improvements........... 1,510 2,705
Construction in progress.............................. 10,931 2,916
Less -- Accumulated depreciation...................... (17,616) (24,491)
-------- --------
Net property, plant and equipment................... 53,892 75,382
-------- --------
Other Assets:
Notes receivables from principal stockholder.......... 8,808 8,809
Restricted cash....................................... 967 745
Other................................................. 1,518 1,956
-------- --------
Total other assets.................................. 11,293 11,510
-------- --------
Total Assets........................................... $101,377 $124,521
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.................. $ 6,602 $ 9,398
Accounts payable...................................... 11,765 16,942
Accrued expenses--
Accrued payroll and benefits......................... 5,754 5,118
Accrued promotions................................... 4,330 4,630
Other................................................ 2,137 2,034
-------- --------
Total current liabilities........................... 30,588 38,122
Long-Term Debt, less current maturities................ 60,162 76,136
-------- --------
Total liabilities................................... 90,750 114,258
-------- --------
Commitments and Contingencies (Notes 2 and 6)
Stockholders' Equity:
Common stocks--
Voting, $1 stated par value, 600 shares authorized;
100 shares issued and outstanding................... -- --
Nonvoting, $1 stated par value, 900 shares
authorized;......................................... 1 1
900 shares issued and outstanding
Additional paid-in capital............................ 655 655
Retained earnings..................................... 9,971 9,607
-------- --------
Total stockholders' equity.......................... 10,627 10,263
-------- --------
Total Liabilities and Stockholders' Equity............. $101,377 $124,521
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
LUIGINO'S, INC.
Statements of Income
(In Thousands)
<TABLE>
<CAPTION>
For the Fiscal Years Ended
--------------------------------------
December 29, January 4, January 3,
1996 1998 1999
------------ ---------- ----------
<S> <C> <C> <C>
Net Sales............................... $199,590 $211,405 $214,975
Cost of Goods Sold...................... 117,636 116,820 118,334
------------ ---------- ----------
Gross profit......................... 81,954 94,585 96,641
------------ ---------- ----------
Operating Expenses:
Selling and promotional.............. 55,371 51,582 51,524
General and administrative........... 15,479 20,490 21,272
Reserve for plant impairment......... -- -- 5,172
Distribution contract termination.... 1,675 -- --
------------ ---------- ----------
Total operating expenses............. 72,525 72,072 77,968
------------ ---------- ----------
Operating income..................... 9,429 22,513 18,673
------------ ---------- ----------
Other Income (Expense):
Interest expense..................... (6,006) (6,476) (6,509)
Interest income...................... 772 786 436
Other, net........................... (156) 180 235
------------ ---------- ----------
Total other expense.................. (5,390) (5,510) (5,838)
------------ ---------- ----------
Net Income.............................. $ 4,039 $ 17,003 $ 12,835
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
LUIGINO'S, INC.
Statements of Stockholders' Equity (Deficit)
For the Fiscal Years Ended December 29, 1996, January 4, 1998 and
January 3, 1999
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Common Stock
------------------------------ Notes Retained Total
Voting Non-Voting Additional Receivable Earnings Stockholders'
-------------- -------------- Paid-In From (Accumulated Equity
Shares Amount Shares Amount Capital Stockholders Deficit) Deficit)
------ ------ ------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995........... 100 $ -- 900 $1 $ 655 $ (2,660) $ (4,963) $ (6,967)
Net income.......................... -- -- -- -- -- -- 4,039 4,039
------ ------ ------ ------ ------- -------- -------- --------
Balance, December 29, 1996........... 100 -- 900 1 655 (2,660) (924) (2,928)
Collection of notes receivable
from stockholders.................. -- -- -- -- -- 2,660 -- 2,660
Distributions to stockholders....... -- -- -- -- -- -- (6,108) (6,108)
Net income.......................... -- -- -- -- -- -- 17,003 17,003
------ ------ ------ ------ ------- -------- -------- --------
Balance, January 4, 1998............. 100 -- 900 1 655 -- 9,971 10,627
Distributions to stockholders....... -- -- -- -- -- -- (13,199) (13,199)
Net income.......................... -- -- -- -- -- -- 12,835 12,835
------ ------ ------ ------ ------- -------- -------- --------
Balance, January 3, 1999............. 100 $ -- 900 $1 $655 $ -- $ 9,607 $ 10,263
====== ====== ====== ====== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
LUIGINO'S, INC.
Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
For the Fiscal Years Ended
--------------------------------------
December 29, January 4, January 3,
1996 1998 1999
------------ ---------- ----------
<S> <C> <C> <C>
Operating Activities:
Net income........................................ $ 4,039 $ 17,003 $ 12,835
Adjustments to net income provided
by operating activities -
Depreciation and amortization.................... 5,477 5,925 7,387
Non-cash portion of plant impairment............. -- -- 4,722
Other............................................ 360 944 212
Changes in operating assets and
liabilities:
Receivables..................................... (4,350) 3,464 (1,139)
Inventories..................................... (549) (1,236) (4,128)
Prepaid expenses and other...................... 400 716 (134)
Accounts payable................................ (788) 251 5,177
Accrued expenses................................ (1,902) (1,182) (439)
-------- -------- --------
Net cash provided by operating activities..... 2,687 25,885 24,493
-------- -------- --------
Investing Activities:
Purchases of property, plant and equipment........ (2,564) (10,202) (33,098)
Purchases of other assets......................... (1,612) (4,653) (1,151)
-------- -------- --------
Net cash used in investing.................... (4,176) (14,855) (34,249)
-------- -------- --------
Financing Activities:
Borrowings on revolving credit agreement.......... 59,850 49,250 53,900
Payments on revolving credit agreement............ (56,800) (68,750) (38,800)
Proceeds from debt................................ 5,463 60,364 11,670
Repayments of debt................................ (6,589) (43,013) (8,000)
Decrease in restricted cash....................... 123 -- 222
Decreases (increases) of notes receivable......... (463) 2,151 (1)
Distributions to stockholders..................... -- (6,108) (13,199)
-------- -------- --------
Net cash provided by (used in)
financing activities......................... 1,584 (6,106) 5,792
-------- -------- --------
Increase (decrease) in cash and cash equivalents... 95 4,924 (3,964)
Cash and cash equivalents, beginning of year....... 138 233 5,157
-------- -------- --------
Cash and cash equivalents, end of year............. $ 233 $ 5,157 $ 1,193
======== ======== ========
Supplemental Information:
Interest paid..................................... $ 6,042 $ 7,253 $ 6,505
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
LUIGINO'S, INC.
Notes to Financial Statements
(Dollars in Thousands, Except Share Data)
1. Operations:
Luigino's, Inc. (the Company), a Minnesota corporation, manufactures food
products primarily under the Michelina's and Yu Sing labels at production
facilities located in Minnesota and Ohio. Its products, distributed
predominately in the North American market, are sold through independent and
chain store retail grocery outlets.
2. Summary of Significant Accounting Policies:
Fiscal Year
The Company has elected a 52/53-week fiscal year which ends on the Sunday
closest to December 31. The year ended December 29, 1996 (fiscal year 1996) and
January 3, 1999 (fiscal year 1998) were 52-week fiscal years. The year ended
January 4, 1998 (fiscal year 1997) was a 53-week fiscal year.
Revenue Recognition
Revenues are recognized as products are shipped, and promotions are accrued as
commitments are made and related products are shipped. The Company records sales
net of "off invoice" promotional discounts, which were $28,247, $22,350 and
$19,651 for fiscal years 1996, 1997 and 1998, respectively.
The Company had a co-pack agreement to manufacture certain food products for a
third party that began in mid-1992 and expired the first quarter of the 1998
fiscal year. As part of the agreement, the Company has provided consulting
services to the third party for which the Company received a fee of $75 per
quarter through 1996. Net sales includes revenues related to the contract
packing agreement of $8,349, $8,394 and $1,006 for fiscal years 1996, 1997 and
1998, respectively.
Product Related Costs
Expenditures for research and development, advertising, sales promotion, new
item placement and other product related costs are expensed as incurred.
Income Taxes
The Company has elected to be classified as an S corporation for federal and
state income tax purposes whereby the Company's taxable income and available tax
credits are included in the individual income tax returns of the stockholders.
The Company reports certain items for income tax purposes on a different basis
from what is reflected in the accompanying financial statements. The principal
differences are related to the depreciation of certain assets using accelerated
methods and reserves and accruals not currently deductible for income tax
purposes. The tax liabilities and benefits relating to the reversal of temporary
differences in future years will be the responsibility of the stockholders
unless the S corporation election is terminated, at which time deferred income
taxes applicable to the temporary differences would be the responsibility of
Company.
Cash and Cash Equivalents
The Company considers all highly liquid investments which are convertible into
known amounts of cash and have an original maturity of three months or less to
be cash and cash equivalents. Cash and cash equivalents consists primarily of
money market deposits. The fair value of cash and cash equivalents approximates
carrying value because of the short maturity of the investments.
F-7
<PAGE>
Derivative Financial Instruments
The Company uses interest rate swap agreements to manage exposure to interest
rate fluctuations. The Company does not use derivative instruments for
speculative purposes. The differential paid or received on interest rate swap
agreements is recognized as an adjustment to interest expense in the period
incurred or earned.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
Concentration of credit risk with respect to trade accounts receivable is
limited due to the large number of customers and their dispersion across many
geographic areas. The Company does not currently foresee a credit risk
associated with these receivables.
The Company has an exclusive distribution agreement with a Canadian company to
distribute the Company's products in Canada. During fiscal year 1998, the
distributor accounted for 11.2% of net sales. During fiscal years 1996 and
1997, no individual customer accounted for 10% of the Company's net sales.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market and
consisted of the following:
<TABLE>
<CAPTION>
January 4, January 3,
1998 1999
---------- ----------
<S> <C> <C>
Raw materials ................................ $ 5,823 $ 7,266
Finished goods ............................... 3,795 6,249
Packaging supplies ........................... 1,802 2,033
---------- ----------
$ 11,420 $ 15,548
========== ==========
</TABLE>
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Additions and improvements
that extend the life of an asset are capitalized, while repairs and maintenance
costs are charged to expense as incurred. Depreciation is provided principally
using the straight-line method based upon an estimated useful life of 20 to 40
years for buildings and improvements, 5 to 10 years for machinery and equipment
and 3 to 10 years for office equipment and leasehold improvements.
Property, plant and equipment, and other long-term assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected undiscounted
cash flows is less than the carrying value of the related asset or group of
assets, a loss is recognized for the difference between the fair value and
carrying value of the asset or group of assets. Such analyses necessarily
involve significant judgement.
Restricted Cash
Restricted cash includes cash restricted for foreign duty bond and debt
retirement.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
ultimate results could differ from those estimates.
F-8
<PAGE>
Reclassifications
Certain amounts in the financial statements for fiscal years 1996 and 1997 have
been reclassified to conform with the fiscal 1998 presentation. Those
reclassifications had no effect on stockholders' equity or net income.
Fair Value of Financial Instruments
Fair values of financial instruments have been estimated in accordance with
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures about
Fair Value of Financial Instruments." The Company has estimated fair values
using available market information and appropriate valuation methods. However,
considerable judgment is required in formulating fair value, and the estimated
fair value amounts may not be indicative of amounts which would be realized in
market transactions. As of January 4, 1998 and January 3, 1999, the fair value
of the Company's financial instruments approximated their respective carrying
values.
Recent Accounting Pronouncements
The Company elected to adopt Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," in
fiscal year 1998. SOP 98-1 provides guidance on the classification of software
project costs between expense and capital. The adoption did not have a
significant effect on the financial position or the results of operations of the
Company.
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in fiscal
year 1998, which requires presentation of comprehensive income on the face of
the financial statements. The adoption did not affect the Company's disclosures
as it currently has no components of other comprehensive income.
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in fiscal year 1998, which established the standards
for the manner in which public enterprises are required to report financial and
descriptive information about their operating segments. The adoption of SFAS
No. 131 did not affect the Company's results of operations, financial position
or cash flows. The Company currently does not have any business activities
which constitute disaggregated separate segments for reporting purposes.
The Company had foreign export sales amounting to 7.0%, 8.0% and 12.7% of net
sales for fiscal years 1996, 1997 and 1998, respectively. The following table
presents the details of net sales:
<TABLE>
<CAPTION>
Fiscal Year 1996 Fiscal Year 1997 Fiscal Year 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
United States $185,695 93.0% $194,696 92.0% $187,680 87.3%
Canada 12,138 6.1% 14,693 7.0% 24,054 11.2%
Other 1,757 0.9% 2,016 1.0% 3,241 1.5%
-------- ------ -------- ------ -------- ------
Total $199,590 100.0% $211,405 100.0% $214,975 100.0%
======== ====== ======== ====== ======== ======
</TABLE>
The following table sets forth the Company's net sales by product line:
<TABLE>
<CAPTION>
Fiscal Year 1996 Fiscal Year 1997 Fiscal Year 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
Green Label $ 98,122 49.2% $104,512 49.4% $113,645 52.9%
Red Label 26,762 13.4% 29,597 14.0% 34,638 16.1%
Blue Label 18,743 9.4% 31,208 14.8% 29,990 14.0%
Black Label 33,564 16.8% 28,598 13.5% 27,726 12.9%
Snacks 14,050 7.0% 9,096 4.3% 7,970 3.7%
Co-pack 8,349 4.2% 8,394 4.0% 1,006 0.4%
-------- ------ -------- ------ -------- ------
Total $199,590 100.0% $211,405 100.0% $214,975 100.0%
======== ====== ======== ======= ======== ======
</TABLE>
F-9
<PAGE>
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 1999. SFAS No. 133
establishes accounting and reporting standards for derivative instruments.
Because of the Company's minimal use of derivatives, management does not
anticipate that the adoption of SFAS No. 133 will have a significant effect on
the financial position or the results of operations of the Company.
3. Long-Term Debt:
The Company's long-term debt consisted of the following:
<TABLE>
<CAPTION>
January 4, January 3,
1998 1999
---------- ----------
<S> <C> <C>
Notes payable to banks; principal payable in varying
amounts through 2004; interest at 8.2%; collateralized by
substantially all assets of the Company............................................ $ 49,200 $ 45,500
Notes payable to banks under revolving credit agreement............................. -- 15,100
Notes payable to government bodies; varying maturity dates through
2013; interest at 2.0% to 8.0%; collateralized by certain equipment and
assets under capital lease obligations related to state development
revenue bonds and guaranteed by the principal stockholders......................... 12,275 10,967
Notes payable; due in varying amounts through 2004; interest at 2.0% to
10.5%; collateralized by certain assets of the Company, including
accounts receivable, inventory, intangibles, building, equipment and
improvements....................................................................... 4,030 13,372
Other............................................................................... 1,259 595
---------- ----------
66,764 85,534
Less -- Current maturities.......................................................... (6,602) (9,398)
---------- ----------
$ 60,162 $ 76,136
========== ==========
</TABLE>
In 1997, the Company entered into a credit agreement with a group of banks that
provides for a $20,000 revolving line of credit due September 30, 2002, and term
loans of $30,000 and $20,000 due in varying installments through June 30, 2002
and June 30, 2004, respectively. The agreement provides for floating rate loans
and Eurodollar rate loans of one, two, three, or six months in duration, plus a
margin determined by the Company's cash flow leverage ratio, and a commitment
fee related to the unused portion of the revolving line of credit. Borrowings
under the agreement are collateralized by substantially all assets of the
Company and a pledge of the Company's stock by its principal stockholder.
The Company entered into a three-year interest rate swap agreement with a
commercial bank in order to manage the relationship of its fixed rate versus
floating rate debt. Income and expense associated with the swap transaction are
accrued over the periods prescribed by the contract. The agreement, which
relates to the notional amount of $25,000, effectively increased the Company's
interest rate on the debt, from the effective date, September 26, 1997, by
approximately 0.29%. The fair value of the interest rate swap agreement as of
January 3, 1999 was not significant.
Under terms of the debt agreements, the Company must meet certain financial and
nonfinancial covenants, including maintaining certain levels of net worth and
meeting or exceeding certain financial ratios. Certain covenants also require
minimum employment levels at specified locations by specified dates, require
certain reporting and place limitations on stock ownership and the movement of
assets and operations. As of January 3, 1999, the Company was in compliance with
or had obtained waivers and amendments for all such covenants.
Aggregate maturities of long-term debt for each of the five years subsequent to
fiscal year 1998 are $9,398, $11,059, $12,577, $28,335, $10,985 and $13,180
thereafter.
F-10
<PAGE>
4. Related-Party Transactions:
The Company maintains a bank account with a bank related to the Company through
common ownership. The Company and related entities also incur costs on behalf of
one another and reimburse each other for such costs. The Company leases its
executive offices in Duluth, Minnesota and certain other facilities from related
parties. The Company's principal shareholder and Paulucci International Ltd.,
Inc., a corporation wholly owned by the principal shareholder, provide the
Company with various consulting and administrative support services. The Company
reimburses these parties for such expenses. Management believes such
transactions with and reimbursements to related parties are at cost or at terms
approximating market value.
As of January 3, 1999, the Company had a note receivable of $9,059, of which
$250 was classified as current due from its principal stockholder. The note
bears interest at the Short Term Applicable Federal Rate (4.5% at January 3,
1999) and is due on or before January 15, 2001. Quarterly interest payments and
annual principal payments commenced on April 15, 1998, and December 31, 1998,
respectively. The intended sources of repayment of this note are personal
assets and future cash flows of the principal stockholder. Interest income
includes interest earned on stockholder notes of approximately $621, $583 and
$472 for fiscal years 1996, 1997 and 1998, respectively.
5. Capital Stock:
The Company has 1,500 authorized shares of common stock, of which 600 are
entitled to vote and 900 are nonvoting. The 100 shares of voting stock
currently issued and outstanding are beneficially owned by the Chairman and CEO
of the Company.
6. Commitments and Contingencies:
Lease Commitments
The Company leases warehouse and office space, equipment and certain other items
under noncancelable operating leases. Total lease expense was $10,902, $11,038
and $5,596 for fiscal years 1996, 1997 and 1998, respectively.
Minimum annual rental commitments for periods subsequent to January 3, 1999
under noncancelable operating leases were as follows:
(After giving effect to the buy-out of lease commitments after year-end as
described in Note 8)
1999..................................$ 757
2000.................................. 343
2001.................................. 149
2002.................................. 72
2003.................................. 23
Thereafter............................ 57
---------
$ 1,401
=========
Guarantee
The Company has guaranteed a $2,000 note payable in connection with a building
in Jackson, Ohio, which the Company currently occupies under a 15-year sublease
agreement.
Consulting and Employment Agreements
The Company and Paulucci International Ltd., Inc. ("Paulucci International"), a
corporation wholly owned by the Company's Chairman and CEO, are parties to a
Consulting Agreement, dated January 1, 1999 (the "Consulting Agreement"),
pursuant to which Paulucci International provides certain consulting services to
the Company. Under the terms of the Consulting Agreement, Paulucci
International is paid an annual fee of $3,000 and is reimbursed for
F-11
<PAGE>
its actual out-of-pocket expenses incurred in rendering such services. If the
Consulting Agreement is terminated by the Company, a termination fee is payable
to Paulucci International equal to the prior twelve months consulting fee if
termination is in the third or fourth year of the agreement, 75% of such amount
in the fifth year and 50% of such amount in the sixth year.
The Company's President and COO is party to an employment agreement with the
Company in effect until December 1999, subject to early termination or
extensions thereunder. The employment agreement covers base salary and annual
bonus, and provides for an 18 month noncompetition covenant upon termination of
the agreement. In addition, the President and COO is paid compensation under the
Company's phantom stock plan. Certain other members of management of the
Company are also party to incentive agreements that link a portion of their
future compensation to EBITDA.
Litigation
In November 1997, Luigino's commenced an action against The Stouffer Corporation
("Stouffer") in the United States District Court, District of Minnesota seeking
a judgment declaring that our Michelina's Lean 'n Tasty trademark does not
infringe or dilute Stouffer's LEAN CUISINE trademark. Stouffer counterclaimed,
alleging willful and bad faith infringement and dilution of its trademark and
seeking damages, including an accounting for profits resulting to Luigino's from
any illegal use. In March 1998, the District Court granted summary judgment in
favor of Luigino's on all claims and Stouffer appealed the matter to the United
States Court of Appeals for the Eighth Circuit. In March 1999, the Court of
Appeals affirmed the decision of the District Court in favor of Luigino's on all
claims and counterclaims.
The Company is a party to litigation in the normal course of business. In the
opinion of management, the resolution of these matters will not have a material
adverse effect on the Company's financial position or results of operations.
Defined Contribution Plan
The Company sponsors a 401(k) plan which is available to all full-time salaried
employees over the age of 21. There were no company contributions to the plan
for fiscal year 1996. The Company provided discretionary matching contributions
of $174 and $241 to eligible employees based upon their contributions to the
plan for fiscal years 1997 and 1998.
Phantom Stock Plan
The Company sponsors a phantom stock plan and has issued one unit to a key
employee. The provisions of the plan include minimum payments of $500 to the
participant and additional amounts if the Company's stock value is in excess of
$100,000. The Company recognizes compensation expense annually for the related
amount based on the minimum payment due plus the additional amounts due based on
stock appreciation, if any. The compensation expense was $63, $240 and $1,000
for fiscal years 1996, 1997 and 1998, respectively.
Plant Impairment
During 1996 the Company entered into an agreement with the Office of the
Commissioner of the Iron Range Resources and Rehabilitation Board (IRRRB) with
respect to construction of a manufacturing facility in Hibbing, Minnesota. As
of January 3, 1999 the Company had invested $4,722 in the project.
In November 1999 the IRRRB made a claim that the Company had not commenced
construction as required by the 1996 agreement, and demanded that the Company
re-convey the property to the IRRRB and pay liquidation damages of $350. The
Company has launched a vigorous defense against the IRRRB claim. Because of the
uncertainty of the resolution of this matter, the Company established a reserve
of $5,172 in 1998, including a non-cash charge of $4,722 for the impaired assets
and $450 for potential liquidated damages and other costs.
F-12
<PAGE>
7. Quarterly Financial Data (Unaudited):
<TABLE>
<CAPTION>
Fiscal Year 1997 Fiscal Year 1998
-------------------------------------- --------------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 61,550 $ 47,144 $ 47,620 $ 55,091 $ 62,958 $ 49,362 $ 44,466 $ 58,189
Gross profit 26,413 21,970 20,776 25,426 26,662 21,151 21,358 27,470
Net income (loss) 3,737 3,741 3,474 6,051 5,691 3,716 (2,915) 6,343
</TABLE>
The first quarter is a 16 week period, while the second through fourth quarters
are 12 week periods. The fourth quarter for fiscal year 1997 was a 13-week
period.
The third quarter of 1998 includes a reserve for plant impairment of $5,172,
including a non-cash charge of $4,722 for the impaired assets and $450 for
potential future liquidated damages and other related costs.
8. Subsequent Event (Unaudited):
On February 4, 1999, the Company amended and restated its existing senior credit
facility with a group of banks to provide for a $50,000 revolving line of credit
due January 31, 2004, and issued $100,000 10.0% Senior Subordinated Notes due
February 1, 2006. The Company used the proceeds of the Senior Subordinated
Notes to retire the outstanding debt under the existing credit facility ($60,600
as of January 3, 1999) and to pay the outstanding balances on certain operating
leases and other indebtedness of $5,950 and $3,133 as of January 3, 1999, and to
make a $15,000 distribution to its shareholders. The amended and restated
credit facility requires the Company to meet certain financial and non-financial
covenants under substantially the same terms and conditions as required by the
previous credit facility.
The Senior Subordinated Notes were issued pursuant to an Indenture dated
February 4, 1999 between the Company and U.S. Bank Trust National Association as
trustee. The Senior Subordinated Notes are due February 1, 2006 and may be
redeemed by the Company for a premium after March 1, 2003. The Company may also
redeem up to $35,000 of the Senior Subordinated Notes with net cash proceeds of
any public offerings of Common Stock at any time prior to February 1, 2002 at a
redemption price of 110% of the principal amount redeemed, provided that such
redemption occurs within 45 days of the closing of such public offering.
F-13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 302A.521 of the Minnesota Statutes provides that a corporation
shall indemnify any person made or threatened to be made a party to a proceeding
by reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan for the same judgments, penalties or
fines; (2) acted in good faith; (3) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of interest), if
applicable, has been satisfied; (4) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in certain
instances. A decision as to required indemnification is made by a disinterested
majority of the Board of Directors present at a meeting at which a disinterested
quorum is present, or by a designated committee of the Board, by special legal
counsel, by the shareholders or by a court.
Provisions regarding indemnification of officers and directors of the
Registrant to the extent permitted by Section 302A.521 are contained in the
registrant's Articles of Incorporation ( Exhibit 3.1 hereto, which is
incorporated herein by reference).
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Number Description
------ -----------
1.1 Purchase Agreement, dated January 29, 1999, by and among the Company
and the Initial Purchasers.
1.2 A/B Exchange Registration Rights Agreement, dated February 4, 1999, by
and among the Company and the Initial Purchasees.
3.1 Articles of Incorporation of the Company, as amended.
3.2 Bylaws of the Company.
4.1 Indenture, dated February 4, 1999, between the Company and U.S. Bank
Trust National Association with respect to the Company's 10% Senior
Subordinated Notes due 2006.
4.2 Form of the Company's Note Certificate for New Notes.
5.1 Opinion of Dorsey & Whitney LLP as to legality.
8.1 Tax Opinion of Dorsey & Whitney LLP (including consent).
II-1
<PAGE>
10.1 Amended and Restated Credit Agreement, dated February 4, 1999, between
and among the Company, The First National Bank of Chicago, as Agent
and the lenders named therein.
10.2 Amendment No. 1 to Amended and Restated Credit Agreement, dated March
12, 1999, by and among the Company and The First National Bank of
Chicago, as Agent, and the lenders named therein.
10.3 Employment Agreement, dated September 1, 1992, between the Company and
Ronald Bubar.
10.4 Consulting Agreement, dated January 1, 1999, between the Company and
Paulucci International Ltd., Inc.
10.5 Tax Distribution Agreement, dated February 4, 1999, among the Company
and all of its shareholders named therein.
10.6 Twentieth Supplemental Trust Agreement, dated as of September 1, 1991,
between the State of Ohio and the Provident Bank, as Trustee, relating
to $6,715,000 State of Ohio Economic Development Revenue Bonds, Series
1991-10.
10.7 Lease, dated as of September 1, 1991, between the Director of
Development of the State of Ohio and the Company.
10.8 Thirty-Eighth Supplemental Trust Agreement, dated as of September 1,
1991, between the State of Ohio and the Provident Bank, as Trustee,
relating to $8,100,000 State of Ohio Economic Development Revenue
Bonds, Series 1993-5 (Foremost Mgmt., Inc. Project).
10.9 Lease, dated as of September 21, 1993, between the Director of
Development of the State of Ohio and Foremost Mgmt., Inc.
10.10 Sublease, dated as of September 21, 1993, between Foremost Mgmt., Inc.
and the Company.
10.11 Amendment and Waiver, dated as of December 22, 1998, between the
Company and Department of Development of the State of Ohio.
10.12 Shareholder Control Agreement, dated February 4, 1999, among the
Company and its shareholders.
12.1 Statement of computation of ratios.
23.1 Consent of Arthur Andersen LLP.
23.2 Consents of Dorsey & Whitney LLP (included in Exhibits 5.1 and 8.1).
24.1 Powers of attorney (included on signature page).
25.1 Statement on Form T-1 of eligibility of Trustee.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Clients.
*99.4 Form of Letter to Nominees.
* To be filed by amendment.
II-2
<PAGE>
(b) Financial Statement Schedules.
Item 22. Undertakings
(a) The Undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the Securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the Securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes:
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 Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, office or controlling person in connection with the Securities being
registered, the Registrant will, unless in the opinion of its counsel the mater
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sanford, State of Florida, on April 8, 1999.
LUIGINO'S, INC.
By: /s/ Jeno F. Paulucci
-------------------------------
Jeno F. Paulucci
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joel C. Kozlak as his or her true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any additional Registration Statement pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and any or all amendments
(including post-effective amendments) to this Registration Statement (or
Registration Statements, if an additional Registration Statement is filed
pursuant to Rule 462(b)), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Jeno F. Paulucci Chief Executive Officer April 8, 1999
- --------------------------- and Director (Principal Executive Officer)
Jeno F. Paulucci
/s/ Joel C. Kozlak Chief Financial Officer April 15, 1999
- --------------------------- (Principal Financial and Accounting Officer)
Joel C. Kozlak
/s/ Robert L. Peterson Director April 12, 1999
- ---------------------------
Robert L. Peterson
__________________________ Director April __, 1999
Anthony Luiso
/s/ Jack Helms Director April 12, 1999
- --------------------------
Jack Helms
/s/ Lois M. Paulucci Director April 8, 1999
- ---------------------------
Lois M. Paulucci
/s/ William H. Hippee, Jr. Director April 8, 1999
- ---------------------------
William H. Hippee, Jr.
/s/ Larry W. Nelson Director April 9, 1999
- ---------------------------
Larry W. Nelson
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
-------------
Number Description
------ -----------
1.1 Purchase Agreement, dated January 29, 1999, by and among the Company
and the Initial Purchasers.
1.2 A/B Exchange Registration Rights Agreement, dated February 4, 1999, by
and among the Company and the Initial Purchasees.
3.1 Articles of Incorporation of the Company, as amended.
3.2 Bylaws of the Company.
4.1 Indenture, dated February 4, 1999, between the Company and U.S. Bank
Trust National Association with respect to the Company's 10% Senior
Subordinated Notes due 2006.
4.2 Form of the Company's Note Certificate for New Notes.
5.1 Opinion of Dorsey & Whitney LLP as to legality.
8.1 Tax Opinion of Dorsey & Whitney LLP (including consent).
10.1 Amended and Restated Credit Agreement, dated February 4, 1999, between
and among the Company, The First National Bank of Chicago, as Agent
and the lenders named therein.
10.2 Amendment No. 1 to Amended and Restated Credit Agreement, dated March
12, 1999, by and among the Company and The First National Bank of
Chicago, as Agent, and the lenders named therein.
10.3 Employment Agreement, dated September 1, 1992, between the Company and
Ronald Bubar.
10.4 Consulting Agreement, dated January 1, 1999, between the Company and
Paulucci International Ltd., Inc.
10.5 Tax Distribution Agreement, dated February 4, 1999, among the Company
and all of its shareholders named therein.
10.6 Twentieth Supplemental Trust Agreement, dated as of September 1, 1991,
between the State of Ohio and the Provident Bank, as Trustee, relating
to $6,715,000 State of Ohio Economic Development Revenue Bonds, Series
1991-10.
10.7 Lease, dated as of September 1, 1991, between the Director of
Development of the State of Ohio and the Company.
10.8 Thirty-Eighth Supplemental Trust Agreement, dated as of September 1,
1991, between the State of Ohio and the Provident Bank, as Trustee,
relating to $8,100,000 State of Ohio Economic Development Revenue
Bonds, Series 1993-5 (Foremost Mgmt., Inc. Project).
10.9 Lease, dated as of September 21, 1993, between the Director of
Development of the State of Ohio and Foremost Mgmt., Inc.
10.10 Sublease, dated as of September 21, 1993, between Foremost Mgmt., Inc.
and the Company.
II-5
<PAGE>
10.11 Amendment and Waiver, dated as of December 22, 1998, between the
Company and Department of Development of the State of Ohio.
10.12 Shareholder Control Agreement, dated February 4, 1999, among the
Company and its shareholders.
12.1 Statement of computation of ratios.
23.1 Consent of Arthur Andersen LLP.
23.2 Consents of Dorsey & Whitney LLP (included in Exhibits 5.1 and 8.1).
24.1 Powers of attorney (included on signature page).
25.1 Statement on Form T-1 of eligibility of Trustee.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Clients.
*99.4 Form of Letter to Nominees.
* To be filed by amendment.
II-6
<PAGE>
Exhibit 1.1
LUIGINO'S, INC.
$100,000,000
10% Series A Senior Subordinated Notes due 2006
Purchase Agreement
January 29, 1999
FIRST CHICAGO CAPITAL MARKETS, INC.
U.S. BANCORP LIBRA, A DIVISION OF U.S. BANCORP INVESTMENTS, INC.
<PAGE>
$100,000,000
10% Series A Senior Subordinated Notes due 2006
of Luigino's, Inc.
PURCHASE AGREEMENT
January 29, 1999
FIRST CHICAGO CAPITAL MARKETS, INC.
U.S. BANCORP LIBRA, A DIVISION OF U.S. BANCORP
INVESTMENTS, INC.
c/o First Chicago Capital Markets, Inc.
One First National Plaza
Mail Suite 0701
Chicago, Illinois 60670
Ladies and Gentlemen:
Luigino's, Inc., a Minnesota corporation (the "Company"), proposes to issue
and sell to First Chicago Capital Markets, Inc. and U.S. Bancorp Libra, a
division of U.S. Bancorp Investments, Inc. (each an "Initial Purchaser" and,
collectively, the "Initial Purchasers") an aggregate of $100,000,000 in
principal amount of its 10% Series A Senior Subordinated Notes due 2006 (the
"Series A Notes"), subject to the terms and conditions set forth herein. The
Series A Notes are to be issued pursuant to the provisions of an indenture (the
"Indenture"), to be dated as of the Closing Date (as defined below), among the
Company and U.S. Bank Trust National Association, as trustee (the "Trustee").
The Series A Notes and the Series B Notes (as defined below) issuable in
exchange therefor are collectively referred to herein as the "Notes."
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
1. Offering Memorandum. The Series A Notes will be offered and sold to the
Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
Company has prepared a preliminary offering memorandum, dated Januaryy12, 1999
(the "Preliminary Offering Memorandum") and a final offering memorandum, dated
January 29, 1999 (the "Offering Memorandum"), relating to the Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
<PAGE>
HEREOF, THE HOLDER: REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) NOT A U.S.
PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION;
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED
HEREBY EXCEPT TO (A) THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
APPLICABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D)
OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE,
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT 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."
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to the terms
and conditions contained herein, the Company agrees to issue and sell to the
Initial Purchasers, and each Initial Purchaser agrees, severally and not
jointly, to purchase from the Company, the principal amount of Series A Notes
set forth opposite the name of such Initial Purchaser on Schedule A hereto at a
purchase price equal to 97.25% of the principal amount thereof (the "Purchase
Price").
3. Terms of Offering. The Initial Purchasers have advised the Company that
the Initial Purchasers will make offers (the "Exempt Resales") of the Series A
Notes purchased hereunder on the terms set forth in the Offering Memorandum, as
amended or supplemented, solely to (i) persons whom the Initial Purchasers
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBs"), and (ii) persons permitted to purchase the Series A
Notes in offshore transactions in reliance upon Regulation S under the Act
(each, a "Regulation S Purchaser") (such persons specified in clauses (i) and
(ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
<PAGE>
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "Commission")
under the circumstances set forth therein, (i) a registration statement under
the Act (the "Exchange Offer Registration Statement") relating to the Company's
10% SeriesyB Senior Subordinated Notes Due 2006 (the "Series B Notes"), to be
offered in exchange for the SeriesyA Notes (such offer to exchange being
referred to as the "Exchange Offer") and (ii) a shelf registration statement
pursuant to Rule 415 under the Act (the "Shelf Registration Statement" and,
together with the Exchange Offer Registration Statement, the "Registration
Statements") relating to the resale by certain holders of the Series A Notes and
to use its best efforts to cause such Registration Statements to be declared and
remain effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the Indenture,
the Notes and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the "Operative Documents."
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Series A Notes
shall be made at the offices of Latham & Watkins, Chicago, Illinois or such
other location as may be mutually acceptable. Such delivery and payment shall be
made at 10:00 a.m. New York City time, on February 5, 1999 or at such other time
on the same date or such other date as shall be agreed upon by the Initial
Purchasers and the Company in writing. The time and date of such delivery and
the payment for the Series A Notes are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive global form, registered
in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Series A Notes (collectively, the "Global Note"), shall be
delivered by the Company to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by the Company
against payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds to the order of the Company. The Global Note shall be
made available to the Initial Purchasers for inspection not later than 10:00
a.m., New York City time, on the business day immediately preceding the Closing
Date.
5. Agreements of the Company. The Company hereby agrees with the Initial
Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period
<PAGE>
referred to in Section 5(c) below that makes any statement of a material fact
made in the Preliminary Offering Memorandum or the Offering Memorandum untrue or
that requires any additions to or changes in the Preliminary Offering Memorandum
or the Offering Memorandum in order to make the statements therein not
misleading. The Company shall use its best efforts to prevent the issuance of
any stop order or order suspending the qualification or exemption of any Series
A Notes under any state securities or Blue Sky laws and, if at any time any
state securities commission or other federal or state regulatory authority shall
issue an order suspending the qualification or exemption of any Series A Notes
under any state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish the Initial Purchasers and those persons identified by the
Initial Purchasers to the Company as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or supplements
thereto, as the Initial Purchasers may reasonably request for the time period
specified in Section 5(c). Subject to the Initial Purchasers' compliance with
its representations, warranties and agreements set forth in Section 7 hereof,
the Company consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers, (i) not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which the Initial
Purchasers shall reasonably object after being so advised and (ii) to prepare
promptly upon the Initial Purchasers' reasonable request, any amendment or
supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchasers, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchasers, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchasers and such other
persons as the Initial Purchasers may designate such number of copies thereof as
the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the registration or qualification of the
Series A Notes for offer and sale to the Initial Purchasers and pursuant to
Exempt Resales under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchasers may request and to continue such registration or
qualification
<PAGE>
in effect so long as required for Exempt Resales and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Preliminary Offering Memorandum,
the Offering Memorandum or Exempt Resales, in any jurisdiction in which it is
not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make generally
available as soon as practicable after the end of each fiscal year to the record
holders of the Notes a financial report of the Company and its subsidiaries (if
any) on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.
(g) So long as the Notes are outstanding, to furnish to the Initial
Purchasers as soon as available copies of all reports or other communications
furnished by the Company to its security holders or furnished to or filed with
the Commission or any national securities exchange on which any class of
securities of the Company is listed and such other publicly available
information concerning the Company and/or its subsidiaries (if any) as the
Initial Purchasers may reasonably request.
(h) So long as any of the Series A Notes remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any holder of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such holder, the
information ("Rule 144A Information") required by Rule 144A(d)(4) under the Act.
(i) 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 the obligations of the Company under
this Agreement, including: (i) the fees, disbursements and expenses of counsel
to the Company and accountants of the Company in connection with the sale and
delivery of the Series A Notes to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the foregoing
(including financial statements), including the mailing and delivering of copies
thereof to the Initial Purchasers and persons designated by it in the
<PAGE>
quantities specified herein, (ii) all costs and expenses related to the transfer
and delivery of the Series A Notes to the Initial Purchasers and pursuant to
Exempt Resales, including any transfer or other taxes payable thereon, (iii) all
costs of printing or producing this Agreement, the other Operative Documents and
any other agreements or documents in connection with the offering, purchase,
sale or delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Initial Purchasers in connection with such registration or qualification and
memoranda relating thereto), (v) the cost of printing certificates representing
the Series A Notes, (vi) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in the National Association of
Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL
("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's counsel
in connection with the Indenture and the Notes, (viii) the costs and charges of
any transfer agent, registrar and/or depositary (including DTC), (ix) any fees
charged by rating agencies for the rating of the Notes, (x) all costs and
expenses of the Exchange Offer and any Registration Statement, as set forth in
the Registration Rights Agreement, and (xi) and all other costs and expenses
incident to the performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section.
(j) To use its best efforts to effect the inclusion of the Series A Notes
in PORTAL and to maintain the listing of the Series A Notes on PORTAL for so
long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the Notes,
and to comply with all of its agreements set forth in the representation letters
of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(l) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or otherwise
transfer or dispose of any debt securities of the Company or any warrants,
rights or options to purchase or otherwise acquire debt securities of the
Company substantially similar to the Notes (other than (i) the Notes and (ii)
commercial paper issued in the ordinary course of business), without the prior
written consent of the Initial Purchasers.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts to claim,
the benefit of any usury laws against the holders of any Notes.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes registered pursuant to the Act to be offered in exchange
for the Series A Notes and to comply with all applicable federal and state
securities laws in connection with the Exchange Offer.
<PAGE>
(p) To comply with all of its agreements set forth in the Registration
Rights Agreement.
(q) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Series A Notes.
6. Representations, Warranties and Agreements of the Company. As of the
date hereof, the Company represents and warrants to, and agrees with, the
Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do not,
and any supplement or amendment to them 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 the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Minnesota and has
the corporate power and authority to carry on its business as described in the
Preliminary Offering Memorandum and the Offering Memorandum and to own, lease
and operate its properties, and is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company (a "Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid, nonassessable and not subject
to any preemptive or similar rights.
(d) The Company has no subsidiaries.
(e) This Agreement has been duly authorized, executed and delivered by the
Company.
(f) The Indenture has been duly authorized by the Company and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Indenture has been duly executed and delivered by the Company, the Indenture
will be a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms except as (i) the
<PAGE>
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of 1939, as
amended (the "TIA" or "Trust Indenture Act "), and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the Closing Date,
will have been validly executed and delivered by the Company. When the Series A
Notes have been issued, 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 this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the Series A
Notes will conform as to legal matters to the description thereof contained in
the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly authorized
by the Company. When the Series B Notes are issued, executed and authenticated
in accordance with the terms of the Exchange Offer and the Indenture, the Series
B Notes will be entitled to the benefits of the Indenture and will be the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(i) The Registration Rights Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company. When the Registration Rights Agreement has been duly executed and
delivered, the Registration Rights Agreement will be a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(j) The Company is not in violation of its charter or by-laws or in default
in the performance of any obligation, agreement, covenant or condition contained
in any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company to which the Company is a party or by
which the Company or its property is bound.
(k) The execution, delivery and performance of this Agreement and the other
Operative Documents by the Company, compliance by the Company with all
provisions hereof and thereof, the issuance of the Notes and the application of
the proceeds thereof and the consummation
<PAGE>
of the transactions contemplated hereby and thereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the
Company, to which the Company is a party or by which the Company or its property
is bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company or its property, (iv) result in the
imposition or creation of (or the obligation to create or impose) any security
interest, claim, lien, encumbrance or adverse interest of any nature (each , a
"Lien") under, any agreement or instrument to which the Company is a party or by
which the Company or its property is bound, or (v) result in the termination,
suspension or revocation of any Authorization (as defined below) of the Company
or result in any other impairment of the rights of the holder of any such
Authorization.
(l) There are no legal or governmental proceedings pending or threatened to
which the Company is or could be a party or to which any of its property is or
could be subject, which might result, singly or in the aggregate, in a Material
Adverse Effect.
(m) The Company has not violated any foreign, federal, state or local law
or regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), any provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or any provisions of the
Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
(n) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for cleanup, closure of properties or compliance with Environmental Laws or any
Authorization, 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.
(o) The Company has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals (each, an "Authorization ") of,
and has made all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to have any
such Authorization or to make any such filing or notice would not, singly or in
the aggregate, have a Material Adverse Effect. Each such Authorization is valid
and in full force and effect and the Company is in compliance with all the terms
and conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such
<PAGE>
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company; except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction would not, singly or in the aggregate, have a
Material Adverse Effect.
(p) The accountants, Arthur Andersen LLP, that have certified the financial
statements and supporting schedules included in the Preliminary Offering
Memorandum and the Offering Memorandum are independent public accountants with
respect to the Company, as required by the Act and the Exchange Act. The
historical financial statements, together with any related schedules and notes,
set forth in the Preliminary Offering Memorandum and the Offering Memorandum
comply as to form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Act.
(q) The historical financial statements, together with any related
schedules and notes forming part of the Offering Memorandum (and any amendment
or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company on the
basis stated in the Offering Memorandum at the respective dates or for the
respective periods to which they apply; such statements and related schedules
and notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information and data
set forth in the Offering Memorandum (and any amendment or supplement thereto)
are, in all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company.
(r) The pro forma financial statements included in the Preliminary Offering
Memorandum and the Offering Memorandum have been prepared on a basis consistent
with the historical financial statements of the Company and give effect to
assumptions used in the preparation thereof on a reasonable basis and in good
faith and present fairly the historical and proposed transactions contemplated
by the Preliminary Offering Memorandum and the Offering Memorandum; and such pro
forma financial statements comply as to form in all material respects with the
requirements applicable to pro forma financial statements included in
registration statements on Form S-1 under the Act. The other pro forma financial
and statistical information and data included in the Offering Memorandum are, in
all material respects, accurately presented and prepared on a basis consistent
with the pro forma financial statements.
(s) The Company is not and, after giving effect to the offering and sale of
the Series A Notes and the application of the net proceeds thereof as described
in the Offering Memorandum, will not be, an "investment company," as such term
is defined in the Investment Company Act of 1940, as amended.
(t) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with the Notes
registered pursuant to any Registration Statement.
<PAGE>
(u) Neither the Company nor any agent thereof acting on the behalf of them
has taken, and none of them will take, any action that might cause this
Agreement or the issuance or sale of the Series A Notes to violate Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System.
(v) No "nationally recognized statistical rating organization" as such term
is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or has
informed the Company that it is considering imposing) any condition (financial
or otherwise) on the Company's retaining any rating assigned to the Company, any
securities of the Company or (ii) has indicated to the Company that it is
considering (a) the downgrading, suspension, or withdrawal of, or any review for
a possible change that does not indicate the direction of the possible change
in, any rating so assigned or (b) any change in the outlook for any rating of
the Company or any securities of the Company.
(w) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company, (ii) there has not been any material adverse change or any
development involving a prospective material adverse change in the capital stock
or in the longterm debt of the Company and (iii) the Company has not incurred
any material liability or obligation, direct or contingent.
(x) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(y) When the Series A Notes are issued and delivered pursuant to this
Agreement, the Series A Notes will not be of the same class (within the meaning
of Rule 144A under the Act) as any security of the Company that is listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated inter-dealer quotation system.
(z) No form of general solicitation or general advertising (as defined in
Regulation D under the Act) was used by the Company or any of their respective
representatives (other than the Initial Purchasers, as to whom the Company makes
no representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Series A Notes have been issued and sold by
the Company within the six-month period immediately prior to the date hereof.
(aa) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
<PAGE>
(bb) The Company has good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by it,
which is material to the business of the Company, in each case free and clear of
all Liens and defects, except such as are described in the Offering Memorandum
or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by the Company are
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company, in each case except as
described in the Offering Memorandum.
(cc) The Company owns or possesses, or can acquire on reasonable terms, all
patents, patent rights, licenses, inventions, copyrights, knowhow (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names ("intellectual property") currently employed by them in connection
with the business now operated by them except where the failure to own or
possess or otherwise be able to acquire such intellectual property would not,
singly or in the aggregate, have a Material Adverse Effect; and the Company has
not received any notice of infringement of or conflict with asserted rights of
others with respect to any of such intellectual property which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect.
(dd) The Company is 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 they are engaged; and the Company (i)
has not received notice from any insurer or agent of such insurer that
substantial capital improvements or other material expenditures will have to be
made in order to continue such insurance or (ii) has no reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers at a cost
that would not have a Material Adverse Effect.
(ee) Except as disclosed in the Offering Memorandum, no relationship,
direct or indirect, exists between or among the Company on the one hand, and the
directors, officers, stockholders, customers or suppliers of the Company on the
other hand, which would be required by the Act to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus included in a
registration statement on Form S-1 filed with the Commission.
(ff) There is no (i) significant unfair labor practice complaint, grievance
or arbitration proceeding pending or threatened against the Company before the
National Labor Relations Board or any state or local labor relations board, (ii)
strike, labor dispute, slowdown or stoppage pending or threatened against the
Company or (iii) union representation question existing with respect to the
employees of the Company, except in the case of clauses (i), (ii) and (iii) for
such actions which, singly or in the aggregate, would not have a Material
Adverse Effect. To the best knowledge of the Company, no collective bargaining
organizing activities are taking place with respect to the Company.
<PAGE>
(gg) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(hh) All material tax returns required to be filed by the Company in any
jurisdiction have been filed, other than those filings being contested in good
faith, and all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due pursuant to such returns or
pursuant to any assessment received by the Company have been paid, other than
those being contested in good faith and for which adequate reserves have been
provided.
(ii) None of the Company nor any of its affiliates nor any person acting on
its or their behalf (other than the Initial Purchasers, as to whom the Company
makes no representation) has engaged or will engage in any directed selling
efforts within the meaning of Regulation S under the Act ("Regulation S") with
respect to the Series A Notes.
(jj) The Series A Notes offered and sold in reliance on Regulation S have
been and will be offered and sold only in offshore transactions.
(kk) The sale of the Series A Notes pursuant to Regulation S is not part of
a plan or scheme to evade the registration provisions of the Act.
(ll) The Company and its affiliates and all persons acting on their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering of the
Series A Notes outside the United States and, in connection therewith, the
Offering Memorandum will contain the disclosure required by Rule 902(g)(2) of
the Act.
(mm) The Series A Notes sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the 40-day
distribution compliance period referred to in Rule 903(b)(3) of the Act and only
upon certification of beneficial ownership of such Series A Notes by non-U.S.
persons or U.S. persons who purchased such Series A Notes in transactions that
were exempt from the registration requirements of the Act.
(nn) No registration under the Act of the Series A Notes is required for
the sale of the Series A Notes to the Initial Purchasers as contemplated hereby
or for the Exempt Resales assuming the accuracy of the Initial Purchasers'
representations and warranties and agreements set forth in Section 7 hereof.
<PAGE>
(oo) Each certificate signed by any officer of the Company and delivered to
the Initial Purchasers or counsel for the Initial Purchasers shall be deemed to
be a representation and warranty by the Company to the Initial Purchasers as to
the matters covered thereby.
(pp) The Company for federal and state income tax purposes is, and has been
since its date of incorporation, an S corporation as defined in Section
1361(a)(1) of the Internal Revenue Code of 1986, as amended.
(qq) The New Credit Facility (as defined in the Offering Memorandum) has
been duly and validly authorized by the Company and, when duly executed and
delivered by the Company, will be a valid and binding agreement of the Company,
enforceable against each of them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization or other similar laws and court decisions relating to or
affecting the rights of creditors generally or by general principles of equity
(whether considered in a proceeding in equity or at law). The Offering
Memorandum contains an accurate summary, in all material respects, of the terms
of the Existing Credit Facility (as defined in the Offering Memorandum) and the
New Credit Facility.
The Company acknowledges that the Initial Purchasers and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the Initial
Purchasers, severally and not jointly, represents and warrants to, and agrees
with, the Company that:
(a) Such Initial Purchaser is either a QIB or an institutional "accredited
investor," as defined in Rule 501(a)(1), (2), (3) or (7) under the Act (an
"Accredited Institution"), in either case, with such knowledge and experience in
financial and business matters as is necessary in order to evaluate the merits
and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes with a
view to any distribution thereof or with any present intention of offering or
selling any of the Series A Notes in a transaction that would violate the Act or
the securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Series A Notes only to
(x) QIBs in reliance on the exemption from the registration requirements of the
Act provided by Rule 144A, and (y) in offshore transactions in reliance upon
Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general solicitation or
general advertising (within the meaning of Regulation D under the Act) has been
or will be used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of the Series A Notes pursuant hereto,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
<PAGE>
(d) Such Initial Purchaser agrees that, in connection with Exempt Resales,
such Initial Purchaser will solicit offers to buy the Series A Notes only from,
and will offer to sell the Series A Notes only to, Eligible Purchasers. Each
Initial Purchaser further agrees that it will offer to sell the Series A Notes
only to, and will solicit offers to buy the Series A Notes only from (A)
Eligible Purchasers that the Initial Purchaser reasonably believes are QIBs, and
(B) Regulation S Purchasers, in each case, that agree that (x) the Series A
Notes purchased by them may be resold, pledged or otherwise transferred within
the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable) under the Act, as in
effect on the date of the transfer of such Series A Notes, only (I) to the
Company, (II) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Act, (III) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the requirements of
Rule 904 of the Act, (IV) in a transaction meeting the requirements of Rule 144
under the Act, (V) to an Accredited Institution that, prior to such transfer,
furnishes the Trustee a signed letter containing certain representations and
agreements relating to the registration of transfer of such Series A Note and,
if such transfer is in respect of an aggregate principal amount of Series A
Notes less than $250,000, an opinion of counsel acceptable to the Company that
such transfer is in compliance with the Act, (VI) in accordance with another
exemption from the registration requirements of the Act (and based upon an
opinion of counsel acceptable to the Company) or (VII) pursuant to an effective
registration statement and, in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction and (y) they will deliver to each person to whom such Series A
Notes or an interest therein is transferred a notice substantially to the effect
of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on its
or their behalf have not engaged or will not engage in any directed selling
efforts within the meaning of Regulation S with respect to the Series A Notes.
(f) The Series A Notes offered and sold by such Initial Purchaser pursuant
hereto in reliance on Regulation S have been and will be offered and sold only
in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not offered or sold and will
not offer or sell the Series A Notes in the United States or to, or for the
benefit or account of, a U.S. Person (other than a distributor), in each case,
as defined in Rule 902 under the Act (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering of the Series A Notes pursuant hereto and the Closing Date, other than
in accordance with Regulation S of the Act or another exemption from the
registration requirements of the Act. Such Initial Purchaser agrees that, during
such 40-day distribution compliance period, it will not cause any advertisement
with respect to the Series A Notes (including any "tombstone" advertisement) to
be published in any newspaper or periodical or posted in any public place and
will not issue any circular relating to the Series A Notes, except such
advertisements as permitted by and include the statements required by Regulation
S.
<PAGE>
(i) Such Initial Purchaser agrees that, at or prior to confirmation of a
sale of Series A Notes by it to any distributor, dealer or person receiving a
selling concession, fee or other remuneration during the 40-day distribution
compliance period referred to in Rule 903(b)(3) under the Act, it will send to
such distributor, dealer or person receiving a selling concession, fee or other
remuneration a confirmation or notice to substantially the following effect:
"The Series A Notes covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (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 your 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 under the Securities Act (or Rule 144A or to institutional
"accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act in transactions that are exempt from the registration
requirements of the Securities Act), and in connection with any subsequent
sale by you of the Series A Notes covered hereby in reliance on Regulation
S during the period referred to above to any distributor, dealer or person
receiving a selling concession, fee or other remuneration, you must deliver
a notice to substantially the foregoing effect. Terms used above have the
meanings assigned to them in Regulation S."
(j) Such Initial Purchaser agrees that the Series A Notes offered and sold
in reliance on Regulation S will be represented upon issuance by a global
security that may not be exchanged for definitive securities until the
expiration of the 40-day distribution compliance period referred to in Rule
903(b)(3) of the Act and only upon certification of beneficial ownership of such
Series A Notes by non-U.S. persons or U.S. persons who purchased such Series A
Notes in transactions that were exempt from the registration requirements of the
Act.
Such Initial Purchaser acknowledges that the Company and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and such Initial
Purchaser hereby consents to such reliance.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Initial
Purchasers, their directors and their officers and each person, if any, who
controls each of the Initial Purchasers within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action, that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Offering Memorandum
(or any amendment or supplement thereto), the Preliminary Offering Memorandum
<PAGE>
or any Rule 144A Information provided by the Company to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) 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,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to an Initial Purchaser furnished in
writing to the Company by such Initial Purchaser.
(b) The Initial Purchasers severally agree to indemnify and hold harmless
the Company and its respective directors and officers and each person, if any,
who controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, to the same extent as the foregoing indemnity from
the Company to the Initial Purchasers but only with reference to information
relating to an Initial Purchaser furnished in writing to the Company by the
relevant Initial Purchaser (and not with respect to the information provided by
any other Initial Purchaser) expressly for use in the Preliminary Offering
Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Initial Purchasers shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Initial Purchasers). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by First Chicago Capital Markets, Inc., in the case of the 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 indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written
<PAGE>
consent or (ii) effected without its written consent if the settlement is
entered into more than twenty business days after the indemnifying party shall
have received a request from the indemnified party for reimbursement for the
fees and expenses of counsel (in any case where such fees and expenses are at
the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (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 Series A Notes 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
the Initial Purchasers, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, 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, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Series A Notes (after underwriting discounts
and commissions, but before deducting expenses) received by the Company, and the
total discounts and commissions received by the Initial Purchasers bear to the
total price to investors of the Series A Notes, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault of the
Company, on the one hand, and 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, on the one hand,
or the Initial Purchasers, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) 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 which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such
<PAGE>
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchasers shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
such Initial Purchaser exceeds the amount of any damages which the Initial
Purchasers have 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Series A Notes purchased by each of the Initial Purchasers
hereunder and not jointly.
(e) 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.
9. Conditions of Initial Purchasers' Obligations. The obligations of the
Initial Purchasers to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in this
Agreement shall be true and correct on the Closing Date with the same force and
effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended review) for a possible change that does
not indicate the direction of the possible change in, any rating of the Company
or any securities of the Company (including, without limitation, the placing of
any of the foregoing ratings on credit watch with negative or developing
implications or under review with an uncertain direction) by any "nationally
recognized statistical rating organization" as such term is defined for purposes
of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any change,
nor shall any notice have been given of any potential or intended change, in the
outlook for any rating of the Company or any securities of the Company by any
such rating organization and (iii) no such rating organization shall have given
notice that it has assigned (or is considering assigning) a lower rating to the
Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of the Company, (ii) there shall
not have been any change or any development involving a prospective change in
the capital stock or in the longterm debt of the Company and (iii) the Company
shall not have incurred any liability or obligation, direct or contingent, the
effect of which, in any such case described in this clause 9(c),
<PAGE>
in your judgment, is material and adverse and, in your judgment, makes it
impracticable to market the Series A Notes on the terms and in the manner
contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by the President and the Chief Financial Officer of the
Company, confirming the matters set forth in Sections 6(w), 9(a) and 9(b) and
stating that the Company has complied with all the agreements and satisfied all
of the conditions herein contained and required to be complied with or satisfied
on or prior to the Closing Date.
(e) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Initial Purchasers), dated the Closing Date, of Dorsey &
Whitney LLP, counsel for the Company, to the effect that:
(i) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction
of incorporation and has the corporate power and authority to
carry on its business as described in the Offering Memorandum and
to own, lease and operate its properties;
(ii) the Company is duly qualified and is in good standing as a
foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, except where
the failure to be so qualified would not have a Material Adverse
Effect;
(iii) all the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid,
nonassessable and not subject to any preemptive or similar
rights;
(iv) the Series A Notes have been duly authorized 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 this Agreement, will be entitled
to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their
terms except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(v) the Indenture has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms
except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y)
<PAGE>
rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability;
(vi) this Agreement has been duly authorized, executed and delivered
by the Company;
(vii) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(viii) the Series B Senior Notes have been duly authorized;
(ix) the statements under the captions "Management and Directors--
Limitation of Liability, --Consulting and Employment Agreements
and -- Certain Relationships and Related Transactions,"
"Description of Other Indebtedness," "Federal Tax
Considerations," "Description of Notes" and "Plan of
Distribution" in the Offering Memorandum, insofar as such
statements constitute a summary of the legal matters, documents
or proceedings referred to therein, fairly present in all
material respects such legal matters, documents and proceedings;
(x) the execution, delivery and performance of this Agreement and the
other Operative Documents by the Company, the compliance by the
Company with all provisions hereof and thereof, and the issuance
of the Notes and the application of the proceeds thereof and the
consummation of the transactions contemplated hereby and thereby
will not (i) require any consent, approval, authorization or
other order of, or qualification with, any court or governmental
body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict
with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Company or any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company to which the Company
is a party or by which the Company or its property is bound,
(iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company
or its property or (iv) result in the imposition or creation of
(or the obligation to create or impose) a Lien under, any
agreement or
<PAGE>
instrument to which the Company is a party or by which the
Company or its property is bound;
(xi) the Company is not and, after giving effect to the offering and
sale of the Series A Notes and the application of the net
proceeds thereof as described in the Offering Memorandum, will
not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(xii) to the best of such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any holder
of securities of the Company granting such holder the right to
require the Company to file a registration statement under the
Act with respect to any securities of the Company or to require
the Company to include such securities with the Notes registered
pursuant to any Registration Statement;
(xiii) the Indenture complies as to form in all material respects with
the requirements of the TIA, and the rules and regulations of the
Commission applicable to an indenture which is qualified
thereunder. It is not necessary in connection with the offer,
sale and delivery of the Series A Notes to the Initial Purchasers
in the manner contemplated by this Agreement or in connection
with the Exempt Resales to qualify the Indenture under the TIA;
and
(xiv) no registration under the Act of the Series A Notes is required
for the sale of the Series A Notes to the Initial Purchasers as
contemplated by this Agreement or for the Exempt Resales assuming
that (i) each Initial Purchaser is a QIB or an Accredited
Institution, (ii) the accuracy of, and compliance with, the
Initial Purchasers' representations and agreements contained in
Section 7 of this Agreement, (iii) the accuracy of the
representations of the Company set forth in Sections 6(ii), (jj),
(kk), (ll) and (mm) of this Agreement.
The opinion of Dorsey & Whitney LLP described above shall be rendered to
you at the request of the Company and shall so state therein. At the time the
foregoing opinion is delivered, Dorsey & Whitney LLP shall additionally state
that it has participated in conferences with officers and other representatives
of the Company, representatives of the Initial Purchasers, counsel to the
Initial Purchasers and representatives of the independent public accountants for
the Company, at which the contents of the Offering 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 Offering Memorandum and has not made any independent
check or verification thereof, during the course of such participation, no facts
came to such counsel's attention that caused it to believe that the Offering
Memorandum, as of its date or as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material
<PAGE>
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, it being understood that such firm
need express no belief with respect to the financial statements or other
financial data included in, or omitted from, the Offering Memorandum.
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers.
(g) The Initial Purchasers shall have received, at the time this Agreement
is executed and at the Closing Date, letters 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 the information and statements of the type ordinarily included in
accountants' "comfort letters" to Initial Purchasers with respect to the
financial statements and certain financial information contained in the Offering
Memorandum.
(h) The Series A Notes shall have been approved by the NASD for trading and
duly listed in PORTAL.
(i) The Initial Purchasers shall have received a counterpart, conformed as
executed, of the Indenture which shall have been entered into by the Company and
the Trustee.
(j) The Company shall have executed the Registration Rights Agreement and
the Initial Purchasers shall have received an original copy thereof, duly
executed by the Company.
(k) The Company shall not have failed to perform or comply with any of the
agreements herein contained and required to be performed or complied with by the
Company at or prior to the Closing Date.
(l) The Company shall have executed and delivered the New Credit Facility
(the form and substance of which amendment shall be reasonably acceptable to the
Initial Purchasers) and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof and of all other documents and agreements entered
into in connection therewith. There shall exist at and as of the Closing Date no
conditions that would constitute an event of default (or an event that with
notice or the lapse of time, or both, would constitute an event of default)
under such New Credit Facility. On the Closing Date, the Credit Agreement shall
be in full force and effect and shall not have been modified since the date of
the Offering Memorandum.
(m) The Tax Payment Agreement in the form attached as Exhibit B hereto and
the Consulting Agreement in the form attached as Exhibit C hereto shall have
been duly authorized, executed and delivered and shall be in full force and
effect, and the Company shall have delivered to the Initial Purchasers and
Latham & Watkins, counsel for the Initial Purchasers, a secretary's certificate
certifying that true, correct and complete copies of the Tax Payment Agreement
and the Consulting Agreement are attached thereto.
<PAGE>
(n) The Company shall have delivered letters from Robert L. Peterson and
Jack Helms confirming that they have agreed to serve as directors of the Company
as described in the Offering Memorandum and the Company shall have delivered to
the Initial Purchasers and Latham & Watkins, counsel for the Initial Purchasers,
a secretary's certificate certifying that true, correct and complete copies of
the shareholders' resolution electing such individuals to the Company's Board of
Directors are attached thereto.
10. Effectiveness of Agreement and Termination. This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchasers by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and, in the Initial Purchasers'
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date any one or more of the Initial Purchasers shall fail
or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase is not more than onetenth
of the aggregate principal amount of the Series A Notes to be purchased on such
date by all Initial Purchasers, each nondefaulting Initial Purchaser shall be
obligated severally, in the proportion which the principal amount of the Series
A Notes set forth opposite its name in Schedule A bears to the aggregate
principal amount of the Series A Notes which all the nondefaulting Initial
Purchasers, as the case may be, have agreed to purchase, or in such other
proportion as you may specify, to purchase the Series A Notes which such
defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed
but failed or refused to purchase on such date; provided that in no event shall
the aggregate principal amount of the Series A Notes which any Initial Purchaser
has agreed to purchase pursuant to Section 2 hereof be increased pursuant to
this Section 10 by an amount in excess of oneninth of such principal amount of
the Series A Notes without the written consent of such Initial Purchaser. If on
the Closing Date any Initial Purchaser or Initial Purchasers shall fail or
<PAGE>
refuse to purchase the Series A Notes and the aggregate principal amount of the
Series A Notes with respect to which such default occurs is more than onetenth
of the aggregate principal amount of the Series A Notes to be purchased by all
Initial Purchasers and arrangements satisfactory to the Initial Purchasers and
the Company for purchase of such the Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any nondefaulting Initial Purchaser and the Company. In any such case which
does not result in termination of this Agreement, 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 Offering
Memorandum or 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 any such Initial Purchaser under
this Agreement.
11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to Luigino's,
Inc., 525 Lake Avenue, South, Duluth, Minnesota 55802, Attention: Chief
Financial Officer and (ii) if to the Initial Purchasers, to First Chicago
Capital Markets, Inc., One First National Plaza, Mail Suite 0701, Chicago,
Illinois 60670, Attention: High Yield Origination, or in any case to such other
address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the Initial Purchasers set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Series A
Notes, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchasers, the officers or
directors of the Initial Purchasers, any person controlling the Initial
Purchasers, the Company, the officers or directors of the Company, or any person
controlling the Company, (ii) acceptance of the Series A Notes and payment for
them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company agrees to reimburse the
Initial Purchasers for all outofpocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
Initial Purchasers and their officers, directors and each person, if any, who
controls such Initial Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act for any and all fees and expenses (including
without limitation the fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Initial
Purchasers, the Initial Purchasers' respective directors and officers, any
controlling persons referred to herein, the directors of the Company and its
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement.
<PAGE>
The term "successors and assigns" shall not include a purchaser of any of the
Series A Notes from the Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the Initial Purchasers.
Very truly yours,
LUIGINO'S, INC.
By: /s/ Joel C. Kozlak
---------------------------------
Name:
Title:
FIRST CHICAGO CAPITAL MARKETS, INC.
U.S. BANCORP INVESTMENTS, INC.
By: First Chicago Capital Markets, Inc.
By: /s/ Kevin J. Rooney
------------------------------------
Name: Kevin J. Rooney
Title: Vice President
<PAGE>
SCHEDULE A
Initial Purchaser .............................Principal Amount of Notes
First Chicago Capital Markets, Inc. ........... $ 90,000,000
U.S. Bancorp Libra, a division of U.S. Bancorp
Investments, Inc. .......................... $ 10,000,000
$100,000,000
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
* Registration rights Agreement filed as Exhibit 1.2 to this Registration
Agreement.
<PAGE>
EXHIBIT 1.2
================================================================================
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of February 4, 1999
by and among
LUIGINO'S, INC.
and
FIRST CHICAGO CAPITAL MARKETS, INC.
and
U.S. BANCORP LIBRA,
A DIVISION OF U.S. BANCORP INVESTMENTS, INC.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of February 4, 1999, by and among Luigino's, Inc., a Minnesota
corporation (the "Company") and First Chicago Capital Markets, Inc. and U.S.
Bancorp Libra, a division of U.S. Bancorp Investments, Inc. (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed
to purchase the Company's 10% Series A Senior Subordinated Notes due 2006 (the
"Series A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated January
29, 1999, (the "Purchase Agreement"), by and among the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to purchase the Series A
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchasers set forth in Section 2 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them the Indenture, dated February 4, 1999, between the
Company and U.S. Bank National Association, as Trustee, relating to the Series A
Notes and the Series B Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1 DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Act of the Exchange Offer Registration Statement relating to the Series B Notes
to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the period required pursuant to Section
3(b) hereof and (c) the delivery by the Company to the Registrar under the
Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes
-1-
<PAGE>
tendered by Holders thereof pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose to
sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and pursuant to Regulation S under
the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at the time
such Registration Statement is declared effective, as amended or supplemented by
any prospectus supplement and by all other amendments thereto, including
post-effective amendments, and all material incorporated by reference into such
Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company relating
to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
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Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 10% Series B Senior Notes due 2006 to be
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa77bbbb) as in
effect on the date of the Indenture.
Transfer Restricted Securities: Each (A) Series A Note, until the earliest
to occur of (i) the date on which such Series A Note is exchanged in the
Exchange Offer for a Series B Note which is entitled to be resold to the public
by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (ii) the date on which such Series A Note has been
disposed of in accordance with a Shelf Registration Statement (and the
purchasers thereof have been issued Series B Notes), or (iii) the date on which
such Series A Note is distributed to the public pursuant to Rule 144 under the
Act and each (B) Series B Note held by a Broker Dealer until the date on which
such Series B Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2 HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3 REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company shall (i) cause the Exchange Offer Registration Statement to
be filed with the Commission as soon as practicable after the Closing Date, but
in no event later than 90 days after the Closing Date (such 90th day being
the "Filing Deadline"), (ii) use its best efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but in
no event later than 150 days after the Closing Date (such 150th day being the
"Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause it to become effective, (B) file, if
applicable, a posteffective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause
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all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Notes to be offered
in exchange for the Series A Notes that are Transfer Restricted Securities and
(ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange
Offer Series A Notes that such Broker-Dealer acquired for its own account as a
result of market making activities or other trading activities (other than
Series A Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Series B Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 business days thereafter (such
30th day being the "Consummation Deadline").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company shall
permit the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery requirement.
To the extent necessary to ensure that the prospectus contained in the Exchange
Offer Registration Statement is available for sales of Series B Notes by
Broker-Dealers, the Company agree to use its best efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented, amended and
current as required by and subject to the provisions of Section 6(a) and (c)
hereof and in
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conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the Consummation Deadline or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company shall provide sufficient
copies of the latest version of such Prospectus to such Broker-Dealers, promptly
upon request, and in no event later than one day after such request, at any time
during such period.
SECTION 4 SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company has complied with the procedures set forth in
Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 Business Days following the Consummation
Deadline that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the Series
B Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Series A Notes acquired directly from
the Company or any of its Affiliates, then the Company shall:
(x) cause to be filed, on or prior to 90 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above
and (ii) the date on which the Company receives the notice specified in
clause (a)(ii) above, (such earlier date, the "Filing Deadline"), a shelf
registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement (the "Shelf
Registration Statement")), relating to all Transfer Restricted Securities,
and
(y) shall use its best efforts to cause such Shelf Registration
Statement to become effective on or prior to 150 days after the Filing
Deadline for the Shelf Registration Statement (such 150th day the
"Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; provided that,
in such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company shall
use its best efforts to keep any Shelf Registration Statement required by this
Section 4(a) continuously effective, supplemented, amended and current as
required by and subject to the
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provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of at least two
years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Shelf Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5 LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded within 2 days by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective within 5 days of filing such post-effective amendment
to such Registration Statement (each such event referred to in clauses (i)
through (iv), a "Registration Default"), then the Company hereby agrees to pay
to each Holder of Transfer Restricted Securities affected thereby liquidated
damages in an amount equal to $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues for the first 90-day period
immediately following the occurrence of such Registration Default. The amount of
the liquidated damages shall increase by an additional $.05 per week per $1,000
in principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 in principal
amount of Transfer Restricted Securities; provided that the Company shall in no
event be required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the
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filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company to pay liquidated damages with respect to securities shall survive until
such time as such obligations with respect to such securities shall have been
satisfied in full.
SECTION 6 SECTION REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company shall (x) comply with all applicable provisions of Section
6(c) below, (y) use its best efforts to effect such exchange and to permit the
resale of Series B Notes by Broker-Dealers that tendered in the Exchange Offer
Series A Notes that such Broker-Dealer acquired for its own account as a result
of its market making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and (z)
comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company hereby agrees to seek a no-action
letter or other favorable decision from the Commission allowing the Company
to Consummate an Exchange Offer for such Transfer Restricted Securities.
The Company hereby agrees to pursue the issuance of such a decision to the
Commission staff level. In connection with the foregoing, the Company
hereby agrees to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which need
not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the
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letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B Notes to be issued in the Exchange Offer and
(C) it is acquiring the Series B Notes in its ordinary course of business.
As a condition to its participation in the Exchange Offer each Holder using
the Exchange Offer to participate in a distribution of the Series B Notes
shall acknowledge and agree that, if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired directly
from the Company or an Affiliate thereof, it (1) could not, under
Commission policy as in effect on the date of this Agreement, rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above),
and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action
letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the Series B Notes to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer and (C)
any other undertaking or representation required by the Commission as set
forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf Registration
Statement, the Company shall:
(i) comply with all the provisions of Section 6(c) below and use its
best efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished
to the Company pursuant to Section 4(b) hereof), and pursuant thereto the
Company and any Guarantor(s), if any, will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act,
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which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance
with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Series A
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Notes on the Shelf Registration Statement
for this purpose and issue the Series B Notes to the purchaser(s) of
securities subject to the Shelf Registration Statement in the names as such
purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable;
upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain an untrue
statement of material fact or omit to state any material fact necessary to
make the statements therein not misleading or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company shall file promptly an appropriate
amendment to such Registration Statement curing such defect, and, if
Commission review is required, use its best efforts to cause such amendment
to be declared effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and
posteffective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act in
a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c), advise the selling Holders and
the underwriters participating in such sale, if any, and, if requested by
such Persons, confirm such advice in writing, (A) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and,
with respect to any
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applicable Registration Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any request by the Commission
for amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; if at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c), furnish to each selling Holder
named in any Registration Statement or Prospectus and each underwriter in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders in connection with such
sale, if any, for a period of at least five Business Days, and the Company
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which such
Holders shall reasonably object within five Business Days after the receipt
thereof; a Holder shall be deemed to have reasonably objected to such
filing if such
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Registration Statement, amendment, Prospectus or supplement, as applicable,
as proposed to be filed, contains an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
not misleading or fails to comply with the applicable requirements of the
Act;
(vi) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c), promptly prior to the filing
of any document that is to be incorporated by reference into a Registration
Statement or Prospectus, provide copies of such document to each such
selling Holder and each underwriter, if any, in connection with such sale,
and make the Company's representatives available for discussion of such
document and other customary due diligence matters on a reasonable basis,
and include such information in such document prior to the filing thereof
as such selling Holders and such underwriters may reasonably request;
(vii) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c), make available, at reasonable
times, for inspection by a representative of the selling Holders and any
attorney or accountant retained by such selling Holders and any
underwriters participating in such sale, all financial and other records,
pertinent corporate documents of the Company and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Holder, attorney or accountant in connection with
such Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness but only if
such Holders and underwriters agree to maintain such information in the
same manner as such Holder or underwriter treats its own confidential
information;
(viii) with respect to any Shelf Registration Statement and any
related Prospectus required by this Agreement, and to the extent that an
Exchange Offer Registration Statement is required to be available to permit
sales by Broker-Dealers as set forth in Section 3(c), if requested by any
selling Holders or any underwriters in connection with such sale, promptly
include in any Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary, such information as
such selling Holders or underwriters may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(ix) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c),
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furnish to each selling Holder or any underwriters in connection with such
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c), deliver to each selling Holder
and any underwriters participating in such sale, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request; the
Company hereby consents to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder
and any underwriters in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
(xi) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c), upon the request of any
selling Holder or any underwriter participating in such sale, enter into
such agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any applicable Registration
Statement contemplated by this Agreement as may be reasonably requested by
any selling Holder or any such underwriter in connection with any sale or
resale pursuant to any applicable Registration Statement; in such
connection, the Company shall:
(A) upon request of any such Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished)
to each such Holder, upon the effectiveness of the Shelf Registration
Statement or, in the event that a Registration Statement is required
to be available to permit sales by Broker-Dealers as set forth in
Section 3(c), to each Broker-Dealer upon Consummation of the Exchange
Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in
Sections 6(w), 9(a) and 9(b) of the Purchase Agreement and such
other similar matters as such Holders, underwriters and/or
Broker-Dealers may reasonably request;
(2) an opinion dated, (x) in the event that a Registration
Statement is required to be available to permit sales of Transfer
Restricted Securities by
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Broker-Dealers as described in Section 3(c), the date of
Consummation of the Exchange Offer or (y) the date of
effectiveness of the Shelf Registration Statement, as the case
may be, of counsel for the Company covering matters similar to
those set forth in paragraph (e) of Section 9 of the Purchase
Agreement and such other matter as such Holders, underwriters
and/or Broker-Dealers may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to the extent such
counsel deems appropriate upon the statements of officers and
other representatives of the Company) and without independent
check or verification), no facts came to such counsel's attention
that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration Statement
or any posteffective amendment thereto became effective and, in
the case of the Exchange Offer Registration Statement, as of the
date of Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted 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; without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included
in any Registration Statement contemplated by this Agreement or
the related Prospectus; and
(3) a customary comfort letter, dated, in the event that a
Registration Statement is required to be available to permit
sales of Transfer Restricted Securities by Broker-Dealers as
described in Section 3(c), the date of Consummation of the
Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to
underwriters in connection with underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 9(g) of the Purchase Agreement; and
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<PAGE>
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriters, if any,
and Broker-Dealers to evidence compliance with the matters covered in
clause (A) above and with any customary conditions contained in the
any agreement entered into by the Company pursuant to this clause
(xi);
(xii) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c), prior to any public offering
of Transfer Restricted Securities, cooperate with the selling Holders, the
underwriters, if any, and their respective counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders or the underwriters, if any, may reasonably request and do any and
all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) with respect to any Shelf Registration Statement and any
related Prospectus required by this Agreement, and to the extent that an
Exchange Offer Registration Statement is required to be available to permit
sales by Broker-Dealers as set forth in Section 3(c), in connection with
any sale of Transfer Restricted Securities that will result in such
securities no longer being Transfer Restricted Securities, cooperate with
the selling Holders and the underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and such
names as the selling Holders may request at least two Business Days prior
to such sale of Transfer Restricted Securities;
(xiv) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement is required to be available to permit sales by
Broker-Dealers as set forth in Section 3(c), use its best efforts to cause
the disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xv) with respect to any Shelf Registration Statement and any related
Prospectus required by this Agreement, and to the extent that an Exchange
Offer Registration Statement
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<PAGE>
is required to be available to permit sales by Broker-Dealers as set forth
in Section 3(c), provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depository
Trust Company;
(xvi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the
Act);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "Recommencement
Date"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of
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<PAGE>
delivery of the Recommencement Date.
SECTION 7 SECTION REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B Notes
to be issued in the Exchange Offer and printing of Prospectuses, messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing the Series B Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities who are
tendering Series A Notes into in the Exchange Offer and/or selling or reselling
Series A Notes or Series B Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Latham & Watkins, unless another firm shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8 SECTION INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company to any Holder
or any prospective purchaser of Series B Notes or registered Series A Notes, or
caused by any
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<PAGE>
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to any of the Holders furnished
in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted agrees, severally and not jointly,
to indemnify and hold harmless the Company and its directors and officers, and
each person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) the Company, to the same extent as the
foregoing indemnity from the Company set forth in section (a) above, but only
with reference to information relating to such Holder furnished in writing to
the Company by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such
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<PAGE>
firm shall be designated in writing by a majority of the Holders, in the case of
the 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 indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) 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 Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, 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, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 8(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of
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<PAGE>
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph 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 matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which 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 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
SECTION 9 SECTION RULE 144A AND RULE 144
The Company agrees with each Holder, for so long as any Transfer Restricted
Securities remain outstanding and during any period in which the Company (i) is
not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder, to such Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and
(ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings
required thereby in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144.
SECTION 10 SECTION MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Sections 3 and 4 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The
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Company has not previously entered into any agreement granting any registration
rights with respect to its securities to any Person. 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 securities under any
agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party beneficiaries
to the agreements made hereunder between the Company, on the one hand, and the
Initial Purchasers, on the other hand, and shall have the right to enforce such
agreements directly to the extent they may deem such enforcement necessary or
advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), or air courier guaranteeing
overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Luigino's, Inc.
525 Lake Avenue, South
Duluth, Minnesota 55802
Attention: Chief Financial Officer
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
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<PAGE>
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 specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) 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.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
LUIGINO'S, INC.
By: /s/ Joel C. Kozlak
----------------------------
Name: Joel C. Kozlak
Title: Chief Financial Officer
FIRST CHICAGO CAPITAL MARKETS, INC.
U.S. BANCORP INVESTMENTS, INC.
By: First Chicago Capital Markets, Inc.
By: /s/ Kevin Rooney
--------------------------------
Name: Kevin Rooney
Title: Vice President
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<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
LUIGINO'S, INC.
To form a Minnesota business corporation under and pursuant to the
Minnesota Business Corporation Act, the following articles of incorporation are,
adopted:
ARTICLE 1. NAME
The name of the corporation is LUIGINO'S, INC.
ARTICLE 2. REGISTERED OFFICE
AND REGISTERED AGENT
The address of the registered office of the corporation is 37th Avenue West
& Oneonta, Duluth, Minnesota, 55807. The name of the registered agent of the
corporation at that address is Jeno F. Paulucci.
ARTICLE 3. AUTHORIZED SHARES
The aggregate number of authorized shares of the corporation is ONE
THOUSAND (1,000) with a par value of One Dollar ($1.00) per share, one hundred
(100) shares of which shall be Voting Common Stock and nine hundred (900) shares
of which shall be Non-Voting Common Stock. The shares of Voting Common Stock
shall possess full voting rights, and the shares of Non-Voting Common Stock
shall possess no voting rights. In all other respects, shares of Voting Common
Stock and Non-Voting Common Stock shall possess equal rights and preferences.
ARTICLE 4. NO PREEMPTIVE RIGHTS
The shareholders of the corporation shall not have any preemptive rights to
subscribe for or acquire securities or rights to purchase securities of any
class, kind, or series of the corporation.
ARTICLE 5. BOARD OF DIRECTORS
The following persons are elected to serve as the members of the first
Board of Directors of this corporation until their successors shall have been
elected and shall qualify:
Jeno F. Paulucci-Chairman of the Board
Lois M. Paulucci
Bruce E. Coleman
<PAGE>
ARTICLE 6. WRITTEN ACTION BY DIRECTORS
An action required or permitted to be taken at a meeting of the board of
directors of the corporation may be taken by a written action signed, or
counterparts of a written action signed in the aggregate, by all of the
directors unless the action need not be approved by the shareholders of the
corporation, in which case the action may be taken by a written action signed,
or counterparts of a written action signed in the aggregate, by the number of
directors that would be required to take the same action at a meeting of the
board of directors of the corporation at which all of the directors were
present.
ARTICLE 7. DIRECTOR LIABILITY
To the fullest extent permitted by the Minnesota Business Corporation Act
as the same exists or may hereafter be amended, a director of this corporation
shall not be liable to this corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director.
ARTICLE 8. INCORPORATOR
The name and address of the incorporator, who is a natural person of full
age, is:
NAME ADDRESS
---- -------
Forrest G. Burke 2200 First Bank Place East
Minneapolis, Minnesota 55402
Dated: February 13, 1991.
/s/ Forrest G. Burke
-------------------------------
Forrest G. Burke
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<PAGE>
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
LUIGINO'S, INC.
We, the undersigned, respectively, the Chief Executive Officer and
Secretary of LUIGINO'S, INC., a Corporation organized under the provisions of
Minnesota Statutes 302 A, do hereby certify that by a Writing In Lieu Of A
Special Meeting Of Voting Shareholders effective September 9, 1991, the
following Resolutions were adopted by unanimous written consent of all this
Corporation's Voting Shareholders, to wit:
"RESOLVED, That ARTICLE 3. AUTHORIZED SHARES of this Corporation's ARTICLES
OF INCORPORATION is and be deleted with the following substituted in its place:
ARTICLE 3. AUTHORIZED SHARES
The aggregate number of authorized Shares of the Corporation is One
Thousand Five Hundred (1,500) with a par value of one and No/100's ($1.00)
Dollar per Share, Six Hundred (600) Shares of which shall be Voting Common Stock
and Nine Hundred (900) Shares of which shall be Non-Voting Common Stock. The
Shares of Voting Common Stock shall possess full voting rights, and the Shares
of Non-Voting Common Stock shall possess no voting rights. In all other
respects, Shares of Voting Common Stock and Non-Voting Common Stock shall
possess equal rights and preferences.'
RESOLVED FURTHER, That the ARTICLES OF AMENDMENT OF THE ARTICLES OF
INCORPORATION setting forth the above described AMENDMENT and the manner of
adoption thereof shall be signed and acknowledged by the Chief Executive officer
and Secretary of the Corporation then filed for record with the Secretary of
State of Minnesota in the manner prescribed by law.".
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed these ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION this 9th day of September, 1991.
LUIGINO'S, INC.
By: /s/ Jeno F. Paulucci
-----------------------------
Jeno F. Paulucci
Its Chief Executive Officer
By: /s/ Bruce E. Coleman
-----------------------------
Bruce E. Coleman
Its: Secretary
STATE OF MINNESOTA )
) SS.
COUNTY OF ST. LOUIS )
I, the undersigned, a Notary Public, hereby certify that on the 9th day of
September, 1991, Jeno F. Paulucci and Bruce E. Coleman personally appeared
before me being first duly sworn, declared that Jeno F. Paulucci is the Chief
Executive Officer and Bruce E. Coleman is the Secretary of LUIGINO'S, INC., they
are the persons who signed the foregoing Document, and that the statements
contained therein are true.
/s/ Gail M. Bukowski
---------------------------------
Notary Public
[notary stamp]
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EXHIBIT 3.2
BYLAWS
OF
LUIGINO'S, INC.
ARTICLE I.
OFFICES, CORPORATE SEAL
Section 1.01. Registered Office. The registered office of the corporation
in Minnesota shall be that set forth in the articles of incorporation or in the
most recent amendment of the articles of incorporation or resolution of the
directors filed with the secretary of state of Minnesota changing the registered
office.
Section 1.02. Other Offices. The corporation may have such other offices,
within or without the state of Minnesota, as the directors shall, from time to
time, determine.
Section 1.03. Corporate Seal. The corporation shall have no seal.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meetings. Except as provided otherwise by
the Minnesota Business Corporation Act, meetings of the shareholders may be held
at any place, within or without the state of Minnesota, as may from time to time
be designated by the directors and, in the absence of such designation, shall be
held at the registered office of the corporation in the state of Minnesota. The
directors shall designate the time of day for each meeting and, in the absence
of such designation, every meeting of shareholders shall be held at ten o'clock
a.m.
Section 2.02. Regular Meetings.
(a) A regular meeting of the shareholders shall be held on such date as the
board of directors shall by resolution establish.
(b) At a regular meeting the shareholders, voting as provided in the
articles of incorporation and these bylaws, shall designate the number of
directors to constitute the board of directors (subject to the authority of the
board of directors thereafter to increase or decrease the number of directors as
permitted by law), shall elect qualified successors for directors who serve for
an indefinite term or whose terms have expired or are due to expire within six
months after the date of the meeting and shall transact such other business as
may properly come before them.
Section 2.03. Special Meetings. Special meetings of the shareholders may be
held at any time and for any purpose and may be called by the chief executive
officer, the chief financial officer, two or more directors or by a shareholder
or shareholders holding 10% or more of the voting power of all shares entitled
to vote, except that a special meeting for the purpose of
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considering any action to directly or indirectly facilitate or affect a business
combination, including any action to change or otherwise affect the composition
of the board of directors for that purpose, must be called by 25% or more of the
voting power of all shares entitled to vote. A shareholder or shareholders
holding the requisite percentage of the voting power of all shares entitled to
vote may demand a special meeting of the shareholders by written notice of
demand given to the chief executive officer or chief financial officer of the
corporation and containing the purposes of the meeting. Within 30 days after
receipt of demand by one of those officers, the board of directors shall cause a
special meeting of shareholders to be called and held on notice no later than 90
days after receipt of the demand, at the expense of the corporation. Special
meetings shall be held on the date and at the time and place fixed by the chief
executive officer or the board of directors, except that a special meeting
called by or at demand of a shareholder or shareholders shall be held in the
county where the principal executive office is located. The business transacted
at a special meeting shall be limited to the purposes as stated in the notice of
the meeting.
Section 2.04. Quorum, Adjourned Meetings. The holders of a majority of the
shares entitled to vote shall constitute a quorum for the transaction of
business at any regular or special meeting. In case a quorum shall not be
present at a meeting, the meeting may be adjourned from time to time without
notice other than announcement at the time of adjournment of the date, time and
place of the adjourned meeting. If a quorum is present, a meeting may be
adjourned from time to time without notice other than announcement at the time
of adjournment of the date, time and place of the adjourned meeting. At
adjourned meetings at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally noticed. If a
quorum is present when a meeting is convened, the shareholders present may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders originally present to leave less than a quorum.
Section 2.05. Voting. At each meeting of the shareholders every shareholder
having the right to vote shall be entitled to vote either in person or by proxy.
Each shareholder, unless the articles of incorporation, these bylaws, or
statutes provide otherwise, shall have one vote for each share having voting
power registered in such shareholder's name on the books of the corporation.
jointly owned shares may be voted by any joint owner unless the corporation
receives written notice from any one of them denying the authority of that
person to vote those shares. Upon the demand of any shareholder entitled to
vote, the vote upon any question before the meeting shall be by ballot. All
questions shall be decided by a majority vote of the number of shares entitled
to vote and represented at the meeting at the time of the vote except if
otherwise required by statute, the articles of incorporation, or these bylaws.
For purposes of these bylaws, no shareholders owning shares of Non- Voting
Common Stock of the corporation shall be entitled to vote.
Section 2.06. Record Date. The board of directors may fix a date, not
exceeding 60 days preceding the date of any meeting of shareholders, as a record
date for the determination of the shareholders entitled to notice of, and to
vote at, such meeting, notwithstanding any transfer of shares on the books of
the corporation after any record date so fixed. If the board of directors
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fails to fix a record date for determination of the shareholders entitled to
notice of, and to vote at, any meeting of shareholders, the record date shall be
the 20th day preceding the date of such meeting.
Section 2.07. Notice of Meetings. There shall be mailed to each
shareholder, shown by the books of the corporation to be a holder of record of
voting shares, at his address as shown by the books of the corporation, a notice
setting out the time and place of each regular meeting and each special meeting,
except (unless otherwise provided in section 2.04 hereof) where the meeting is
an adjourned meeting and the date, time and place of the meeting were announced
at the time of adjournment, which notice shall be mailed at least five days
prior thereto (unless otherwise provided in section 2.04 hereof); except that
notice of a meeting at which a plan of merger or exchange is to be considered
shall be mailed to all shareholders of record, whether entitled to vote or not,
at least fourteen days prior thereto. Every notice of any special meeting called
pursuant to section 2.03 hereof shall state the purpose or purposes for which
the meeting has been called, and the business transacted at all special meetings
shall be confined to the purposes stated in the notice. The written notice of
any meeting at which a plan of merger or exchange is to be considered shall so
state such as a purpose of the meeting. A copy or short description of the plan
of merger or exchange shall be included in or enclosed with such notice.
Section 2.08. Waiver of Notice. Notice of any regular or special meeting
may be waived by any shareholder either before, at or after such meeting orally
or in writing signed by such shareholder or a representative entitled to vote
the shares of such shareholder. A shareholder, by his attendance at any meeting
of shareholders, shall be deemed to have waived notice of such meeting, except
where the shareholder objects at the beginning of the meeting to the transaction
of business because the meeting is not lawfully called or convened, or objects
before a vote on an item of business because the item may not lawfully be
considered at that meeting and does not participate in the consideration of the
item at that meeting.
Section 2.09. Written Action. Any action which might be taken at a meeting
of the shareholders may be taken without a meeting if done in writing and signed
by all of the shareholders entitled to vote on that action.
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ARTICLE III.
DIRECTORS
Section 3.01. General Powers. The business and affairs of the corporation
shall be managed by or under the authority of the board of directors, except as
otherwise permitted by statute.
Section 3.02. Number, Qualification and Term of Office. Until the
organizational meeting of the board of directors, the number of directors shall
be the number named in the articles of incorporation. Thereafter, the number of
directors shall be increased or decreased from time to time by resolution of the
board of directors or the shareholders. Directors need not be shareholders. Each
of the directors shall hold office until the regular meeting of shareholders
next held after such director's election and until such director's successor
shall have been elected and shall qualify, or until the earlier death,
resignation, removal, or disqualification of such director.
Section 3.03. Board Meetings. Meetings of the board of directors may be
held from time to time at such time and place within or without the state of
Minnesota as may be designated in the notice of such meeting.
Section 3.04. Calling Meetings. Notice Meetings of the board of directors
may be called by the chairman of the board by giving at least twenty-four hours'
notice, or by any other director by giving at least five days' notice, of the
date, time and place thereof to each director by mail, telephone, telegram or in
person, if the day or date, time and place of a meeting of the board of
directors has been announced at a previous meeting of the board, no notice is
required. Notice of an adjourned meeting of the board of directors need not be
given other than by announcement at the meeting at which adjournment is taken.
Section 3.05. Waiver of Notice. Notice of any meeting of the board of
directors may be waived by any director either before, at, or after such meeting
orally or in a writing signed by such director. A director, by his attendance at
any meeting of the board of directors, shall be deemed to have waived notice of
such meeting, except where the director objects at the beginning of the meeting
to the transaction of business because the meeting is not lawfully called or
convened and does not participate thereafter in the meeting.
Section 3.06. Quorum. A majority of the directors holding office
immediately prior to a meeting of the board of directors shall constitute a
quorum for the transaction of business at such meeting.
Section 3.07. Absent Directors. A director may give advance written consent
or opposition to a proposal to be acted on at a meeting of the board of
directors. If such director is not present at the meeting, consent or opposition
to a proposal does not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as
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a vote in favor of or against the proposal and shall be entered in the minutes
or other record of action at the meeting, if the proposal acted on at the
meeting is substantially the same or has substantially the same effect as the
proposal to which the director has consented or objected.
Section 3.08. Conference Communications. Any or all directors may
participate in any meeting of the board of directors, or of any duly constituted
committee thereof, by any means of communication through which the directors may
simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this section 3.08 shall be deemed present in person at
the meeting; and the place of the meeting shall be the place of origination of
the conference telephone conversation or other comparable communication
technique.
Section 3.09. Vacancies; Newly Created Directorships. Vacancies on the
board of directors of this corporation occurring by reason of death,
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the board although less than a
quorum, newly created directorships resulting from an increase in the authorized
number of directors by action of the board of directors as permitted by section
3.02 may be fined by a majority vote of the directors serving at the time of
such increase; and each director elected pursuant to this section 3.09 shall be
a director until such director's successor is elected by the shareholders at
their next regular or special meeting.
Section 3.10. Removal. Any or all of the directors may be removed from
office at any time, with or without cause, by the affirmative vote of the
shareholders holding a majority of the shares entitled to vote at an election of
directors except, as otherwise provided by the Minnesota Business Corporation
Act, section 302A.223, as amended, when the shareholders have the right to
cumulate their votes. A director named by the board of directors to fill a
vacancy may be removed from office at any time, with or without cause, by the
affirmative vote of the remaining directors if the shareholders have not elected
directors in the interim between the time of the appointment to fill such
vacancy and the time of the removal. In the event that the entire board or any
one or more directors be so removed, new directors may be elected at the same
meeting.
Section 3.11. Committees. A resolution approved by the affirmative vote of
a majority of the board of directors may establish committees having the
authority of the board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the Director and control of,
and vacancies in the membership thereof shall be filled by, the board of
directors, except as provided by the Minnesota Business Corporation Act, section
302A.243.
A majority of the members of the committee present at a meeting is a quorum
for the transaction of business, unless a larger or smaller proportion or number
is provided in a resolution approved by the affirmative vote of a majority of
the directors present.
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Section 3.12. Written Action. Any action which might be taken at a meeting
of the board of directors, or any duly constituted committee thereof, may be
taken without a meeting if done in writing and signed by all of the directors or
committee members, unless the articles provide otherwise and the action need not
be approved by the shareholders.
Section 3.13. Compensation. Directors who are not salaried officers of this
corporation shall receive such fixed sum per meeting attended or such fixed
annual sum as shall be determined, from time to time, by resolution of the board
of directors. The board of directors may, by resolution, provide that all
directors shall receive their expenses, if any, of attendance at meetings of the
board of directors or any committee thereof. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
ARTICLE IV.
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist of a
chairman of the board (if one is elected by the board), a chief executive
officer, a president, one or more vice presidents (if desired by the board), a
treasurer, a secretary (if one is elected by the board) and such other officers
and agents as may, from time to time, be elected by the board of directors. Any
number of offices may be held by the same person.
Section 4.02. Election, Term of Office and Qualifications. The board of
directors shall elect or appoint, by resolution approved by the affirmative vote
of a majority of the directors present, from within or without their number, the
president, treasurer and such other officers as may be deemed advisable, each of
whom shall have the powers, rights, duties, responsibilities, and terms in
office provided for in these bylaws or a resolution of the board of directors
not inconsistent therewith. The president and all other officers who may be
directors shall continue to hold office until the election and qualification of
their successors, notwithstanding an earlier termination of their directorship.
Section 4.03. Removal and Vacancies. Any officer may be removed from his
office by the board of directors at any time, with or without cause. Such
removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy in an office of the corporation by
reason of death, resignation or otherwise, such vacancy shall be filled for the
unexpired term by the board of directors.
Section 4.04. Chairman of the Board. The chairman of the board, if one is
elected, shall preside at all meetings of the shareholders and directors and
shall have such other duties as may be prescribed, from time to time, by the
board of directors.
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Section 4.05. Chief Executive Officer. The chief executive officer shall
have general active management of the business of the corporation. In the
absence of the chairman of the board, he shall preside at all meetings of the
shareholders and directors. He shall see that all orders and resolutions of the
board of directors are carried into effect. He shall execute and deliver, in the
name of the corporation, any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the corporation unless the authority
to execute and deliver is required by law to be exercised by another person or
is expressly delegated by the articles or bylaws or by the board of directors to
some other officer or agent of the corporation. He shall maintain records of
and, whenever necessary, certify all proceedings of the board of directors and
the shareholders, and in general, shall perform all duties usually incident to
the office of the president He shall have such other duties as may, from time to
time, be prescribed by the board of directors.
Section 4.06. President. The president shall assist the chief executive
officer and shall have such powers and shall perform such duties as may be
delegated or prescribed by the board of directors or the chief executive
officer, including without limitation, the power to execute share certificates
issued by the corporation.
Section 4.07. Vice President. Each vice president, if one or more is
elected, shall have such powers and shall perform such duties as may be
prescribed by the 'board of directors, the chief executive officer, or the
president. In the event of the absence or disability of the president, the vice
president(s) shall succeed to his power and duties in the order designated by
the board of directors.
Section 4.08. Secretary. The secretary, if one is elected, shall be
secretary of and shall attend all meetings of the shareholders and board of
directors and shall record all proceedings of such meetings in the minute book
of the corporation. He shall give proper notice of meetings of shareholders and
directors. He shall perform such other duties as may, from time to time, be
prescribed by the board of directors or by the president and chief executive
officer.
Section 4.09. Treasurer. The treasurer shall be the chief financial officer
and shall keep accurate financial records for the corporation. He shall deposit
all moneys, drafts and checks in the name of, and to the credit of, the
corporation in such banks and depositories as the board of directors shall, from
time to time, designate. He shall have power to endorse, for deposit, all notes,
checks and drafts received by the corporation. He shall disburse the funds of
the corporation, as -ordered by the board of directors, making proper vouchers
therefor. He shall render to the president and the directors, whenever
requested, an account of all his transactions as treasurer and of the financial
condition of the corporation, and shall perform such other duties as may, from
time to time, be prescribed by the board of directors or by the president.
Section 4.10. Compensation. The officers of the corporation shall receive
such compensation for their services as may be determined, from time to time, by
resolution of the board of directors.
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ARTICLE V.
SHARES AND THEIR TRANSFER
Section 5.01. Certificates for Shares. All shares of the corporation shall
be certificated shares. Every owner of shares of the corporation shall be
entitled to a certificate, to be in such form as shall be prescribed by the
board of directors, certifying the number of shares of the corporation owned by
such shareholder. The certificates for such shares shall be numbered in the
order in which they shall be issued and shall be signed, in the name of the
corporation, by the chief executive officer (or the president if the chief
executive officer delegates such authority) and by the secretary or an assistant
secretary or by such officers as the board of directors may designate. If the
certificate is signed by a transfer agent or registrar, such signatures of the
corporate officers may be by facsimile if authorized by the board of directors.
Every certificate surrendered to the corporation for exchange or transfer shall
be canceled and no new certificate or certificates shall, be issued in exchange
for any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in section 5.04.
Section 5.02. Issuance of Shares. The board of directors is authorized to
cause to be issued shares of the corporation up to the full amount authorized by
the articles of incorporation in such amounts as may be determined by the board
of directors and as may be permitted by law. Shares may be issued for any
consideration, including, without limitation, in consideration of cash or other
property, tangible or intangible, received or to be received by the corporation
under a written agreement, of services rendered or to be rendered to the
corporation under a written agreement, or of an amount transferred from surplus
to stated capital upon a share dividend. At the time of approval of the issuance
of shares, the board of directors shall state, by resolution, its determination
of the fair value to the corporation in monetary terms of any consideration
other than cash for which shares are to be issued.
Section 5.03. Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named in the certificate,
or the shareholder's legal representative, or the shareholder's duly authorized
attorney-in-fact, and upon surrender of the certificate or the certificates for
such shares. The corporation may treat as the absolute owner of shares of the
corporation, the person or persons in whose name shares are registered on the
books of the corporation.
Section 5.04. Loss of Certificates. Except as otherwise provided by the
Minnesota Business Corporation Act, section 302A.419, any shareholder claiming a
certificate for shares to be lost, stolen, or destroyed shall make an affidavit
of that fact in such form as the board of directors shall require and shall., if
the board of directors so requires, give the corporation a bond of indemnity in
form, in an amount, and with one or more sureties satisfactory to the board of
directors, to indemnify the corporation against any claim which may be made
against it on account of the reissue of such certificate, whereupon a new
certificate may be issued in the same tenor and for the same number of shares as
the one alleged to have been lost, stolen or destroyed.
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ARTICLE VI.
DISTRIBUTIONS, RECORD DATE
Section 6.01. Distributions. Subject to the provisions of the articles of
incorporation, of these bylaws, and of law, the board of directors may authorize
and cause the corporation to make distributions whenever, and in such amounts or
forms as, in its opinion, are deemed advisable.
Section 6.02. Record Date. Subject to any provisions of the articles of
incorporation, the board of directors may fix a date not exceeding 120 days
preceding the date fixed for the payment of any distribution as the record date
for the determination of the shareholders entitled to receive payment of the
distribution and, in such case, only shareholders of record on the date so fixed
shall be entitled to receive payment of such distribution notwithstanding any
transfer of shares on the books of the corporation after the record date.
ARTICLE VII.
BOOKS AND RECORDS, FISCAL YEAR
Section 7.01. Share Register. The board of directors of the corporation
shall cause to be kept at its principal executive office, or at another place or
places within the United States determined by the board:
(1) a share register not more than one year old, containing the names and
addresses of the shareholders and the number and classes of shares held by each
shareholder; and
(2) a record of the dates on which certificates or transaction statements
representing shares were issued.
Section 7.02. Other Books and Records. The board of directors shall cause
to be kept at its principal executive office, or, if its principal executive
office is not in Minnesota, shall make available at its Minnesota registered
office within ten days after receipt by an officer of the corporation of a
written demand for them made by a shareholder or other person authorized by the
Minnesota Business Corporation Act, section 302A.461, originals or copies of-
(1) records of all proceedings of shareholders for the last three
years;
(2) records of all proceedings of the board for the last three years;
(3) its articles and all amendments currently in effect;
(4) its bylaws and all amendments currently in effect;
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(5) financial statements required by the Minnesota Business
Corporation Act, section 302A.463 and the financial statements
for the most recent interim period prepared in the course of the
operation of the corporation for distribution to the shareholders
or to a governmental agency as a matter of public record;
(6) reports made to shareholders generally within the last three
years;
(7) a statement of the names and usual business addresses of its
directors and principal officers; and
(8) any shareholder voting or control agreements of which the
corporation is aware.
Section 7.03. Fiscal Year. The fiscal year of the corporation shall be
determined by the board of directors.
ARTICLE VIII
LOANS, GUARANTEES, SURETYSHIP
Section 8.01. The corporation may lend money to, guarantee an obligation
of, become a surety for, or otherwise financially assist a person if the
transaction, or a class of transactions to which the transaction belongs, is
approved by the affirmative vote of a majority of the directors present, and:
(1) is in the usual and regular course of business of the corporation
(2) is with, or for the benefit of, a related corporation, an
organization in which the corporation has a financial interest,
an organization with which the corporation has a business
relationship, or an organization to which the corporation has the
power to make donations;
(3) is with, or for the benefit of, an officer or other employee of
the corporation or a subsidiary, including an officer or employee
who is a director of the corporation or a subsidiary, and may
reasonably be expected, in the judgment of the board, to benefit
the corporation; or
(4) has been approved by (a) the holders of two-thirds of the voting
power of the shares entitled to vote which are owned by persons
other than the interested person or persons, or (b) the unanimous
affirmative vote of the holders of all outstanding shares whether
or not entitled to vote.
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Such loan, guarantee, surety contract or other financial assistance may be
with or without interest, and may be unsecured, or may be secured in the manner
as a majority of the directors present approve, including, without limitation, a
pledge of or other security interest in shares of the corporation. Nothing in
this section shall be deemed to deny, limit or restrict the powers of guaranty,
surety or warranty of the corporation at common law or under a statute of the
state of Minnesota.
ARTICLE XI.
INDEMNIFICATION OF CERTAIN PERSONS
Section 9.01. The corporation shall indemnify all officers and directors of
the corporation, for such expenses and liabilities, in such manner, under such
circumstances and to such extent as permitted by Minnesota Business Corporation
Act section 302A.521, as now enacted or hereafter amended. Unless otherwise
approved by the board of directors, the corporation shall not indemnify any
employee of the corporation who is not otherwise entitled to indemnification
pursuant to the prior sentence of this section 9.01.
ARTICLE X.
AMENDMENTS
Section 10.01. These bylaws may be amended or altered by a vote of the
majority of the whole board of directors at any meeting. Such authority of the
board of directors is subject to the power of the shareholders, exercisable in
the manner provided in the Minnesota Business Corporation Act, section 302A.181,
subd. 3, to adopt, amend, repeal bylaws adopted, amended, or repealed by the
board of directors. After the adoption of the initial bylaws, the board of
directors shall not make or alter any bylaws fixing a quorum for meetings of
shareholders, prescribing procedures for removing directors or filling vacancies
in the board of directors, or fixing the number of directors or their
classifications, qualifications, or terms of office, except that the board of
directors may adopt or amend any bylaw to increase their number.
ARTICLE XI.
SECURITIES OF OTHER CORPORATIONS
Section 11.01. Voting Securities Held by the Corporation. Unless otherwise
ordered by the board of directors, the president and chief executive officer
shall have full power and authority on behalf of the corporation (a) to attend
any meeting of security holders of other corporations in which the corporation
may hold securities and to vote such securities on behalf of this corporation;
(b) to execute any proxy for such meeting on behalf of the corporation; or (c)
to execute a written action in lieu of a meeting of such other corporation on
behalf of this corporation. At such meeting, the president shall possess and may
exercise any and all rights and
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powers incident to the ownership of such securities that the corporation
possesses. The board of directors may, from time to time, grant such power and
authority to one or more other persons and may remove such power and authority
from the president or any other person or persons.
Section 11.02. Purchase and Sale of Securities. Unless otherwise ordered by
the board of directors, the president and chief executive officer shall have
full power and authority on behalf of the corporation to purchase, sell,
transfer or encumber any and all securities of any other corporation owned by
the corporation, and may execute and deliver such documents as may be necessary
to effectuate such purchase, sale, transfer or encumbrance. The board of
directors may, from time to time, confer like powers upon any other person or
persons.
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EXHIBIT 4.1
LUIGINO'S, INC.
SERIES A AND SERIES B
10% SENIOR SUBORDINATED NOTES DUE 2006
------------------------
INDENTURE
Dated as of February 4, 1999
------------------------
U.S. Bank Trust National Association
Trustee
------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE..........................1
Section 1.01. Definitions...................................................1
Section 1.02. Other Definitions............................................13
Section 1.03. Incorporation by Reference of Trust Indenture Act............14
Section 1.04. Rules of Construction........................................14
ARTICLE 2 THE NOTES..........................................................15
Section 2.01. Form and Dating..............................................15
Section 2.02. Execution and Authentication.................................16
Section 2.03. Registrar and Paying Agent...................................16
Section 2.04. Paying Agent to Hold Money in Trust..........................16
Section 2.05. Holder Lists.................................................17
Section 2.06. Transfer and Exchange........................................17
Section 2.07. Replacement Notes............................................28
Section 2.08. Outstanding Notes............................................28
Section 2.09. Treasury Notes...............................................28
Section 2.10. Temporary Notes..............................................28
Section 2.11. Cancellation.................................................29
Section 2.12. Defaulted Interest...........................................29
ARTICLE 3 REDEMPTION AND PREPAYMENT..........................................29
Section 3.01. Notices to Trustee...........................................29
Section 3.02. Selection of Notes to Be Redeemed............................29
Section 3.03. Notice of Redemption.........................................30
Section 3.04. Effect of Notice of Redemption...............................30
Section 3.05. Deposit of Redemption Price..................................31
Section 3.06. Notes Redeemed in Part.......................................31
Section 3.07. Optional Redemption..........................................31
Section 3.08. Mandatory Redemption.........................................32
Section 3.09. Offer to Purchase by Application of Excess Proceeds..........32
ARTICLE 4 COVENANTS..........................................................33
Section 4.01. Payment of Notes.............................................33
Section 4.02. Maintenance of Office or Agency..............................34
Section 4.03. Reports......................................................34
Section 4.04. Compliance Certificate.......................................34
Section 4.05. Taxes........................................................35
Section 4.06. Stay, Extension and Usury Laws...............................35
Section 4.07. Restricted Payments..........................................35
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.................................................37
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock...37
Section 4.10. Asset Sales..................................................39
Section 4.11. Transactions with Affiliates.................................40
Section 4.12. Liens........................................................40
Section 4.13. Business Activities..........................................40
Section 4.14. Corporate Existence..........................................41
Section 4.15. Offer to Repurchase Upon Change of Control...................41
Section 4.16. No Senior Subordinated Debt..................................41
Section 4.17. Limitation on Sale and Leaseback Transactions................42
Section 4.18. Limitation on Issuances and Sales of Capital Stock of
Wholly Owned Subsidiaries....................................42
Section 4.19. Payments for Consent.........................................42
Section 4.20. Subsidiary Guarantees.......................................42
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ARTICLE 5 SUCCESSORS.........................................................43
Section 5.01. Merger, Consolidation, or Sale of Assets.....................43
Section 5.02. Successor Corporation Substituted............................43
ARTICLE 6 DEFAULTS AND REMEDIES..............................................43
Section 6.01. Events of Default............................................44
Section 6.02. Acceleration.................................................45
Section 6.03. Other Remedies...............................................46
Section 6.04. Waiver of Past Defaults......................................46
Section 6.05. Control by Majority..........................................46
Section 6.06. Limitation on Suits..........................................46
Section 6.07. Rights of Holders of Notes to Receive Payment................47
Section 6.08. Collection Suit by Trustee...................................47
Section 6.09. Trustee May File Proofs of Claim.............................47
Section 6.10. Priorities...................................................48
Section 6.11. Undertaking for Costs........................................48
ARTICLE 7 TRUSTEE............................................................48
Section 7.01. Duties of Trustee............................................48
Section 7.02. Rights of Trustee............................................49
Section 7.03. Individual Rights of Trustee.................................50
Section 7.04. Trustee's Disclaimer.........................................50
Section 7.05. Notice of Defaults...........................................50
Section 7.06. Reports by Trustee to Holders of the Notes...................50
Section 7.07. Compensation and Indemnity...................................51
Section 7.08. Replacement of Trustee.......................................51
Section 7.09. Successor Trustee by Merger, etc.............................52
Section 7.10. Eligibility; Disqualification................................52
Section 7.11. Preferential Collection of Claims Against Company............53
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE...........................53
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.....53
Section 8.02. Legal Defeasance and Discharge...............................53
Section 8.03. Covenant Defeasance..........................................53
Section 8.04. Conditions to Legal or Covenant Defeasance...................54
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions........................55
Section 8.06. Repayment to Company.........................................55
Section 8.07. Reinstatement................................................55
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER...................................56
Section 9.01. Without Consent of Holders of Notes..........................56
Section 9.02. With Consent of Holders of Notes.............................56
Section 9.03. Compliance with Trust Indenture Act..........................58
Section 9.04. Revocation and Effect of Consents............................58
Section 9.05. Notation on or Exchange of Notes.............................58
Section 9.06. Trustee to Sign Amendments, etc..............................58
ARTICLE 10 SUBORDINATION......................................................59
Section 10.01. Agreement to Subordinate....................................59
Section 10.02. Liquidation; Dissolution; Bankruptcy........................59
Section 10.03. Payment on Change in Control................................59
Section 10.04. Default on Designated Senior Debt...........................59
Section 10.05. Acceleration of Securities..................................60
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Section 10.06. When Distribution Must Be Paid Over.........................60
Section 10.07. Notice by Company...........................................61
Section 10.08. Subrogation.................................................61
Section 10.09. Relative Rights.............................................61
Section 10.10. Subordination May Not Be Impaired by Company................61
Section 10.11. Distribution or Notice to Representative....................61
Section 10.12. Rights of Trustee and Paying Agent..........................62
Section 10.13. Authorization to Effect Subordination.......................62
Section 10.14. Amendments..................................................62
ARTICLE 11 SUBSIDIARY GUARANTEES..............................................62
Section 11.01. Guarantee...................................................62
Section 11.02. Subordination of Subsidiary Guarantee.......................63
Section 11.03. Limitation on Guarantor Liability...........................63
Section 11.04. Execution and Delivery of Subsidiary Guarantee and
Supplemental Indenture......................................64
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms..........64
Section 11.06. Releases Following Sale of Assets...........................65
ARTICLE 12 MISCELLANEOUS......................................................65
Section 12.01. Trust Indenture Act Controls................................65
Section 12.02. Notices.....................................................65
Section 12.03. Communication by Holders of Notes with Other Holders of
Notes.......................................................67
Section 12.04. Certificate and Opinion as to Conditions Precedent..........67
Section 12.05. Statements Required in Certificate or Opinion...............67
Section 12.06. Rules by Trustee and Agents.................................67
Section 12.07. No Personal Liability of Directors, Officers, Employees
and Stockholders............................................67
Section 12.08. Governing Law...............................................68
Section 12.09. No Adverse Interpretation of Other Agreements...............68
Section 12.10. Successors..................................................68
Section 12.11. Severability................................................68
Section 12.12. Counterpart Originals.......................................68
Section 12.13. Table of Contents, Headings, etc............................68
EXHIBITS*
Exhibit A1 FORM OF NOTE
Exhibit A2 FORM OF REGULATION -S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF NOTE GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT
GUARANTORS
*Filed without exhibits - Such exhibits will be filed with the commission upon
request.
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INDENTURE dated as of February 4, 1999 between Luigino's, Inc., a
Minnesota corporation (the "Company"), and U.S. Bank Trust National Association,
as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10% Series A
Senior Subordinated Notes due 2006 (the "Series A Notes") and the 10% Series B
Senior Subordinated Notes due 2006 (the "Series B Notes" and, together with the
Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of this Indenture described in Section 4.15 and/or Section 5.01 hereof and not
by Section 4.10 hereof), and (ii) the issue or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by the
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Company to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the
Company or to another Wholly Owned Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary, and (iii) a Restricted Payment that is permitted by Section 4.07
hereof shall not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Credit Agreement or with any domestic commercial
bank having capital and surplus in excess of $500.0 million and a Thompson Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group and in each case maturing within six months after the date
of acquisition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to
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any "person" (as such term is used in Section 13(d)(3) of the Exchange Act)
other than to the Principal or his Related Parties, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principal and his Related Parties, becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), (iv) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors or (v) the Company consolidates with, or merges
with or into, any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
"Company" means Luigino's, Inc., a Minnesota corporation, and any and
all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with a
Capital Lease Obligation, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or
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governmental regulation applicable to that Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Consulting Agreement" means that certain Consulting Agreement dated
as of January 1, 1999 among Paulucci International Ltd., Inc. and the Company,
as in effect on the date of this Indenture.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors (described in clause (i) or clause (ii) of this
definition) who were members of such Board at the time of such nomination or
election.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"Credit Agreement" means that certain Amended and Restated Credit
Agreement, dated as of February 4, 1999, by and among the Company, The First
National Bank of Chicago, as Agent, U.S. Bank National Association (formerly
known as First Bank National Association) as Co-Agent, and the lenders party
thereto, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced (directly or
indirectly) in whole or in part from time to time.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Credit Agreement) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness incurred under Credit
Facilities in existence on the date of the Indenture shall be deemed to have
been incurred on such date in reliance on, and shall be permitted by, the
exception provided in Section 4.09(b)(i) hereof.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the
giving of notice or both would
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be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof,
substantially in the form of Exhibit A1 hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"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 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means (i) any Senior Debt outstanding under
the Credit Agreement and (ii) any other Senior Debt permitted under this
Indenture the principal amount of which is $20.0 million or more and that has
been designated by the Company (with, so long as the Credit Agreement is in
effect, the consent of the Representative thereunder) as "Designated Senior
Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of this Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its 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, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person
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and its Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Subsidiaries or secured by a Lien on assets of such Person
or one of its Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all cash dividend payments or other
distributions (and non-cash dividend payments in the case of a Person that is a
Subsidiary) on any series of preferred equity of such Person 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
such Person (or in the case of a Person that is an "S Corporation" or other
pass-through entity for federal income tax purposes, the highest combined
federal and state income tax rate of a shareholder of such S Corporation or
other pass-through entity for federal income tax purposes), expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems
any Indebtedness (other than revolving credit borrowings) or issues preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"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 have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A1 or A2 hereto issued in accordance with Section 2.01,
2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for
6
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collection in the ordinary course of business), direct or indirect, in any
manner (including, without limitation, letters of credit and reimbursement
agreements in respect thereof), of all or any part of any Indebtedness.
"Guarantor" means any Subsidiary that executes a Subsidiary Guarantee
in accordance with the provisions of this Indenture, and its respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Purchasers" means First Chicago Capital Markets, Inc. and
U.S. Bancorp Libra.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or
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disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of Section 4.07.
"Issue Date" means the date on which the Series A Notes are first
issued and delivered.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person for any period, (i)
the net income (loss) of such Person for such period, determined in accordance
with GAAP and before any reduction in respect of preferred interests or
dividends, excluding, however, (a) any gain (but not loss), together with any
related provision for taxes on such gain (but not loss), realized in connection
with (1) any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (2) the disposition of any securities by
such Person or any of its Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Subsidiaries and (b) any extraordinary or
nonrecurring gain (but not loss), together with any related provision for taxes
on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Senior Debt) secured by a Lien on the asset or assets that were the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest (including interest
accruing after the commencement of any bankruptcy, reorganization, insolvency or
similar proceeding relating to the Company or any of its Subsidiaries, whether
or not allowed as a claim in such proceeding), penalties, fees,
indemnifications,
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reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means the business conducted by the Company on
the date of this Indenture and businesses reasonably related thereto.
"Permitted Investments" means (a) any Investment in the Company or in
a Wholly Owned Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Subsidiary of the Company
in a Person, if as a result of such Investment (i) such Person becomes a Wholly
Owned Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company; (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 hereof; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; and (f) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (f) that are at the time
outstanding, not to exceed $5.0 million.
"Permitted Junior Securities" means Equity Interests in the Company
or debt securities that are subordinated to all Senior Debt (and any debt or
equity securities issued in exchange for Senior Debt) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Debt pursuant to this Indenture.
"Permitted Liens" means (i) Liens on assets of the Company and the
Guarantors securing Senior Debt that was permitted by the terms of this
Indenture to be incurred; (ii) Liens in favor of the Company; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety
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or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by Section 4.09(b)(iv) hereof
covering only the assets acquired with such Indebtedness; (vii) Liens existing
on the date of this Indenture; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (ix)
Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding; and (x) Liens on assets of one or more
Subsidiaries that are not Guarantors securing Indebtedness not to exceed $5.0
million.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or any other entity.
"Principal" means Mr. Jeno F. Paulucci.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"QIB" means a "Qualified Institutional Buyer" as defined in Rule
144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Company and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from time
to time.
"Regulation-S" means Regulation-S promulgated under the Securities
Act.
"Regulation-S Global Note" means Regulation-S Temporary Global Note
or Regulation-S Permanent Global Note, as appropriate.
"Regulation-S Permanent Global Note" means a permanent global Note in
the form of Exhibit A1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf
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of and registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation-S
Temporary Global Note upon expiration of the Restricted Period.
"Regulation-S Temporary Global Note" means a temporary global Note in
the form of Exhibit A2 hereto bearing the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Notes initially sold in reliance on Rule 903 of Regulation-S.
"Related Party" means (i) any immediate family member of the
Principal and (ii) 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 the Principal and/or such
other Persons referred to in clause (i) of this definition.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer or other employee to whom such matter is referred because of
his knowledge of and familiarity with the particular subject.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; provided that if and
for so long as any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation-S.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness now or hereafter outstanding
under Credit Facilities and all Hedging Obligations with respect thereto, (ii)
any other Indebtedness permitted to be incurred by the Company or a Guarantor
under the terms of this Indenture, unless the instrument under which such
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Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes or the Guarantee of such
Guarantor, as the case may be, and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (w) any liability for federal, state, local or other taxes
owed or owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness
that is incurred in violation of this Indenture.
"Senior Guarantees" means the Guarantees by the Guarantors of
Obligations under the Senior Debt.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means a Guarantee by a Subsidiary on a senior
subordinated basis of the Company's payment obligations under the Notes and this
Indenture in the form attached hereto as Exhibit E.
"Tax Distribution Agreement" means the agreement dated the Issue Date
among the Company's shareholders and the Company, as in effect on the date of
this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note
substantially in the form of Exhibit A1 attached hereto that bears the Global
Note Legend and that has the "Schedule of Exchanges of Interests in the Global
Note" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Notes that do
not bear the Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(k) under the
Securities Act.
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"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the board
of directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
Section 1.02. Other Definitions.
Defined in
Term Section
- ---- -------
"Acceleration Notice"..................................... 6.02
"Affiliate Transaction"................................... 4.11
"Asset Sale Offer"........................................ 3.09
"Authentication Order".................................... 2.02
"Calculation Date"........................................ 1.01
"Change of Control Offer"................................. 4.15
"Change of Control Payment"............................. 4.15
"Change of Control Payment Date".......................... 4.15
"Covenant Defeasance"..................................... 8.03
"DTC"..................................................... 2.03
"Event of Default"........................................ 6.01
"Excess Proceeds"......................................... 4.10
"incur"................................................... 4.09
"Legal Defeasance"........................................ 8.02
"Offer Amount"............................................ 3.09
"Offer Period"............................................ 3.09
"Paying Agent"............................................ 2.03
"Payment Blockage Notice"................................. 10.04
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Defined in
Term Section
- ---- -------
"Payment Default"......................................... 6.01
"Permitted Debt".......................................... 4.09
"Purchase Date"........................................... 3.09
"Registrar"............................................... 2.03
"Restricted Payments"..................................... 4.07
"Supplemental Indenture".................................. 4.20
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the
Company and the Guarantors, respectively, and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
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(f) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A1 or A2 hereto.
The Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its authentication.
The Notes shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibits A1 or A2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation-S shall be issued initially in the form of the Regulation-S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from Euroclear and Cedel
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation-S
Temporary Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein during the Restricted Period pursuant to another
exemption from registration under the Securities Act and who will take delivery
of a beneficial ownership interest in a 144A Global Note or an IAI Global Note
bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii)
hereof), and (ii) an Officers' Certificate from the Company. Following the
termination of the Restricted Period, beneficial interests in the Regulation-S
Temporary Global Note shall be exchanged for beneficial interests in
Regulation-S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation-S Permanent Global Notes,
the Trustee shall cancel the Regulation-S Temporary Global Note. The aggregate
principal amount of the Regulation-S Temporary Global Note and
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<PAGE>
the Regulation-S Permanent Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depositary
or its nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation-S Temporary Global Note and the
Regulation-S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
An Officer shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. 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 has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
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<PAGE>
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
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
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation-S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(b)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06, Section
2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and
shall be, a Global Note. A Global Note may not be exchanged for another Note
other than as provided in this Section 2.06(a), however, beneficial interests in
a Global Note may be transferred and exchanged as provided in Section 2.06(b),
(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
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(i) Transfer of Beneficial Interests in the Same Global
Note. Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance
with the transfer restrictions set forth in the Private Placement
Legend; provided, however, that prior to the expiration of the
Restricted Period, transfers of beneficial interests in the
Regulation S Temporary Global Note may not be made to a U.S. Person
or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Beneficial interests in any Unrestricted Global Note may
be transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders
or instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Notes. In connection with all transfers and
exchanges of beneficial interests that are not subject to Section
2.06(b)(i) above, the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another
Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance
with the Applicable Procedures containing information regarding the
Participant account to be credited with such increase or (B) (1) a
written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing
the Depositary to cause to be issued a Definitive Note in an amount
equal to the beneficial interest to be transferred or exchanged and
(2) instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note
shall be registered to effect the transfer or exchange referred to in
(1) above; provided that in no event shall Definitive Notes be issued
upon the transfer or exchange of beneficial interests in the
Regulation-S Temporary Global Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Company in accordance
with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section
2.06(h) hereof.
(iii)Transfer of Beneficial Interests to Another
Restricted Global Note. A beneficial interest in any Restricted
Global Note may be transferred to a Person who takes delivery thereof
in the form of a beneficial interest in another Restricted Global
Note if the transfer complies with the requirements of Section
2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the
form of a beneficial interest in the 144A Global Note,
then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item
(1) thereof;
(B) if the transferee will take delivery in the
form of a beneficial interest in the Regulation-S
Temporary Global Note or the Regulation-S Global Note,
then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item
(2) thereof; and
(C) if the transferee will take delivery in the
form of a beneficial interest in the IAI
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Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may
be exchanged by any Holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with
the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder of the
beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it
is not (1) a Broker-Dealer, (2) a Person participating in
the distribution of the Exchange Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such beneficial
interest in a Restricted Global Note proposes
to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global
Note, a certificate from such Holder in the
form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the Holder of such beneficial
interest in a Restricted Global Note proposes
to transfer such beneficial interest to a
Person who shall take delivery thereof in the
form of a beneficial interest in an
Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D),
if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
If any such transfer is effected pursuant to subparagraph
(B) or (D) above at a time when an Unrestricted Global Note has not
yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the
Trustee shall authenticate one or more Unrestricted Global Notes in
an aggregate principal amount equal to the aggregate principal amount
of beneficial interests transferred pursuant to subparagraph (B) or
(D) above.
Beneficial interests in an Unrestricted Global Note cannot
be exchanged for, or transferred to Persons who take delivery thereof
in the form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
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(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any Holder of a beneficial interest
in a Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the
form of a Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such beneficial interest
in a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904 under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration
requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
(F) if such beneficial interest is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being
transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions
a Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or
denominations as the Holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and
the Participant or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Regulation-S Temporary Global
Note to Definitive Notes.
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Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation-S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule
903(b)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A Holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder of such
beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
Broker-Dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is
an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such beneficial
interest in a Restricted Global Note proposes
to exchange such beneficial interest for a
Definitive Note that does not bear the Private
Placement Legend, a certificate from such
Holder in the form of Exhibit C hereto,
including the certifications in item (1)(b)
thereof; or
(2) if the Holder of such beneficial
interest in a Restricted Global Note proposes
to transfer such beneficial interest to a
Person who shall take delivery thereof in the
form of a Definitive Note that does not bear
the Private Placement Legend, a certificate
from such Holder in the form of Exhibit B
hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D),
if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any Holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Definitive Note, then, upon satisfaction of the conditions set forth
in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate
principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a
beneficial interest
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pursuant to this Section 2.06(c)(iv) shall be registered in such name
or names and in such authorized denomination or denominations as the
Holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.06(c)(iv) shall not bear the Private Placement
Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive
Note proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive
Notes to a Person who takes delivery thereof in the form of a
beneficial interest in a Restricted Global Note, then, upon receipt
by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive
Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904 under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration
requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case
of clause (A) above, the appropriate Restricted Global Note, in the
case of clause (B) above, the 144A Global Note, in the case of clause
(C) above, the Regulation-S Global Note, and in all other cases, the
IAI Global Note.
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(ii) Restricted Definitive Notes to Beneficial Interests
in Unrestricted Global Notes. A Holder of a Restricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Restricted Definitive Note
to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case
of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a Broker-Dealer, (2) a
Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive
Notes proposes to exchange such Notes for a
beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the
form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive
Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the
form of a beneficial interest in the
Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D),
if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel
the Definitive Notes and increase or cause to be increased the
aggregate principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. A Holder of an Unrestricted
Definitive Note may exchange such Note for a beneficial interest in
an Unrestricted Global Note or transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note at any time. Upon receipt of
a request for such an exchange or transfer, the Trustee shall cancel
the applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of one of the
Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to
a beneficial interest is effected pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above at a time when an Unrestricted Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the
Trustee shall authenticate one or more Unrestricted Global
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Notes in an aggregate principal amount equal to the principal amount
of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to
Rule 144A under the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to
Rule 903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to
any other exemption from the registration requirements of
the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted
Definitive Notes. Any Restricted Definitive Note may be exchanged by
the Holder thereof for an Unrestricted Definitive Note or transferred
to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case
of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a Broker-Dealer, (2) a
Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to
the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such
Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of
Exhibit C hereto, including the certifications
in item (1)(d) thereof; or
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(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery
thereof in the form of an Unrestricted
Definitive Note, a certificate from such Holder
in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D),
if the Registrar so requests, an Opinion of Counsel in
form reasonably acceptable to the Company to the effect
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted
Definitive Notes. A Holder of Unrestricted Definitive Notes may
transfer such Notes to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note. Upon receipt of a request to
register such a transfer, the Registrar shall register the
Unrestricted Definitive Notes pursuant to the instructions from the
Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
Broker-Dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and all
Notes issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER:
REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) NOT A U.S. PERSON AND IS ACQUIRING
THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL
NOT RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) AN INSTITUTIONAL
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ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF APPLICABLE) OR IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE
PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE, SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT 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."
(B) Notwithstanding the foregoing, any Global
Note or Definitive Note issued pursuant to subparagraphs
(b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) to this Section 2.06 (and all Notes issued
in exchange therefor or substitution thereof) shall not
bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a
legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO ARTICLE 2 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III)
THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation-S Temporary Global Note Legend. The
Regulation-S Temporary Global Note shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION-S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION-S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in
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a particular Global Note have been exchanged for Definitive Notes or a
particular Global Note has been redeemed, repurchased or canceled in whole and
not in part, each such Global Note shall be returned to or retained and canceled
by the Trustee in accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note or for Definitive Notes, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Global
Notes and Definitive Notes upon the Company's order or at the
Registrar's request.
(ii) No service charge shall be made to a Holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other
than any such transfer taxes or similar governmental charge payable
upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09,
4.10, 4.15 and 9.05 hereof).
(iii)The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or
in part, except the unredeemed portion of any Note being redeemed in
part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and
ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of any
Note being redeemed in part or (C) to register the transfer of or to
exchange a Note between an interest payment record date and the next
succeeding interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes,
and none of the Trustee, any Agent or the Company shall be affected
by notice to the contrary.
(vii)The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
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(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon receipt of
an Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
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, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, 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 the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable
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delay, the Company shall prepare and the Trustee shall authenticate definitive
Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. In the event
of partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the redemption date by the Trustee from the outstanding Notes not
previously called for redemption.
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The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
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.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) 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 shall be issued in the name of the Holder thereof upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
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Section 3.05. Deposit of Redemption Price.
One Business Day prior to a redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, 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 on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in Section 3.07(b), the Company shall not
have the option to redeem the Notes pursuant to this Section 3.07 prior to
February 1, 2003. Thereafter, the Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' written notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on February 1 of the
years indicated below:
Year Percentage
- ---- ----------
2003.................................................... 105.00%
2004.................................................... 102.50%
2005 and thereafter..................................... 100.000%
(b) Notwithstanding the provisions of Section 3.07(a), at any time on
or before February 1, 2002, the Company may redeem up to 35% of the aggregate
principal amount of Notes originally issued under this Indenture at a redemption
price equal to 110.00% of the aggregate principal amount thereof plus accrued
and unpaid interest and Liquidated Damages thereon, if any to the redemption
date, with the net cash proceeds from the sale of common stock of the Company
for aggregate proceeds of at least $35.0 million to a Person
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(or Persons) that is not an Affiliate of the Company; provided that at least 65%
in aggregate principal amount of the Notes originally issued remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
such redemption shall occur within 45 days of the date of the closing of such
sale of common stock.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as set forth in Sections 4.10 and 4.15 hereof, the Company
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may elect to have Notes purchased in integral multiples of
$1,000 only;
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(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
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The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. 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 Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the Holders
of Notes (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports, in each case, within the time periods specified in the SEC's rules and
regulations. In addition, following consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall file
a copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA ss. 314(a).
(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and any Guarantor (to the extent that such Guarantor
is so required under the
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TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal
year, an Officers' Certificate stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of 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,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, 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 has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any
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of its Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of the Company's or any of its Subsidiaries'
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is pari
passu with or subordinated to the Notes (other than Notes), except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in Section 4.09(a); and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii), (iv) and (v) of the next
succeeding paragraph), is less than the sum, without duplication of
(i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of this Indenture to the end
of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (ii) 100% of
the aggregate net cash proceeds received by the Company since the
date of this Indenture as a contribution to its common equity capital
or from the issue or sale since the date of this Indenture of Equity
Interests of the Company (other than Disqualified Stock) or from the
issue or sale of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company and other than
Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date of this Indenture
is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment, less (iv) 100% of
the amounts permitted to be paid under the Tax Distribution Agreement
accrued since the date of this Indenture.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption,
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repurchase or other acquisition of pari passu or subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend by a Subsidiary of the Company to the holders
of its common Equity Interests on a pro rata basis; (v) so long as no Default or
Event of Default has occurred and is continuing, payments by the Company or any
Subsidiary of the Company, directly or indirectly, to the Company's stockholders
in accordance with the Tax Distribution Agreement as in effect on the date of
this Indenture; (vi) payments made under the Consulting Agreement; and (vii) the
payment on or after the date of this Indenture of dividends in respect of the
Company's common stock in an aggregate amount not exceeding $15.0 million.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $1.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
to (i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) applicable law,
(b) any instrument governing Indebtedness or Capital Stock of a Person acquired
by the Company or any of its Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of this Indenture to be incurred by the Company or such Subsidiary, as
applicable, at the time of such acquisition, (c) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (d) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, (e)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced or (f) the Credit Agreement as in effect as of the date of this
Indenture and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements and refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements and refinancings are no more restrictive with respect
to such dividend and other payment restrictions than those contained in the
Credit Agreement as in effect on the date of this Indenture.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
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(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1.0 if such incurrence or issuance occurs on or prior
to February 1, 2001 and at least 2.25 to 1.0 if such incurrence or issuance
occurs at any time thereafter, in each case determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom) as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.
(b) The provisions of Section 4.09(a) shall not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness
(including letters of credit) under the Credit Agreement (or if the
Credit Agreement has matured or been terminated or repaid in whole or
in part, any other Credit Facility); provided that the aggregate
principal amount of all Indebtedness (with letters of credit being
deemed to have a principal amount equal to the maximum potential
liability of the Company and its Subsidiaries thereunder) outstanding
under the Credit Agreement (or if the Credit Agreement has matured or
been terminated or repaid in whole or in part, all Credit Facilities)
which has been incurred pursuant to this clause (i), after giving
effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (i), does not exceed an
amount equal to $50.0 million less the aggregate amount of all Net
Proceeds from Asset Sales applied to permanently reduce Indebtedness
under Credit Facilities;
(ii) the incurrence by the Company and its Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence of Indebtedness represented by the
Notes and the Subsidiary Guarantees;
(iv) the incurrence by the Company of Indebtedness
represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in
the business of the Company, in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this
clause (iv), not to exceed $5.0 million at any time outstanding;
(v) the incurrence by the Company or any of its
Subsidiaries of Permitted Refinancing Indebtedness in exchange for,
or the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was
permitted by this Indenture to be incurred;
(vi) the incurrence by the Company or any of its
Subsidiaries of intercompany Indebtedness between or among the
Company and any of its Wholly Owned Subsidiaries; provided, however,
that (i) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full
in cash of all Obligations with respect to the Senior Debt and the
Notes and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than the Company or a Wholly Owned Subsidiary and (B)
any sale or other transfer of any such Indebtedness to a Person that
is not either the Company or a Wholly Owned Subsidiary shall
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be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Subsidiary, as the case may be,
that is not permitted by this clause (vi);
(vii) the incurrence by the Company or any of its
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding;
(viii) (A) the guarantee by the Company or any of the
Guarantors of Indebtedness of the Company or a Subsidiary of the
Company that was permitted to be incurred by another provision of
this covenant, including, without limitation, Guarantees by
Subsidiaries of Obligations under Credit Facilities incurred in
accordance with this covenant and (B) the guarantee by a Subsidiary
of the Company that is not a Guarantor of Indebtedness of another
Subsidiary of the Company that is not a Guarantor that was permitted
to be incurred by another provision of this Section 4.09; and
(ix) the incurrence by the Company or any of its
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (ix), not to exceed $5.0 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above or is
entitled to be incurred pursuant to Section 4.09(a) hereof, the Company shall,
in its sole discretion, classify such item of Indebtedness in any manner that
complies with this Section 4.09 and such item 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, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness will not be
deemed to be an incurrence of Indebtedness for purposes of this Section 4.09.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Subsidiaries
to, consummate an Asset Sale unless (i) the Company (or the Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) of the
assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 85% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Subsidiary from such transferee that are immediately
(subject to ordinary settlement periods) converted by the Company or such
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this Section 4.10.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds at its option, (a) to repay
indebtedness under a Credit Facility or Senior Debt (and to correspondingly
reduce commitments with respect to revolving borrowings) or (b) to the
acquisition of a controlling interest in another business, the making of a
capital expenditure or the acquisition of other long-term assets, in each case,
in the same or a similar line of business as the Company was engaged in on
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the date of this Indenture. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $7.5
million, the Company will be required to make an Asset Sale Offer to all Holders
of Notes to purchase the maximum principal amount of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in Section 3.09 hereof. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to the Company or the relevant Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that (x) any employment agreement entered into with an
officer of the Company who is not otherwise an Affiliate of the Company by the
Company or any of its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary, (y)
transactions between or among the Company and/or its Subsidiaries and (z)
Restricted Payments that are permitted by the provisions of Section 4.07 hereof
in each case, shall not be deemed Affiliate Transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness or trade payables on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any of its Subsidiaries
to, engage in any business other than Permitted Businesses, except to such
extent as would not be material to the Company and its Subsidiaries taken as a
whole.
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Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within ten days following any Change of
Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by this Indenture and described in such notice. The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.15 and Article 3 hereof and all other provisions of this
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Section 4.16. No Senior Subordinated Debt.
Notwithstanding the provisions of Section 4.09 hereof, (i) the
Company shall not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right
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of payment to any Senior Debt and senior in any respect in right of payment to
the Notes, and (ii) no Guarantor shall incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Guarantee of Senior Debt by such Guarantor and senior in
any respect in right of payment to the Subsidiary Guarantees.
Section 4.17. Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Subsidiaries
to, enter into any sale and leaseback transaction; provided that the Company may
enter into a sale and leaseback transaction if (i) the Company could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio
test set forth in Section 4.09(a) hereof and (b) incurred a Lien to secure such
Indebtedness pursuant to the provisions of Section 4.12 hereof, (ii) the gross
cash proceeds of such sale and leaseback transaction are at least equal to the
fair market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with, Section 4.10
hereof.
Section 4.18. Limitation on Issuances and Sales of Capital Stock of Wholly
Owned Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly Owned
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Wholly Owned Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Subsidiary of the Company), unless (a)
such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Wholly Owned Subsidiary and (b) the cash Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof and (ii) shall not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
Section 4.19. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Section 4.20. Subsidiary Guarantees.
(a) If the Company directly or indirectly acquires or creates any
domestic Subsidiary, the Company shall cause such Subsidiary to (A) execute and
deliver to the Trustee a supplemental indenture in the form attached hereto as
Exhibit F pursuant to which such Subsidiary shall unconditionally guarantee all
of the Company's obligations under the Notes on the terms set forth in such
supplemental indenture (a "Supplemental Indenture") and (B) deliver to the
Trustee an Opinion of Counsel reasonably satisfactory to the Trustee that such
Supplemental Indenture has been duly executed and delivered by such Subsidiary.
(b) The Company (i) shall not permit any of its Subsidiaries that is
not a Guarantor to incur, guarantee or secure through the granting of Liens the
payment of any Indebtedness of the Company or a
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Guarantor, and (ii) shall not and shall not permit any of its Subsidiaries that
are not Guarantors to pledge any intercompany notes representing obligations of
any such Subsidiaries, to secure the payment of any Indebtedness of the Company
or a Guarantor, in each case unless such Subsidiary, the Company and the Trustee
execute and deliver a Supplemental Indenture and the Company delivers to the
Trustee an Opinion of Counsel.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and this Indenture pursuant to a supplemental Indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of the
Company with or into a Wholly Owned Subsidiary of the Company, the Company or
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have a
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section-4.09(a) hereof.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
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Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
Article 10 hereof) and such default continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes (whether or not prohibited by Article 10 hereof)
when the same becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise;
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.09, 4.10 or 4.15 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the Notes for
60 days after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding voting as a
single class;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries), whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (i) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Subsidiaries and such judgment or judgments remain undischarged for a
period (during which execution shall not be effectively stayed) of 60 days,
provided that the aggregate of all such undischarged judgments exceeds $5
million;
(g) any Subsidiary Guarantee is terminated for any reason not
permitted by this Indenture, or any Guarantor or any Person acting on behalf of
any Guarantor denies such Guarantor's obligations under its respective
Subsidiary Guarantee;
(h) the Company or any of its Subsidiaries, pursuant to or within the
meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii)consents to the appointment of a custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
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(v) generally is not paying its debts as they become due;
or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Subsidiaries in an involuntary case;
(ii) appoints a custodian of the Company or any of its
Subsidiaries or for all or substantially all of the property of the
Company or any of its Subsidiaries; or
(iii)orders the liquidation of the Company or any of its
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive days.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section-6.01 hereof with respect to the Company or any
Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice") and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Credit Agreement, shall become due and payable upon the first to occur of an
acceleration under the Credit Agreement or five Business Days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice. Notwithstanding the foregoing, if an Event of Default
specified in Sections 6.01(h) or (i) hereof occurs, with respect to the Company
or any Subsidiary, all outstanding Notes will become due and payable without
further action or notice. Holders of the Notes may not enforce this Indenture or
the Notes except as provided in this Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.07 hereof, an equivalent premium shall also become and be immediately
due and payable, to the extent permitted by law, upon the acceleration of the
Notes. If an Event of Default occurs prior to February 1, 2003 by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding the prohibition on redemption of the Notes prior
to such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable in an amount, for each of the
years beginning on February 1 of the years set forth below, as set forth below
(expressed as a percentage of the principal amount of the Notes on the date of
payment that would otherwise be due but for the provisions of this sentence):
Year Percentage
- ---- ----------
1999................................................... 115.00%
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2000................................................... 112.50%
2001 .................................................. 110.00%
2002 .................................................. 107.50%
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, Liquidated Damages, if any, and 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 of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written
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request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) 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
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on a Note, on or after the respective due dates
expressed in such Note (including in connection with an offer to purchase), or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest 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 is authorized to 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 of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding 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 agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. 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
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or composition affecting the Notes or the rights of any Holder, 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 pursuant to this Article 6, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.07 hereof, including payment of all
compensation, expense and liabilities incurred, and all advances
made, by the Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on
the Notes for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal,
premium and Liquidated Damages, if any and interest, respectively;
and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes 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 a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of 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 its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to
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the Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities 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;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible 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 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(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.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) 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 unless such Holders shall have offered to
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the Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) The Trustee shall have no duty to inquire as to the performance
of the Company's covenants in Article IV. In addition, the Trustee shall not be
deemed to have knowledge of any Default or Event of Default except (i) any Event
of Default occurring pursuant to Sections 6.01 and 4.01 hereof or (ii) any
Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.03 hereof is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of their covenants
hereunder (as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
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 any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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 or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
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A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. 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 promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and 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 any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. 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. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
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Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or 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 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 then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
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 then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and is a member of a Bank Holding Company that has a combined
capital and surplus of at least $100 million as set forth in its most recent
published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
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Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages on such
Notes when such payments are due, (b) the Company's obligations with respect to
such Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article 8. Subject to
compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03
hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19 and 4.20 hereof and Section
5.01(iv) hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, 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,
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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 of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 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 of the Notes, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and Liquidated
Damages, if any, and interest on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness, all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article 8
concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting
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creditors' rights generally;
(g) 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; and
(h) 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.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 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 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), 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 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
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If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company or such
Guarantor pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to allow any Guarantor to execute a Supplemental Indenture and/or
a Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or
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supplement this Indenture (including Section 3.09, 4.10 and 4.15 hereof) and the
Notes may be amended or supplemented with the consent of the Holders of at least
a majority in principal amount of the Notes then outstanding voting as a single
class (including, without limitation, consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes), and, subject to
Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, premium,
if any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Section 2.08
hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
Notwithstanding any other provision of this Indenture or the Notes to
the contrary, without the consent of at least 75% in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for, or purchase of, such Notes), no waiver or amendment
to this Indenture may make any change to the subordination provisions of Article
10 hereof that adversely affects the rights of any Holder of Notes.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes 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 amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes (except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof);
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
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(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or interest on the Notes; or
(g) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
(h) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or this Indenture, except in accordance with the terms of
this Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
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 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental Indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
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ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by and all Obligations relating to the Notes is
subordinated in right of payment, to the extent and in the manner provided in
this Article 10, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed), and that the subordination is for the benefit
of the holders of Senior Debt.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(i) holders of Senior Debt shall be entitled to receive
payment in full in cash or Cash Equivalents of all Obligations in
respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the
applicable Senior Debt) before Holders of the Notes shall be entitled
to receive any payment of cash, property or securities with respect
to the Notes (except that Holders may receive and retain (A)
Permitted Junior Securities and (B) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01
hereof); and
(ii) until all Obligations with respect to Senior Debt (as
provided in clause (i) above) are paid in full in cash or Cash
Equivalents, any distribution to which Holders would be entitled but
for this Article 10 shall be made to holders of Senior Debt (except
that Holders of Notes may receive (A) Permitted Junior Securities and
(B) payments and other distributions made from any defeasance trust
created pursuant to Section 8.01 hereof), as their interests may
appear.
Section 10.03. Payment on Change in Control.
Notwithstanding the provisions of Section 4.15 hereof, if the Company
then has Obligations under Senior Debt whose terms do not permit the repurchase
of Notes pursuant to any Change of Control Offer, the Company shall not,
directly or indirectly, repurchase any Notes tendered to the Company pursuant to
a Change of Control Offer unless the Company has, within 90 days of the Change
of Control, paid in full in cash or Cash Equivalents all Obligations relating to
such Senior Debt or obtained the requisite consent from the holders of such
Senior Debt for the repurchase of Notes so tendered. Notwithstanding the
provisions of this Section 10.03, a failure to repurchase Notes as required
pursuant to Section 4.15 shall be an Event of Default under Section 6.01(b)
hereof.
Section 10.04. Default on Designated Senior Debt.
(a) The Company may not, directly or indirectly, make any payment or
distribution to the Trustee or any Holder in respect of Obligations with respect
to the Notes and may not acquire from the Trustee or any Holder any Notes for
cash or property (other than (A) Permitted Junior Securities and (B) payments
and other distributions made from any defeasance trust created pursuant to
Section 8.01 hereof) until all principal
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and other Obligations with respect to the Senior Debt have been paid in full if:
(i) a default in the payment of any principal of, premium,
if any, interest or other Obligations with respect to Designated
Senior Debt occurs and is continuing; or
(ii) a default, other than a payment default, on
Designated Senior Debt occurs and is continuing that then permits
holders of such Designated Senior Debt to accelerate its maturity and
the Trustee receives a notice of the default (a "Payment Blockage
Notice") from a Person (or their Representative, if applicable) who
may give it pursuant to Section 10.12 hereof. If the Trustee receives
any such Payment Blockage Notice, no subsequent Payment Blockage
Notice shall be effective for purposes of this Section unless and
until (A) at least 360 days shall have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice and
(B) all scheduled payments of principal, premium, if any, and
interest on the Notes that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall
be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been cured or waived for a period of
not less than 180 days.
(b) The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(i) the date upon which the default referred to in Section
10.04(i) or (ii) hereof is cured or waived, or
(ii) in the case of a default referred to in Section
10.04(ii) hereof, the 179th day after the receipt by the Trustee of
the applicable Payment Blockage Notice if the maturity of such
Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.05. Acceleration of Securities.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
Section 10.06. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when such payment is
prohibited by Section 10.04 hereof, such payment shall be held by the Trustee or
such Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt 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 Debt, and shall not be
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liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Debt shall be entitled by virtue of this Article 10,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
Section 10.07. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
Section 10.08. Subrogation.
After all Senior Debt is paid in full in cash or Cash Equivalents and
until the Notes are paid in full, Holders of Notes shall be subrogated (equally
and ratably with all other Indebtedness pari passu with the Notes) to the rights
of holders of Senior Debt to receive distributions applicable to Senior Debt to
the extent that distributions otherwise payable to the Holders of Notes have
been applied to the payment of Senior Debt. A distribution made under this
Article 10 to holders of Senior Debt that otherwise would have been made to
Holders of Notes is not, as between the Company and Holders of Notes, a payment
by the Company on the Notes.
Section 10.09. Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(i) impair, as between the Company and Holders of Notes,
the obligation of the Company, which is absolute and unconditional,
to pay principal of and interest on the Notes in accordance with
their terms;
(ii) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to
holders of Senior Debt; or
(iii)prevent the Trustee or any Holder of Notes from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of
or interest on a Note on the due date, the failure is still a Default or Event
of Default.
Section 10.10. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Section 10.11. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution
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may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt 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 10.
Section 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least three Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company (but only
with respect to a default described in Section 10.04(a)(i) hereof) or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representative(s) of Designated Senior Debt are hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.
Section 10.14. Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11
SUBSIDIARY GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each Guarantor that becomes party to this
Indenture hereby, jointly and severally, unconditionally guarantees to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, irrespective of the validity and enforceability
of this Indenture, the Notes or the obligations of the Company hereunder or
thereunder, that: (a) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration,
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redemption or otherwise, and interest on the overdue principal of and interest
on the Notes, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same immediately.
Each Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
Each Guarantor that becomes party to this Indenture hereby agrees
that their 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 a guarantor. Each Guarantor that becomes party to this Indenture
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 covenant that this Subsidiary Guarantee shall 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, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor that becomes party to this Indenture agrees that it
shall not be entitled to any right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby. Each such Guarantor further agrees that, as
between the Guarantors, 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 6 hereof for the purposes of this Subsidiary
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 declaration of acceleration of such obligations as provided in
Article 6 hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Subsidiary Guarantee. The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Guarantee.
Section 11.02. Subordination of Subsidiary Guarantee.
The Obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior
Guarantee of such Guarantor on the same basis as the Notes are junior and
subordinated to Senior Debt of the Company. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any of the Guarantors only at such times as they may receive
and/or retain payments in respect of the Notes pursuant to this Indenture,
including Article 10 hereof.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor that becomes party to this Indenture, and by its
acceptance of Notes, each Holder,
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hereby confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and each Guarantor hereby irrevocably agrees
that the obligations of such Guarantor will, after giving effect to such maximum
amount and all other contingent and fixed liabilities of such Guarantor that are
relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under this
Article 11, result in the obligations of such Guarantor under its Subsidiary
Guarantee not constituting a fraudulent transfer or conveyance.
Section 11.04. Execution and Delivery of Subsidiary Guarantee and
Supplemental Indenture.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor that becomes party to this Indenture hereby agrees that a notation of
such Subsidiary Guarantee substantially in the form included in Exhibit E shall
be endorsed by an Officer of such Guarantor on each Note authenticated and
delivered by the Trustee and that such Guarantor shall become party to, and
bound by the terms of, this Indenture by execution on behalf of such Guarantor
by its President or one of its Vice Presidents of a Supplemental Indenture in
the form of Exhibit F hereto.
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 notation of such Subsidiary Guarantee.
If an Officer whose signature is on a Supplemental Indenture or on a
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed or at the
time the Trustee accepts delivery of the executed Subsidiary Guarantee and
Supplemental Indenture, the Subsidiary Guarantee shall be valid nevertheless.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.20 hereof, the Company shall cause such Subsidiaries to execute Supplemental
Indentures to this Indenture in the form of Exhibit F hereto and Subsidiary
Guarantees in the form of Exhibit E hereto in accordance with Section 4.20
hereof and this Article 11, to the extent applicable.
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 11.06, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless:
(a) subject to Section 11.06 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such Guarantor, pursuant
to a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, this Indenture and the Subsidiary Guarantee on the
terms set forth herein or therein; and
(b) immediately after giving effect to such transaction, no Default
or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance
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of all of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor Person shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a Guarantor.
Such successor Person thereupon may cause to be signed any or all of the
Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Subsidiary Guarantees so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms of this Indenture
as though all of such Subsidiary Guarantees had been issued at the date of the
execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 11.06. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transactions) a
Subsidiary of the Company, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company in accordance
with the provisions of this Indenture, including without limitation Section 4.10
hereof, the Trustee shall execute any documents reasonably required in order to
evidence the release of any Guarantor from its obligations under its Subsidiary
Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss.318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
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If to the Company:
Luigino's, Inc.
525 Lake Avenue South
Duluth, MN 55802
Telecopier No.: (218) 723-5565
Attention: Chief Financial Officer
With a copy to:
Dorsey & Whitney, LLP
220 South Sixth Street
Minneapolis, MN 55402
Telecopier No.: (612) 340-8738
Attention: Frank Voigt, Esq.
If to the Trustee:
U.S. Bank Trust National Association
100 Wall Street
New York, New York 10005
Attention: Corporate Trust Department
With a copy to:
U.S. Bank Trust National Association
U.S. Bank Trust Center
180 East Fifth Street, Suite 200
St. Paul, MN 55101
Telecopier No.: (651) 244-0089
Attention: Judy Zuzek
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
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.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
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If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he or she 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
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company
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or any Guarantor, as such, shall have any liability for any obligations of the
Company or such Guarantor under the Notes, the Subsidiary Guarantees, 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 issuance of the Notes.
Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors. All agreements of each Guarantor in this Indenture shall bind
its successors, except as otherwise provided in Section 11.05
Section 12.11. 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.
Section 12.12. 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 12.13. Table of Contents, Headings, etc.
The Table of Contents and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
LUIGINO'S, INC.
By: /s/ Joel C. Kozlak
--------------------------------
Name: Joel C. Kozlak
-----------------------------
Title: Chief Financial Officer
---------------------------
U.S. BANK TRUST NATIONAL ASSOCIATION
By: /s/ Judith M. Zuzek
--------------------------------
Name: Judith M. Zuzek
-----------------------------
Title: Trust Officer
--------------------------
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EXHIBIT 4.2
[Face of Note]
CUSIP/CINS ____________
10% [Series B] Senior Subordinated Notes due 2006
No. ___ $____________
LUIGINO'S, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on February 1, 2006.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Dated: _______________, ____
LUIGINO'S, INC.
By:
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By: __________________________________
Authorized Signatory
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[Back of Note]
10%[Series B] Senior Subordinated Notes due 2006
[THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO ARTICLE 2 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III)
THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.]1/
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT 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 OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]2/
- --------------------------
1
To be included only on Global Notes.
2
To be included only on Global Notes deposited with the DTC as Depositary.
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<PAGE>
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Luigino's, Inc., a Minnesota corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 10%
per annum from February 4, 1999 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages
semi-annually in arrears on February 1 and August 1 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"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 the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be August 1, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the January 15 or July
15 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture
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with respect to defaulted interest. The Notes will be payable as to principal,
premium, if any, Liquidated Damages, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City and
State of New York, or, at the option of the Company, payment of interest and
Liquidated Damages may be made by check mailed to the Holders at their addresses
set forth in the register of Holders, and provided that payment by wire transfer
of immediately available funds will be required with respect to principal of and
interest, premium, if any, and Liquidated Damages, if any, on all Global Notes
and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, U.S. Bank Trust National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of February 4, 1999 ("Indenture") between the Company 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 (15
U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $100.0 million
in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to February 1, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
February 1 of the years indicated below:
Year Percentage
- ---- ----------
2003................................................... 105.00%
2004................................................... 102.50%
2005 and thereafter.................................... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to February 1, 2002, the Company may redeem up to
35% of the aggregate principal amount of Notes originally issued under the
Indenture at a redemption price equal to 110.00% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with net cash proceeds from the sale of common
stock of the Company for aggregate proceeds of at least $35.0 million to a
Person (or Persons) that is not an Affiliate of the Company; provided that at
least 65% in
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aggregate principal amount of the Notes originally issued remain outstanding
immediately after the occurrence of such redemption; and provided, further that
such redemption occurs within 45 days of the date of the closing of such sale of
common stock.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales,
within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $7.5 million, the Company shall commence an offer to all Holders of
Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company (or such Subsidiary) may use such deficiency for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. SUBORDINATION. The Notes are subordinated in right of payment, to
the extent and in the manner provided in Article 10 of the Indenture, to the
prior payment in full of all Senior Debt. To the extent
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provided in the Indenture, Senior Debt must be paid before the Notes may be
paid. The Company agrees and each Holder of Notes by accepting a Note consents
and agrees to the subordination provided in the Indenture and authorizes the
Trustee to give it effect.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes voting as a single class, and any existing
default or compliance with any provision of the Indenture, the Subsidiary
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes voting as a single
class. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on or Liquidated Damages with
respect to the Notes (whether or not prohibited by Article 10 of the Indenture);
(ii) default in payment when due of principal of or premium, if any, on the
Notes (whether or not prohibited by Article 10 of the Indenture) when the same
becomes due and payable at maturity, upon redemption (including in connection
with an offer to purchase) or otherwise, (iii) failure by the Company to comply
with Section 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the
Company for 60 days after notice to the Company by the Trustee or the Holders of
at least 25% in principal amount of the Notes then outstanding voting as a
single class to observe or perform any other covenant, representation, warranty,
or other agreement in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default (a) is
caused by a Payment Default, as defined in Section 6.01(e) of the Indenture or
(b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) a final judgment or final
judgments for the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Subsidiaries and such judgment or
judgments remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $5 million; (vii) any Subsidiary Guarantee is
terminated for any reason not permitted by the Indenture, or any Guarantor or
any Person acting on behalf of any Guarantor denies such Guarantor's obligations
under its respective Subsidiary Guarantee or (viii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Subsidiaries. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
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Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, 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. 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.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of February 4, 1999, between the Company and the parties
named on the signature pages thereof (the "Registration Rights Agreement").
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 the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. 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.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Luigino's, Inc.
525 Lake Avenue South
Duluth, MN 55802
Attention: Chief Financial Officer
A1-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
(Insert assignee's legal name)
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
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 face
of this Note)
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$
Date:
Your Signature:
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-9
<PAGE>
Exhibit 5.1
[LETTERHEAD OF DORSEY & WHITNEY LLP]
Luigino's, Inc.
525 Lake Avenue South
Duluth, Minnesota 55802
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Luigino's, Inc., a Minnesota corporation (the
"Company"), in connection with a Registration Statement on Form S-4 (the
"Registration Statement") relating to the proposed issuance by the Company of
$100,000,000 aggregate principal amount of the Company's 10% Senior Subordinated
Notes Due 2006 (the "New Notes") registered under the Securities Act of 1933, as
amended (the "Securities Act"), in exchange for up to $100,000,000 aggregate
principal amount of the Company's outstanding 10% Senior Subordinated Notes Due
2006 (the "Old Notes"). The New Notes are issuable under an Indenture dated as
of February 4, 1999 (the "Indenture") between the Company and U.S. Bank Trust
National Association, as Trustee (the "Trustee").
We have examined such documents, including resolutions adopted by written
consent by the sole director of the Company effective as of January 8, 1999 (the
"Resolutions"), and have reviewed such questions of law as we have considered
necessary and appropriate for the purposes of our opinion set forth below. In
rendering our opinion, we have assumed the authenticity of all documents
submitted to us as originals, the genuineness of all signatures and the
conformity to authentic originals of all documents submitted to us as copies. We
have also assumed the legal capacity for all purposes relevant hereto of all
natural persons and, with respect to all parties to agreements or instruments
relevant hereto other than the Company, that such parties had the requisite
power and authority (corporate or otherwise) to execute, deliver and perform
such agreements or instruments, that such agreements or instruments have been
duly authorized by all requisite action (corporate or otherwise), executed and
delivered by such parties and that such agreements or instruments are the valid,
binding and enforceable obligations of such parties. As to questions of fact
material to our opinion, we have relied upon certificates of officers of the
Company and of public officials.
Based on the foregoing, we are of the opinion that the New Notes have been
duly authorized by all requisite corporate action and, when executed and
authenticated as specified in the Indenture and delivered against surrender and
cancellation of a like principal amount of Old Notes in the manner described in
the Registration Statement, the New Notes will constitute valid and binding
obligations of the Company, enforceable in accordance with their terms.
The opinions set forth above are subject to the following qualifications
and exceptions:
(a) Our opinions stated above are subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar law of general application affecting creditors' rights.
(b) Our opinions stated above are subject to the effect of general
principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair
<PAGE>
Luigino's, Inc.
Page 2
dealing, and other similar doctrines affecting the enforceability of
agreements generally (regardless of whether considered in a proceeding in
equity or at law).
(c) In rendering the opinions set forth above, we have assumed that,
at the time of the authentication and delivery of a series of New Notes,
the Resolutions referred to above will not have been modified or rescinded,
there will not have occurred any change in the law affecting the
authorization, execution, delivery, validity or enforceability of the New
Notes, the Registration Statement will have been declared effective by the
Securities and Exchange Commission and will continue to be effective, none
of the particular terms of a series of New Notes will violate any
applicable law and neither the issuance and sale thereof nor the compliance
by the Company with the terms thereof will result in a violation of any
agreement or instrument then binding upon the Company or any order of any
court or governmental body having jurisdiction over the Company.
(d) Minnesota Statutes ss. 290.371, Subd. 4, provides that any
corporation required to file a Notice of Business Activities Report does
not have a cause of action upon which it may bring suit under Minnesota law
unless the corporation has filed a Notice of Business Activities Report and
provides that the use of the courts of the State of Minnesota for all
contracts executed and all causes of action that arose before the end of
any period for which a corporation failed to file a required report is
precluded. Insofar as our opinion may relate to the valid, binding and
enforceable character of any agreement under Minnesota law or in a
Minnesota court, we have assumed that any party seeking to enforce such
agreement has at all times been, and will continue at all times to be,
exempt from the requirement of filing a Notice of Business Activities
Report or, if not exempt, has duly filed, and will continue to duly file,
all Notice of Business Activities Reports.
Our opinion expressed above is limited to the laws of the State of
Minnesota and New York and the federal laws of the United States of America.
We hereby consent to your filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the caption
"Legal Matters" contained in the Prospectus included therein.
Dated: April 19, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
FHV
<PAGE>
Exhibit 8.1
[LETTERHEAD OF DORSEY & WHITNEY LLP]
April 19, 1999
Luigino's Inc.
525 Lake Avenue South
Duluth, Minnesota 55802
Re: $100,000,000 10% Senior Subordinated
Notes due 2006 Exchange Offer
Dear Ladies and Gentlemen:
We have acted as counsel to Luigino's Inc., a Minnesota corporation (the
"Company"), in connection with the filing by the Company with the Securities and
Exchange Commission (the "Commission") on April 19, 1999 of a registration
statement (the "Registration Statement") on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act"), relating to the proposed issuance, in
exchange for $100.0 million aggregate principal amount of the Company's 10%
Senior Subordinated Notes due 2006 (the "Old Notes"), of $100.0 million
aggregate principal amount of the Company's 10% Senior Notes due 2006 (the "New
Notes"). The New Notes are to be issued pursuant to an Indenture (the
"Indenture") between the Company and U.S. Bank Trust National Association, as
trustee (the "Trustee"). Capitalized terms used herein and not defined have the
meanings ascribed thereto in the Indenture.
We hereby confirm that the statements set forth in the prospectus (the
"Prospectus") forming a part of the Registration Statement under the heading
"Federal Tax Considerations" accurately describe the material federal income tax
consequences to the holders of the New Notes issued pursuant to the Prospectus.
We know that we are referred to under the heading "Legal Matters" in the
Prospectus, and we hereby consent to such use of our name therein and to the use
of this opinion for filing with the Registration Statement as Exhibit 8.1
thereto.
Very truly yours,
/s/ Dorsey & Whitney LLP
WHH
<PAGE>
EXHIBIT 10.1
================================================================================
$50,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
LUIGINO'S, INC.,
as Borrower,
THE LENDERS NAMED HEREIN,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
DATED AS OF
February 4, 1999
================================================================================
Arranged By
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ................................................. 1
ARTICLE II THE CREDITS .................................................16
2.1. Advances ....................................................16
2.2. Ratable Loans ...............................................17
2.3. Types of Advances ...........................................17
2.4. Commitment Fee; Reductions in Aggregate Commitment ..........17
2.5. Minimum Amount of Each Advance ..............................18
2.6. Optional Principal Payments .................................18
2.7. Mandatory Commitment Reductions .............................18
2.8. Method of Selecting Types and Interest Periods for
New Advances ................................................18
2.9. Conversion and Continuation of Outstanding Advances .........19
2.10. Changes in Interest Rate, etc. ..............................19
2.11. Rates Applicable After Default ..............................20
2.12. Method of Payment ...........................................20
2.13. Notes; Telephonic Notices ...................................20
2.14. Interest Payment Dates; Interest and Fee Basis ..............20
2.15. Notification of Advances, Interest Rates,
Prepayments, Commitment Reductions and Issuance Requests ....21
2.16. Lending Installations .......................................21
2.17. Non-Receipt of Funds by the Agent ...........................21
2.18. Taxes .......................................................22
2.19. Agent's Fees ................................................23
2.20. Facility Letters of Credit ..................................23
2.20.1 Issuance of Facility Letters of Credit ..............23
2.20.2 Participating Interests .............................23
2.20.3 Facility Letter of Credit Reimbursement
Obligations .........................................24
2.20.4 Procedure for Issuance ..............................25
2.20.5 Nature of the Lenders' Obligations ..................26
2.20.6 Facility Letter of Credit Fees ......................26
2.20.7 Effectiveness of Existing Letters of Credit .........27
ARTICLE III CHANGE IN CIRCUMSTANCES .....................................27
3.1. Yield Protection ............................................27
3.2. Changes in Capital Adequacy Regulations .....................28
3.3. Availability of Types of Advances ...........................28
3.4. Funding Indemnification .....................................28
3.5. Lender Statements; Survival of Indemnity ....................29
3.6. Substitution of Lenders .....................................29
<PAGE>
ARTICLE IV CONDITIONS PRECEDENT ........................................29
4.1. Effectiveness of This Agreement .............................29
4.2. Each Future Advance and Facility Letter of Credit ...........31
ARTICLE V REPRESENTATIONS AND WARRANTIES ..............................32
5.1. Corporate Existence and Standing ............................32
5.2. Authorization and Validity ..................................32
5.3. Compliance with Laws and Contracts ..........................32
5.4. Governmental Consents .......................................33
5.5. Financial Statements ........................................33
5.6. Material Adverse Change .....................................33
5.7. Taxes .......................................................33
5.8. Litigation and Contingent Obligations .......................34
5.9. Capitalization ..............................................34
5.10. ERISA .......................................................34
5.11. Defaults ....................................................34
5.12. Federal Reserve Regulations .................................34
5.13. Investment Company; Public Utility Holding Company ..........35
5.14. Certain Fees ................................................35
5.15. Solvency ....................................................35
5.16. Ownership of Properties .....................................35
5.17. Security ....................................................35
5.18. Indebtedness ................................................36
5.19. Employee Controversies ......................................36
5.20. Material Agreements .........................................36
5.21. Environmental Laws ..........................................36
5.22. Insurance ...................................................37
5.23. Year 2000 ...................................................37
5.24. Subordinated Indebtedness ...................................37
5.25. Disclosure ..................................................37
ARTICLE VI COVENANTS ...................................................38
6.1. Financial Reporting .........................................38
6.2. Use of Proceeds .............................................39
6.3. Notice of Default. ..........................................40
6.4. Conduct of Business .........................................40
6.5. Taxes .......................................................40
6.6. Insurance ...................................................40
6.7. Compliance with Laws ........................................40
6.8. Maintenance of Properties ...................................40
6.9. Inspection ..................................................40
6.10. Capital Stock and Dividends .................................41
-iii-
<PAGE>
6.11. Indebtedness ................................................41
6.12. Merger ......................................................42
6.13. Sale of Assets ..............................................42
6.14. Sale of Accounts ............................................42
6.15. Sale and Leaseback ..........................................42
6.16. Investments and Purchases ...................................42
6.17. Contingent Obligations ......................................43
6.18. Liens .......................................................43
6.19. Capital Expenditures ........................................44
6.20. Lease Rentals ...............................................45
6.21. Affiliates ..................................................45
6.22. Subordinated Indebtedness; Other Indebtedness ...............45
6.23. Year 2000 ...................................................45
6.24. Environmental Matters .......................................45
6.25. Change in Corporate Structure; Fiscal Year ..................46
6.26. Inconsistent Agreements .....................................46
6.27. Financial Covenants .........................................46
6.27.1 Cash Flow Leverage Ratio ............................46
6.27.2 Interest Coverage Ratio .............................46
6.27.3 Fixed Charge Coverage Ratio .........................47
6.28. ERISA Compliance ............................................47
6.29. Other Matters ...............................................48
6.30. Subsidiary Guaranties and Personal Property Pledges .........48
6.31. Subsidiary Stock Pledge .....................................48
ARTICLE VII DEFAULTS ....................................................48
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES ..............51
8.1. Acceleration ................................................51
8.2. Amendments ..................................................51
8.3. Preservation of Rights ......................................52
ARTICLE IX GENERAL PROVISIONS ..........................................52
9.1. Survival of Representations .................................52
9.2. Governmental Regulation .....................................52
9.3. Taxes52
9.4. Headings ....................................................53
9.5. Entire Agreement ............................................53
9.6. Several Obligations; Benefits of this Agreement .............53
9.7. Expenses; Indemnification ...................................53
9.8. Numbers of Documents ........................................54
9.9. Accounting ..................................................54
9.10. Severability of Provisions ..................................54
-iv-
<PAGE>
9.11. Nonliability of Lenders .....................................54
9.12. CHOICE OF LAW ...............................................54
9.13. CONSENT TO JURISDICTION .....................................55
9.14. WAIVER OF JURY TRIAL ........................................55
9.15. Disclosure ..................................................55
9.16. Counterparts ................................................55
9.17. Release of Stock Pledge .....................................55
9.18. Effect of Amendment and Restatement upon Security
Documents ...................................................56
ARTICLE X THE AGENT ...................................................56
10.1. Appointment .................................................56
10.2. Powers ......................................................56
10.3. General Immunity ............................................56
10.4. No Responsibility for Loans, Recitals, etc. .................56
10.5. Action on Instructions of Lenders ...........................57
10.6. Employment of Agents and Counsel ............................57
10.7. Reliance on Documents; Counsel ..............................57
10.8. Agent's Reimbursement and Indemnification ...................57
10.9. Notice of Default ...........................................57
10.10. Rights as a Lender ..........................................58
10.11. Lender Credit Decision ......................................58
10.12. Successor Agent .............................................58
ARTICLE XI SETOFF; RATABLE PAYMENTS ....................................59
11.1. Setoff ......................................................59
11.2. Ratable Payments ............................................59
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS ...........59
12.1. Successors and Assigns ......................................59
12.2. Participations. .............................................60
12.2.1. Permitted Participants; Effect ......................60
12.2.2. Voting Rights .......................................60
12.2.3. Benefit of Setoff ...................................60
12.3. Assignments .................................................60
12.3.1. Permitted Assignments ...............................60
12.3.2. Effect; Effective Date ..............................61
12.4. Dissemination of Information ................................61
12.5. Tax Treatment ...............................................61
ARTICLE XIII NOTICES .....................................................61
13.1. Giving Notice ...............................................61
13.2. Change of Address ...........................................62
-v-
<PAGE>
EXHIBITS*
Exhibit A (Article I) Note
Exhibit B (Section 6.1(c)) Compliance Certificate
Exhibit C (Section 12.3.1) Assignment Agreement
SCHEDULES*
Schedule 1.1 Margins and Percentages
Schedule 1.3 Inventory Locations
Schedule 2.20 Existing Letters of Credit
Schedule 5.3 Approvals and Consents
Schedule 5.8 Litigation and Material Contingent Obligations
Schedule 5.9 Capitalization and Capital Contributions
Schedule 5.10 ERISA
Schedule 5.16 Owned and Leased Properties
Schedule 5.18 Indebtedness
Schedule 5.21 Environmental Proceedings
Schedule 5.22 Insurance
Schedule 6.16 Investments
Schedule 6.18 Liens
Schedule 7.5 Exceptions to Defaults
*Filed without exhibits and schedules. Such exhibits and schedules will be
filed with the Commission upon request.
-vi-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement, dated as of February 4, 1999,
is among LUIGINO'S, INC., a Minnesota corporation, the Lenders and THE FIRST
NATIONAL BANK OF CHICAGO, individually and as Agent.
R E C I T A L S:
A. The Borrower, the Agent and certain financial institutions have entered
into that certain Credit Agreement, dated as of September 24, 1997 (as
heretofore amended, the "Existing Credit Agreement"), pursuant to which the
lenders party thereto agreed to make financial accommodations to the Borrower
under term loan, revolving credit and letter of credit facilities, subject to
certain restrictions set forth therein, in an aggregate principal amount not to
exceed $75,000,000 at any one time outstanding.
B. The Borrower has requested that the Existing Credit Agreement be amended
and restated in order to eliminate the term loan facilities, increase the
revolving credit facility and make certain other changes to the Existing Credit
Agreement.
C. The Borrower, the Agent and the Lenders desire to amend and restate the
Existing Credit Agreement to, among other things, accomplish such amendments.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree to amend and restate the Existing Credit Agreement as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Accounts" means all present and future rights of the Borrower to payment
for goods sold or leased or for services rendered, whether or not they have been
earned by performance.
"Accounting Period" means the thirteen periods, each having a duration of
either four or five weeks, into which the Borrower's fiscal year is divided.
"Adjusted Net Income" means for any period, the Net Income of the Borrower
for such period excluding therefrom non-operating gains and losses (including
extraordinary or unusual gains and
<PAGE>
losses, gains and losses from discontinuance of operations, gains and losses
arising from the sale of assets other than Inventory, and other non-recurring
gains and losses) during such period.
"ADP Compliance Certificate" is defined in Section 6.1(j).
"Advance" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made on the same Borrowing Date by the Lenders to the Borrower
of the same Type and, in the case of Eurodollar Advances, for the same Interest
Period.
"Adverse Event" means occurrence of any event that could reasonably be
expected to have a Material Adverse Effect on the business, operations,
property, assets or condition (financial or otherwise) of the Borrower or on the
ability of the Borrower to perform the Borrower's obligations under the Loan
Documents to which the Borrower is a party.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means First Chicago in its capacity as agent for the Lenders
pursuant to Article X, and not in its individual capacity as a Lender, and any
successor Agent appointed pursuant to Article X.
"Aggregate Available Commitment" means, at any time, (a) the Aggregate
Commitment at such time less (b) the outstanding Facility Letter of Credit
Obligations.
"Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders hereunder.
"Agreement" means this Amended and Restated Credit Agreement, as it may be
amended, modified or restated and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the financial statements referred to in Section 5.5;
provided, however, that for purposes of all computations required to be made
with respect to compliance by the Borrower with Section 6.27, such term shall
mean generally accepted accounting principles as in effect on the Restatement
Date, applied in a manner consistent with those used in preparing the financial
statements referred to in Section 5.5.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (a) the Corporate Base Rate for such day, and (b) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
2
<PAGE>
"Applicable Dividend Percentage" means, with respect to any fiscal year of
the Borrower, the percentage determined in accordance with Schedule 1.1 computed
by reference to the Cash Flow Leverage Ratio as of the end of such fiscal year.
"Applicable Fee Rate" means, at any time, the percentage rate per annum at
which Commitment Fees are accruing on the unused portion of the Aggregate
Commitment at such time as set forth in Schedule 1.1.
"Applicable Margin" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in Schedule 1.1.
"Applicable Measurement Date" means the last day of each Accounting Period
in the Borrower's fiscal year.
"Arranger" means First Chicago Capital Markets, Inc. and its successors.
"Article" means an Article of this Agreement unless another document is
specifically referenced.
"Asset Disposition" means (a) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices and (b) the issue or sale by the
Borrower or any of its Subsidiaries of Equity Interests of any of the Borrower's
Subsidiaries, in the case of either clause (a) or (b), whether in a single
transaction or a series of related transactions. Notwithstanding the foregoing,
neither (i) a transfer of assets by the Borrower to a Wholly-Owned Subsidiary or
by a Wholly-Owned Subsidiary to the Borrower or to another Wholly-Owned
Subsidiary nor (ii) an issuance of Equity Interests by a Wholly-Owned Subsidiary
to the Borrower or to another Wholly-Owned Subsidiary will be deemed to be Asset
Dispositions.
"Authorized Officer" means any of the chief executive officer, president,
or chief financial officer of the Borrower, acting singly.
"Bankruptcy Code" means Title 11, United States Code, sections 1 et seq.,
as the same may be amended from time to time, and any successor thereto or
replacement therefor which may be hereafter enacted.
"Borrower" means Luigino's, Inc., a Minnesota corporation, and its
successors and assigns.
"Borrowing Date" means a date on which an Advance is made or a Facility
Letter of Credit is issued or extended hereunder.
"Borrowing Notice" is defined in Section 2.8.
3
<PAGE>
"Business Day" means (a) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago for the conduct of substantially all
of their commercial lending activities and on which dealings in United States
dollars are carried on in the London interbank market, and (b) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in Chicago for the conduct of substantially all of their commercial lending
activities.
"Capital Expenditures" means any amount debited to the fixed asset account
on the Borrower's balance sheet in respect of: (a) the acquisition (including,
without limitation, acquisition by entry into a Capitalized Lease),
construction, improvement, replacement or betterment of land, buildings,
machinery, equipment or of any other fixed assets or leaseholds; and (b) to the
extent related to and not included in (a) above, materials, contract labor and
direct labor (excluding expenditures properly chargeable to repairs or
maintenance in accordance with Agreement Accounting Principles).
"Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Capital Stock" means (a) in the case of a corporation, corporate stock,
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Flow Leverage Ratio" means, at any Quarterly Measurement Date, the
ratio of: (a) the sum at such time of the Borrower's interest bearing
Indebtedness, Capitalized Lease Obligations and Contingent Obligations in
respect of interest or non-interest bearing Indebtedness for money borrowed and
Capitalized Lease Obligations; to (b) EBITDA for the Measurement Period ending
on such date.
"Change" is defined in Section 3.2.
"Change in Control" means (a) the acquisition by any Person, or two or more
Persons acting in concert, including without limitation any acquisition effected
by means of any transaction contemplated by Section 6.12, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or more of the
outstanding shares of voting stock of the Borrower, (b) JFP, his estate and his
immediate family shall cease to own at least 51% of the shares of all voting
stock of the Borrower or shall cease
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to control the power to elect a majority of the Borrower's board of directors or
shall cease to control the power to direct the Borrower's management and
policies whether through the ownership of voting securities, by contract or
otherwise, or (c) the occurrence of a "Change of Control" under the Senior
Subordinated Indenture.
"Closing Date" means September 24, 1997.
"Closing Transactions" is defined in Section 4.1(d).
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means, collectively, the Property of the Borrower which is
pledged, assigned or mortgaged to the Agent, for the benefit of the Lenders,
pursuant to the Loan Documents.
"Commitment" means, for each Lender, the obligation of such Lender to make
Loans not exceeding the amount set forth opposite its signature below or as set
forth in any Notice of Assignment relating to any assignment that has become
effective pursuant to Section 12.3.2, as such amount may be modified from time
to time pursuant to the terms hereof.
"Commitment Fee" is defined in Section 2.4.
"Compliance Certificate" is defined in Section 6.1(c).
"Condemnation" is defined in Section 7.8.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person
(other than by endorsement of instruments for deposit or collection in the
ordinary course of business), or agrees to maintain the net worth or working
capital or other financial condition of any other Person, or otherwise assures
any creditor of such other Person against loss, including, without limitation,
any comfort letter, operating agreement or take-or-pay contract or application
for a Letter of Credit.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes. The Corporate Base Rate is a reference
rate and does not necessarily represent the lowest
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or best rate of interest actually charged to any customer. First Chicago may
make commercial loans or other loans at rates of interest at, above or below the
Corporate Base Rate.
"Default" means an event described in Article VII.
"Dividend Availability Amount" means, at any time, an amount equal to (a)
the sum, for all fiscal years (commencing with fiscal year 1997) of the Borrower
which have been completed at such time and for which the Borrower has delivered
to the Agent financial statements pursuant to Section 6.1(a) ("Completed
Years"), of the Applicable Dividend Percentage for each Completed Year times the
amount equal to (i) the Borrower's Net Income for such Completed Year minus (ii)
the Tax Distributions actually paid by the Borrower with respect thereto to the
shareholders of the Borrower for such Completed Year minus (b) the aggregate
amount of all dividends declared or paid by the Borrower pursuant to Section
6.10(b)(iii) after the date hereof.
"EBIT" means, for any Measurement Period, (a) the after-tax Adjusted Net
Income of the Borrower for such Measurement Period; plus (b) the sum of the
following amounts deducted in arriving at such Adjusted Net Income: (i)
interest (including the interest portion of payments under Capitalized Leases);
and (ii) federal (including, without limitation, U.S. and Canadian federal
income taxes), state and local income taxes.
"EBITDA" means, for any Measurement Period, (a) the after-tax Adjusted Net
Income of the Borrower for such Measurement Period; plus (b) the sum of the
following amounts deducted in arriving at such Adjusted Net Income: (i)
interest (including the interest portion of payments under Capitalized Leases);
(ii) depreciation, amortization and other non-cash expenses (to the extent not
included in clause (i) or (iii)); and (iii) federal (including, without
limitation, U.S. and Canadian federal income taxes), state and local income
taxes.
"Environmental Permits" is defined in Section 5.21.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Advance" means an Advance which bears interest at the
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the rate determined by the Agent to be the rate at
which deposits in U.S. dollars are offered by First Chicago to first-class banks
in the London interbank market at approximately 11 a.m. (London time) two
Business Days prior to the first day of such Interest Period, in the approximate
amount of First Chicago's relevant Eurodollar Loan and having a maturity
approximately equal to such Interest Period.
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"Eurodollar Loan" means a Loan which bears interest at the Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (a) the quotient of (i) the Eurodollar Base
Rate applicable to such Interest Period, divided by (ii) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(b) the Applicable Margin. The Eurodollar Rate shall be rounded to the next
higher multiple of 1/16 of 1% if the rate is not such a multiple.
"Existing Credit Agreement" is defined in the Recitals hereto.
"Facility Letter of Credit" means a Letter of Credit issued pursuant to
Section 2.20.
"Facility Letter of Credit Obligations" means as at the time of
determination thereof, the sum of (a) the Reimbursement Obligations then
outstanding and (b) the aggregate then undrawn face amount of the then
outstanding Facility Letters of Credit.
"Facility Letter of Credit Sublimit" means an aggregate amount of
$5,000,000.
"Facility Termination Date" means January 31, 2004.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Financial Statements" is defined in Section 5.5.
"First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors.
"Fixed Charge Coverage Ratio" means, at any Quarterly Measurement Date, the
ratio of: (a) the sum of (i) EBITDA for the Measurement Period ending on such
date; plus (ii) Operating Lease Payments made, or required to have been made, by
the Borrower during such Measurement Period; minus (iii) Tax Distributions
(without duplication for any amount subtracted under clause (iv) below) paid by
the Borrower to its shareholders during such Measurement Period; minus (iv) the
amount (without duplication for any amount subtracted under clause (iii) above)
of any increase in the outstanding principal balance of the Shareholder Note on
the last day of such Measurement Period from the first day of such Measurement
Period, to (b) the sum of: (i) Interest Expense of the Borrower for such
Measurement Period; plus (ii) Operating Lease Payments made, or required to have
been made, by the Borrower during such Measurement Period; plus (iii) scheduled
principal
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<PAGE>
payments of Indebtedness made, or required to have been made, by the Borrower
during such Measurement Period.
"Floating Rate" means, for any day, a rate per annum equal to (a) the
Alternate Base Rate for such day, plus (b) the Applicable Margin, in each case
changing when and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Government Claim" means any rights to payment for goods sold or leased by
the Borrower or for services rendered by the Borrower, whether or not earned by
performance, together with all security interests or other security held by or
granted to the Borrower to secure such rights to payment, which constitute a
claim against the federal government, any state government or any
instrumentality or agency of any of the foregoing.
"Hazardous Materials" is defined in Section 5.21.
"Indebtedness" of a Person means such Person's (a) obligations for borrowed
money, (b) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course of such
Person's business payable on terms customary in the trade), (c) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from Property now or hereafter owned or acquired by such Person, (d)
obligations which are evidenced by notes, acceptances, or similar instruments,
(e) Capitalized Lease Obligations, (f) Rate Hedging Obligations, (g) Contingent
Obligations, (h) obligations for which such Person is obligated pursuant to or
in respect of a Facility Letter of Credit and the face amount of any other
Letter of Credit and (i) repurchase obligations or liabilities of such Person
with respect to accounts or notes receivable sold by such Person. For the
purpose hereof, the amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Intellectual Property Assignment" means that certain Intellectual Property
Assignment, dated as of the date hereof, duly executed and delivered by the
Borrower in favor of the Agent, on behalf of the Lenders, as the same may be
amended, supplemented or otherwise modified from time to time.
"Interest Coverage Ratio", means at any Quarterly Measurement Date, the
ratio of: (a) EBIT for the Measurement Period ending on such date; to (b) the
Interest Expense of the Borrower for such Measurement Period.
"Interest Expense" of a Person means the gross interest expense of such
Person as determined in accordance with Agreement Accounting Principles.
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"Interest Period" means, with respect to a Eurodollar Advance, a period of
one, three or six months commencing on a Business Day selected by the Borrower
pursuant to this Agreement. Such Interest Period shall end on (but exclude) the
day which corresponds numerically to such date one, three or six months
thereafter; provided, however, that if there is no such numerically
corresponding day in such next, third or sixth succeeding month, such Interest
Period shall end on the last Business Day of such next, third or sixth
succeeding month. If an Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next succeeding
Business Day; provided, however, that if said next succeeding Business Day falls
in a new calendar month, such Interest Period shall end on the immediately
preceding Business Day.
"Inventory" means all goods now or at any time hereafter owned by the
Borrower and held for sale or lease, or furnished or to be furnished by the
Borrower under contracts of service, or consumed in the Borrower's business,
including, without limitation, all merchandise, raw materials, parts, supplies,
work-in-process and finished goods intended for sale.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade), deposit
account or contribution of capital by such Person to any other Person or any
investment in, or purchase or other acquisition of, the stock, partnership
interests, notes, debentures or other securities of any other Person made by
such Person.
"Issuance Request" is defined in Section 2.20.4.
"Issuer" means First Chicago.
"JFP" means Jeno F. Paulucci.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent
referred to, any office, branch, subsidiary or affiliate of such Lender or the
Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Letter of Credit Cash Collateral Account" is defined in Section 8.1. Such
account and the related cash collateralization shall be subject to documentation
satisfactory to the Agent.
"Lien" means any security interest, lien (statutory or other), mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the
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<PAGE>
interest of a vendor or lessor under any conditional sale, Capitalized Lease or
other title retention agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance and "Loans" means, with respect to the Lenders, the aggregate of all
Advances.
"Loan Documents" means this Agreement, the Notes, the Security Documents,
the Reimbursement Agreements and the other documents and agreements contemplated
hereby and executed by the Borrower or any Subsidiary in favor of the Agent or
any Lender.
"Margin Stock" has the meaning assigned to that term under Regulation U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, Property, condition (financial or other), performance, results of
operations, or prospects of the Borrower, (b) the ability of the Borrower to
perform its obligations under the Loan Documents, or (c) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Agent or the Lenders thereunder.
"Measurement Period" means, at any Applicable Measurement Date, the
thirteen (13) Accounting Periods ending on such date.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Net Available Proceeds" means the aggregate cash proceeds received by the
Borrower or any of its Subsidiaries in respect of any Asset Disposition
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Disposition),
net of the direct costs relating to such Asset Disposition (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts required to be
applied to the repayment of the Indebtedness (other than the Obligations)
secured by a Lien on the asset or assets that were the subject of such Asset
Disposition and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with Agreement Accounting Principles.
"Net Income" means, for any computation period, cumulative net income of
the Borrower earned during such period as determined in accordance with
Agreement Accounting Principles.
"Note" means a promissory note in substantially the form of Exhibit A
hereto, with appropriate insertions, duly executed and delivered to the Agent by
the Borrower and payable to the order of a Lender in the amount of its
Commitment, including any amendment, modification, renewal or replacement of
such promissory note.
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"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes, the Facility Letter of Credit Obligations and all other
liabilities (if any), whether actual or contingent, of the Borrower with respect
to Facility Letters of Credit, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent or any indemnified party hereunder arising under any
of the Loan Documents or under any Rate Swap Agreement entered into between the
Borrower and any Lender.
"Operating Lease Payment" means rent and any other payments made pursuant
to any lease of (or other agreement conveying the right to use) real and/or
personal property other than a Capitalized Lease.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each March, June, September and
December.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, limited liability company, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan, as defined in Section 3(2)
of ERISA, as to which the Borrower or any member of the Controlled Group may
have any liability.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"Pro-Rata" means, when used with respect to a Lender, and any described
aggregate or total amount, an amount equal to such Lender's pro-rata share or
portion based on its percentage of the Aggregate Commitment or if the Aggregate
Commitment has been terminated, its percentage of the aggregate principal amount
of outstanding Advances and Facility Letter of Credit Obligations.
"Purchase" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (a) acquires any going business or all or substantially all
of the assets of any firm, corporation or division or line of business thereof,
whether through purchase of assets, merger or otherwise, or (b) directly or
indirectly acquires (in one transaction or as the most recent transaction in a
series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership.
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"Purchasers" is defined in Section 12.3.1.
"Quarterly Measurement Date" means the last day of the fourth, seventh,
tenth and thirteenth Accounting Periods in each fiscal year of the Borrower.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or cross-
currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing.
"Rate Swap Agreements" means interest rate swap, exchange, cap, hedging or
similar interest rate protection agreements permitted hereunder in form and
substance and, where applicable with swap parties, acceptable to the Agent.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to depositary institutions.
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor or
other regulation or official interpretation of such Board of Governors relating
to the extension of credit by securities brokers and dealers for the purpose of
purchasing or carrying margin stocks applicable to such Persons.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to such Persons.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by the specified lenders for the purpose of
purchasing or carrying margin stocks applicable to such Persons.
"Reimbursement Agreement" means a letter of credit application and
reimbursement agreement in such form as the Issuer may from time to time employ
in the ordinary course of business.
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"Reimbursement Obligations" means, at any time, the aggregate (without
duplication) of the Obligations of the Borrower to the Lenders, the Issuer
and/or the Agent in respect of all unreimbursed payments or disbursements made
by the Lenders, the Issuer and/or the Agent under or in respect of draws made
under the Facility Letters of Credit.
"Release" is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 39601 et seq.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of Property, including without limitation Capitalized
Leases having an original term (including any required renewals) of one year or
more.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable Event regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or Section 412(d)
of the Code.
"Required Lenders" means Lenders in the aggregate having at least 66-2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
the sum of (a) the aggregate unpaid principal amount of the outstanding Loans
plus (b) the aggregate amount of the outstanding Facility Letter of Credit
Obligations; provided, however, that the required percentage shall be 100% so
long as (i) there are not more than two Lenders and (ii) each such Lender has
(A) twenty-five percent (25%) or more of the Aggregate Commitment then in effect
or (B) if the Aggregate Commitment has been terminated, twenty-five percent
(25%) or more of the sum of (x) the aggregate unpaid principal amount of the
outstanding Loans plus (y) the aggregate amount of the outstanding Facility
Letter of Credit Obligations.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Restatement Date" means February 4, 1999.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Security Agreement" means that certain Security Agreement, dated as of the
date hereof, duly executed and delivered by the Borrower in favor of the Agent,
on behalf of the Lenders, as the same may be amended, supplemented or otherwise
modified from time to time.
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"Security Documents" means, collectively, (a) the Security Agreement, (b)
the Intellectual Property Assignment and (c) all other security agreements,
patent and trademark assignments, guarantees and other similar agreements
between the Borrower or any Subsidiary and the Lenders or the Agent for the
benefit of the Lenders now or hereafter delivered to the Lenders or the Agent
pursuant to or in connection with the transactions contemplated hereby, and any
amendments, supplements, modifications, renewals, replacements, consolidations,
substitutions and extensions of any of the foregoing.
"Senior Subordinated Debt Documents" means the Senior Subordinated
Indenture, the Senior Subordinated Notes and the other documents and instruments
executed and delivered in connection therewith.
"Senior Subordinated Indenture" means that certain Senior Subordinated Note
Indenture, dated as of February 4, 1999, between the Borrower and U.S. Bank
Trust National Association, as trustee.
"Senior Subordinated Notes" means those certain $100,000,000 Luigino's,
Inc. 10% Senior Subordinated Notes of the Borrower due 2006.
"Shareholder Loan" means each loan or advance made by the Borrower to JFP
prior to the date hereof; provided, however, that accrued interest on any
Shareholder Loan which is added to the outstanding principal balance thereof
shall not constitute a loan or advance for purposes of this definition.
"Shareholder Note" means each note heretofore or hereafter executed and
delivered by JFP payable to the order of the Borrower to evidence a Shareholder
Loan.
"Single Employer Plan" means a Plan subject to Title IV of ERISA maintained
by the Borrower or any member of the Controlled Group for employees of the
Borrower or any member of the Controlled Group, other than a Multiemployer Plan.
"Solvent" means, when used with respect to a Person, that (a) the fair
saleable value of the assets of such Person as a going concern is in excess of
the total amount of the present value of its liabilities (including for purposes
of this definition all liabilities (including loss reserves as determined by
such Person), whether or not reflected on a balance sheet prepared in accordance
with Agreement Accounting Principles and whether direct or indirect, fixed or
contingent, secured or unsecured, disputed or undisputed), (b) such Person is
able to pay its debts or obligations in the ordinary course as they mature and
(c) such Person does not have unreasonably small capital to carry out its
business as conducted and as proposed to be conducted. "Solvency" shall have a
correlative meaning.
"Subordinated Indebtedness" of a Person means any Indebtedness of such
Person the payment of which is subordinated to payment of the Obligations to the
written satisfaction of the Required
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Lenders and shall include, in the case of the Borrower, the Indebtedness of the
Borrower under the Senior Subordinated Notes.
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any partnership, association, joint venture, limited liability company or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which (a) represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries, as would be shown in
the consolidated financial statements of the Borrower and its Subsidiaries as at
the end of the quarter next preceding the date on which such determination is
made, or (b) is responsible for more than 10% of the consolidated net sales or
of the Net Income of the Borrower and its Subsidiaries for the 12-month period
ending as of the end of the quarter next preceding the date of determination.
"Tax Distributions" means, for any period, an amount equal to the federal
and state income tax liability of the Borrower's shareholders arising from their
respective allocable share of the Borrower's taxable income for such period so
long as the Borrower has made an effective election to be treated as an "S"
Corporation under Code Section 1361(a)(i) and shall be computed on the basis of
the highest marginal combined tax rate possible under the Code and applicable
state law for the applicable year; provided, however, that if, for any of the
Borrower's fiscal years, the amount of the Tax Distributions calculated in
accordance with this definition exceeds 45% of the Borrower's taxable income,
then the Borrower shall provide the Agent and the Lenders with information
showing the actual tax liability relating to the Borrower's taxable income
(assuming that such shareholder's allocable share of the Borrower's taxable
income is taxed at such shareholder's actual marginal tax rate) of the
shareholder of the Borrower which owns at least 10% of the Borrower's issued and
outstanding capital stock and which has the highest marginal tax rate and the
amount of the Tax Distributions shall be limited to such marginal rate.
"Termination Event" means, with respect to a Plan which is subject to Title
IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Borrower or any
other member of the Controlled Group from such Plan during a plan year in which
the Borrower or any other member of the Controlled Group was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under
Section 4068(f) of ERISA, (c) the termination of such Plan, the filing of a
notice of intent to terminate such Plan or the treatment of an amendment of such
Plan as a termination under Section 4041 of ERISA, (d) the institution by the
PBGC of proceedings to terminate such Plan or (e) any event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of, or
appointment of a trustee to administer, such Plan.
"Transferee" is defined in Section 12.4.
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"Type" means, with respect to any Advance, its nature as a Floating Rate
Advance or Eurodollar Advance.
"UCC" means the Illinois Uniform Commercial Code as amended or modified and
in effect from time to time.
"Unfunded Liability" means the amount (if any) by which the present value
of all vested and unvested accrued benefits under a Single Employer Plan exceeds
the fair market value of assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plans using PBGC actuarial
assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means a Subsidiary of such Person all
of the outstanding Capital Stock or other ownership interests of which (other
than directors' qualifying shares) shall at the time be owned by such Person or
by one or more Wholly-Owned Subsidiaries of such Person and one or more Wholly-
Owned Subsidiaries of such Person.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications of the Borrower
and its Subsidiaries to effectively handle data including dates on and after
January 1, 2000, as such inability affects the business, operations and
financial condition of the Borrower and its Subsidiaries.
"Year 2000 Program" is defined in Section 5.23.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1 Advances. Subject to the terms of the Existing Credit Agreement, the
Lenders party thereto established in favor of the Borrower, and the Lenders
hereby continue, a revolving credit facility pursuant to which, and upon the
terms and subject to the following conditions:
(a) From and including the date hereof to but excluding the Facility
Termination Date, each Lender severally (and not jointly) agrees, on the terms
and conditions set forth in this Agreement, to make Loans to the Borrower from
time to time in amounts not to exceed in the aggregate at any one time
outstanding the amount of its Pro-Rata share of the Aggregate Available
Commitment existing at such time. Subject to the terms of this Agreement, the
Borrower may borrow, repay and reborrow Advances at any time prior to the
Facility Termination Date.
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(b) The Borrower hereby agrees that if at any time as a result of
reductions in the Aggregate Commitment pursuant to Section 2.7 or otherwise, the
aggregate balance of the sum of the Loans and the Facility Letter of Credit
Obligations exceeds the Aggregate Commitment, the Borrower shall repay
immediately its then outstanding Loans in such amount as may be necessary to
eliminate such excess; provided, that if an excess remains after repayment of
all outstanding Loans, then the Borrower shall cash collateralize the Facility
Letter of Credit Obligations by depositing into the Letter of Credit Cash
Collateral Account such amount as may be necessary to eliminate such excess.
(c) The Borrower's obligation to pay the principal of, and interest
on, the Loans shall be evidenced by the Notes. Although the Notes shall be
dated the Restatement Date, interest in respect thereof shall be payable only
for the periods during which the Loans evidenced thereby are outstanding and,
although the stated amount of each Note shall be equal to the applicable
Lender's Commitment, each Note shall be enforceable, with respect to the
Borrower's obligation to pay the principal amount thereof, only to the extent of
the unpaid principal amount of the Loan at the time evidenced thereby.
(d) All outstanding Advances and all other unpaid Obligations shall be
paid in full by the Borrower on the Facility Termination Date.
(e) Upon the effectiveness of this Agreement pursuant to Section 4.1,
each Revolving Credit Advance which is then outstanding under the Existing
Credit Agreement shall be deemed an Advance outstanding under this Agreement.
2.2 Ratable Loans. Each Advance hereunder shall consist of Loans made
from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
2.3 Types of Advances. The Advances may be Floating Rate Advances or
Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.8 and 2.9.
2.4 Commitment Fee; Reductions in Aggregate Commitment. (a) The
Borrower agrees to pay to the Agent for the account of each Lender a commitment
fee (the "Commitment Fee") in an amount equal to the Applicable Fee Rate times
the daily average unutilized portion (with Facility Letters of Credit being
deemed usage) of the Commitment of such Lender from the Restatement Date to and
including the Facility Termination Date, payable on each Payment Date hereafter
and on the Facility Termination Date. All accrued commitment fees shall be
payable on the effective date of any termination of the obligations of the
Lenders to make Loans hereunder.
(b) The Borrower may permanently reduce the Aggregate Commitment in
whole, or in part ratably among the Lenders in a minimum aggregate amount of
$1,000,000 or any integral multiple of $1,000,000 in excess thereof, upon at
least three (3) Business Days' written notice to the Agent, which notice shall
specify the amount of any such reduction; provided, however, that the
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amount of the Aggregate Commitment may not be reduced below the sum of (i) the
aggregate principal amount of the outstanding Advances, plus (ii) the aggregate
amount of the outstanding Facility Letter of Credit Obligations. Such reductions
shall be in addition to reductions occurring pursuant to Section 2.7.
2.5 Minimum Amount of Each Advance. Each Eurodollar Advance shall be in
the minimum amount of $1,000,000 (and in multiples of $1,000,000 if in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$500,000 (and in multiples of $100,000 if in excess thereof); provided, however,
that (a) any Floating Rate Advance may be in the amount of the unused Aggregate
Commitment and (b) in no event shall more than six (6) Eurodollar Advances be
permitted to be outstanding at any time.
2.6 Optional Principal Payments. The Borrower may from time to time pay,
without penalty or premium, all outstanding Floating Rate Advances, or, in a
minimum aggregate amount of $500,000 or any integral multiple of $100,000 in
excess thereof, any portion of the outstanding Floating Rate Advances. Subject
to Section 3.4 and upon three Business Days prior notice to the Agent, a
Eurodollar Advance may be paid prior to the last day of the applicable Interest
Period in a minimum amount of $1,000,000 or an integral multiple thereof.
2.7 Mandatory Commitment Reductions. (a) The Aggregate Commitment shall
be automatically and permanently reduced 360 days after the receipt by the
Borrower or any Subsidiary of the Net Available Proceeds of any Asset
Disposition, by an amount equal to 100% of the aggregate Net Available Proceeds
in excess of $500,000 realized upon all Asset Dispositions in any fiscal year of
the Borrower; provided, however, that a reduction of the Aggregate Commitment
shall not be made under this Section 2.7(a) to the extent, within 360 days after
the receipt of such Net Available Proceeds, the Borrower applies such Net
Available Proceeds towards the acquisition of a controlling interest in another
business, the making of a capital expenditure or the acquisition of other long-
term assets, in each case, in the same or a similar line of business as the
Borrower was engaged in on the Restatement Date.
(b) Within 360 days after the receipt by the Borrower or any
Subsidiary of the Net Available Proceeds of any Asset Disposition, the Borrower
shall repay the Loans in an amount equal to the lesser of (i) the outstanding
principal amount of Loans and (ii) the amount of such reduction; provided,
however, that a prepayment shall not be required to be made under this Section
2.7(b) to the extent, within 360 days after the receipt of such Net Available
Proceeds, the Borrower applies such Net Available Proceeds towards the
acquisition of a controlling interest in another business, the making of a
capital expenditure or the acquisition of other long-term assets, in each case,
in the same or a similar line of business as the Borrower was engaged in on the
Restatement Date.
2.8 Method of Selecting Types and Interest Periods for New Advances. The
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable to each Advance from time to time. The
Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not
later than 10:00 a.m. (Chicago time) on the Borrowing Date of each
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Floating Rate Advance and at least three (3) Business Days before the Borrowing
Date for each Eurodollar Advance, specifying:
(a) the Borrowing Date of such Advance, which shall be a Business
Day;
(b) the aggregate amount of such Advance;
(c) the Type of Advance selected; and
(d) in the case of each Eurodollar Advance, the Interest Period
applicable thereto, which shall end on or prior to the Facility Termination
Date.
Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Loan or Loans, in funds immediately available in Chicago, to
the Agent at its address specified pursuant to Article XIII. The Agent will
make the funds so received from the Lenders available to the Borrower at the
Agent's aforesaid address.
2.9 Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into Eurodollar Advances. Each Eurodollar Advance
shall continue as a Eurodollar Advance until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Advance shall be
automatically converted into a Floating Rate Advance unless the Borrower shall
have given the Agent a Conversion/Continuation Notice requesting that, at the
end of such Interest Period, such Eurodollar Advance continue as a Eurodollar
Advance for the same or another Interest Period. Subject to the terms of
Section 2.5, the Borrower may elect from time to time to convert all or any part
of an Advance of any Type into any other Type or Types of Advances; provided,
however, that any conversion of any Eurodollar Advance shall be made on, and
only on, the last day of the Interest Period applicable thereto. The Borrower
shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of
each conversion of a Floating Rate Advance or continuation of a Eurodollar
Advance not later than 10:00 a.m. (Chicago time) on the date of such conversion
or continuation, in the case of a conversion into a Floating Rate Advance, or at
least three (3) Business Days, in the case of a conversion into or continuation
of a Eurodollar Advance, prior to the date of the requested conversion or
continuation, specifying:
(a) the requested date of such conversion or continuation, which
shall be a Business Day;
(b) the aggregate amount and Type of the Advance which is to be
converted or continued; and
(c) the amount and Type(s) of Advance(s) into which such Advance is to
be converted or continued and, in the case of a conversion into or continuation
of a Eurodollar Advance, the duration of the Interest Period applicable thereto,
which shall end on or prior to the Facility Termination Date.
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2.10 Changes in Interest Rate, etc. Each Floating Rate Advance shall bear
interest at the Floating Rate from and including the date of such Advance or the
date on which such Advance was converted into a Floating Rate Advance to (but
not including) the date on which such Floating Rate Advance is paid or converted
to a Eurodollar Advance. Changes in the rate of interest on that portion of any
Advance maintained as a Floating Rate Advance will take effect simultaneously
with each change in the Alternate Base Rate. Each Eurodollar Advance shall bear
interest from and including the first day of the Interest Period applicable
thereto to, but not including, the last day of such Interest Period at the
interest rate determined as applicable to such Eurodollar Advance. No Interest
Period may end after the Facility Termination Date. The Borrower shall select
Interest Periods so that it is not necessary to repay any portion of a
Eurodollar Advance prior to the last day of the applicable Interest Period in
order to make a mandatory repayment required pursuant to Section 2.1(d).
2.11 Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8 or 2.9, no Advance may be made as, converted
into or continued as a Eurodollar Advance (except with the consent of the Agent
and the Required Lenders) when any Default or Unmatured Default has occurred and
is continuing. During the continuance of a Default the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest rates),
declare that each Eurodollar Advance and Floating Rate Advance shall bear
interest (for the remainder of the applicable Interest Period in the case of
Eurodollar Advances) at a rate per annum equal to the rate otherwise applicable
plus two percent (2%) per annum; provided, however, that such increased rate
shall automatically and without action of any kind by the Lenders become and
remain applicable until revoked by the Required Lenders in the event of a
Default described in Section 7.6 or 7.7.
2.12 Method of Payment. All payments of the Obligations hereunder shall be
made, without setoff, deduction or counterclaim, in immediately available funds
to the Agent at the Agent's address specified pursuant to Article XIII, or at
any other Lending Installation of the Agent specified in writing by the Agent to
the Borrower, by noon (Chicago time) on the date when due and shall be applied
ratably by the Agent among the Lenders. Each payment delivered to the Agent for
the account of any Lender shall be delivered promptly by the Agent to such
Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in a
notice received by the Agent from such Lender.
2.13 Notes; Telephonic Notices. Each Lender is hereby authorized to record
the principal amount of each of its Loans and each repayment on the schedule
attached to its Note; provided, however, that neither the failure to so record
nor any error in such recordation shall affect the Borrower's obligations under
such Note. The Borrower hereby authorizes the Lenders and the Agent to extend,
convert or continue Advances, effect selections of Types of Advances and to
transfer funds based on telephonic notices made by any person or persons the
Agent or any Lender in good faith believes to be acting on behalf of the
Borrower. The Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender, of
each telephonic notice signed by an Authorized Officer. If the written
confirmation differs in any
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material respect from the action taken by the Agent and the Lenders, the records
of the Agent and the Lenders shall govern absent manifest error.
2.14 Interest Payment Dates; Interest and Fee Basis. Interest accrued on
each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the Closing Date, on any date on which a
Floating Rate Advance is prepaid, whether due to acceleration or otherwise, and
at maturity. Interest accrued on each Eurodollar Advance shall be payable on the
last day of its applicable Interest Period, on any date on which the Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and at maturity.
Interest accrued on each Eurodollar Advance having an Interest Period longer
than three months shall also be payable on the last day of each three- month
interval during such Interest Period. Interest on Eurodollar Advances and
commitment fees shall be calculated for actual days elapsed on the basis of a
360-day year, and interest on Floating Rate Advances shall be calculated for
actual days elapsed on the basis of a 365 or 366 day year, as applicable.
Interest shall be payable for the day an Advance is made but not for the day of
any payment on the amount paid if payment is received prior to noon (Chicago
time) at the place of payment. If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.
2.15 Notification of Advances, Interest Rates, Prepayments, Commitment
Reductions and Issuance Requests. Promptly after receipt thereof, the Agent will
notify each Lender of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice, Conversion/ Continuation Notice, Issuance Request and
repayment notice received by it hereunder. The Agent will notify each Lender of
the interest rate applicable to each Eurodollar Advance promptly upon
determination of such interest rate and will give each Lender prompt notice of
each change in the Alternate Base Rate.
2.16 Lending Installations. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Lender for the benefit
of such Lending Installation. Each Lender may, by written or telex notice to the
Agent and the Borrower, designate a Lending Installation through which Loans
will be made by it and for whose account Loan payments are to be made.
2.17 Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as
the case may be, notifies the Agent prior to the date on which it is scheduled
to make payment to the Agent of (a) in the case of a Lender, the proceeds of a
Loan, or (b) in the case of the Borrower, a payment of principal, interest or
fees to the Agent for the account of the Lenders, that it does not intend to
make such payment, the Agent may assume that such payment has been made. The
Agent may, but shall not be obligated to, make the amount of such payment
available to the intended recipient in reliance upon such assumption. If the
Borrower has not in fact made such payment to the Agent, the Lenders shall, on
demand by the Agent, repay to the Agent the amount so made available together
with interest thereon in respect of each day during the period commencing on the
date such amount
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was so made available by the Agent until the date the Agent recovers such amount
at a rate per annum equal to the Federal Funds Effective Rate for such day. If
any Lender has not in fact made such payment to the Agent, such Lender or the
Borrower shall, on demand by the Agent, repay to the Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to (a)
in the case of payment by a Lender, the Federal Funds Effective Rate for such
day, or (b) in the case of payment by the Borrower, the interest rate applicable
to the relevant Loan.
2.18 Taxes. (a) Any payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income taxes and franchise taxes or any other tax based upon net income
imposed on the Agent or any Lender by the jurisdiction in which the Agent or
such Lender is incorporated or has its principal place of business. If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Agent or any Lender hereunder, the amounts so payable to the
Agent or such Lender shall be increased to the extent necessary to yield to the
Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
or pursuant to this Agreement; provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the U.S. or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this Section 2.18. Whenever any
Non-Excluded Taxes are payable by the Borrower, as promptly as practicable
thereafter the Borrower shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and the Lenders for
any incremental taxes, interest or penalties that may become payable by any
Agent or any Lender as a result of any such failure. The agreements in this
Section 2.18 shall survive the termination of this Agreement and the payment of
all other amounts payable hereunder.
(b) At least five Business Days prior to the first date on which interest
or fees are payable hereunder for the account of any Lender, each Lender that is
not incorporated under the laws of the United States of America, or a state
thereof, agrees that it will deliver to each of the Borrower and the Agent two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Lender is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes. Each Lender which so delivers a Form 1001 or
4224 further undertakes to deliver to each of the Borrower and the Agent two
additional copies of such form (or a successor form) on or before the date that
such form expires (currently, three successive calendar years for Form 1001 and
one calendar year for Form 4224) or becomes obsolete or after the occurrence of
any event requiring a change in the most recent forms so delivered by it, and
such amendments thereto or extensions or renewals thereof
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as may be reasonably requested by the Borrower or the Agent, in each case
certifying that such Lender is entitled to receive payments under this Agreement
and the Notes without deduction or withholding of any United States federal
income taxes, unless an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required 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 advises the Borrower and the Agent that
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax. A Lender which fails to comply with the first
sentence of this Section shall not be entitled to reimbursement by the Borrower
of Non-Excluded Taxes which would otherwise not be payable by such Lender.
2.19 Agent's Fees. The Borrower shall pay to the Agent those fees, in
addition to the commitment fees referenced in Section 2.4(a), in the amounts and
at the times separately agreed to between the Agent and the Borrower by letter
dated January 5, 1999.
2.20 Facility Letters of Credit.
2.20.1 Issuance of Facility Letters of Credit. (a) From and after the
date hereof, the Issuer agrees, upon the terms and conditions set forth in
this Agreement, to issue at the request and for the account of the
Borrower, one or more Facility Letters of Credit; provided, however, that
the Issuer shall not be under any obligation to issue, and shall not issue,
any Facility Letter of Credit if (i) any order, judgment or decree of any
governmental authority or other regulatory body with jurisdiction over the
Issuer shall purport by its terms to enjoin or restrain such Issuer from
issuing such Facility Letter of Credit, or any law or governmental rule,
regulation, policy, guideline or directive (whether or not having the force
of law) from any governmental authority or other regulatory body with
jurisdiction over the Issuer shall prohibit, or request that the Issuer
refrain from, the issuance of Facility Letters of Credit in particular or
shall impose upon the Issuer with respect to any Facility Letter of Credit
any restriction or reserve or capital requirement (for which the Issuer is
not otherwise compensated) or any unreimbursed loss, cost or expense which
was not applicable, in effect and known to the Issuer as of the date of
this Agreement and which the Issuer in good faith deems material to it;
(ii) one or more of the conditions to such issuance contained in Section
4.2 is not then satisfied; or (iii) after giving effect to such issuance,
the aggregate outstanding amount of the Facility Letter of Credit
Obligations would exceed the Facility Letter of Credit Sublimit.
(b) In no event shall: (i) the aggregate amount of the Facility Letter
of Credit Obligations at any time exceed the Facility Letter of Credit
Sublimit; (ii) the sum at any time of (A) the aggregate amount of Facility
Letter of Credit Obligations and (B) the aggregate principal balance of
outstanding Advances exceed the amount of the Aggregate Commitment; or
(iii) the expiration date of any Facility Letter of Credit (including,
without limitation, Facility Letters of Credit issued with an automatic
"evergreen" provision providing for renewal absent advance notice by the
Borrower or the Issuer), or the date for
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payment of any draft presented thereunder and accepted by the Issuer, be
later than five Business Days prior to the Facility Termination Date.
2.20.2 Participating Interests. Immediately upon the issuance by the
Issuer of a Facility Letter of Credit in accordance with Section 2.20.4,
each Lender shall be deemed to have irrevocably and unconditionally
purchased and received from the Issuer, without recourse, representation or
warranty, an undivided participation interest equal to its Pro-Rata share
of the Aggregate Commitment of the face amount of such Facility Letter of
Credit and each draw paid by the Issuer thereunder. Each Lender's
obligation to pay its proportionate share of all draws under the Facility
Letters of Credit, absent gross negligence or willful misconduct by the
Issuer in honoring any such draw, shall be absolute, unconditional and
irrevocable and in each case shall be made without counterclaim or set-off
by such Lender.
2.20.3 Facility Letter of Credit Reimbursement Obligations. (a) The
Borrower agrees to pay to the Issuer of a Facility Letter of Credit (i) on
each date that any amount is drawn under each Facility Letter of Credit a
sum (and interest on such sum as provided in clause (ii) below) equal to
the amount so drawn plus all other charges and expenses with respect
thereto specified in Section 2.20.6 or in the applicable Reimbursement
Agreement and (ii) interest on any and all amounts remaining unpaid under
this Section 2.20.3 until payment in full at the Floating Rate plus the
margin specified in Section 2.11. The Borrower agrees to pay to the Issuer
the amount of all Facility Letter of Credit Reimbursement Obligations owing
in respect of any Facility Letter of Credit immediately when due, under all
circumstances, including, without limitation, any of the following
circumstances: (w) any lack of validity or enforceability of this Agreement
or any of the other Loan Documents; (x) the existence of any claim,
set-off, defense or other right which the Borrower may have at any time
against a beneficiary named in a Facility Letter of Credit, any transferee
of any Facility Letter of Credit (or any Person for whom any such
transferee may be acting), any Lender or any other Person, whether in
connection with this Agreement, any Facility Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including
any underlying transaction between the Borrower and the beneficiary named
in any Facility Letter of Credit); (y) the validity, sufficiency or
genuineness of any document which the Issuer has determined in good faith
complies on its face with the terms of the applicable Facility Letter of
Credit, even if such document should later prove to have been forged,
fraudulent, invalid or insufficient in any respect or any statement therein
shall have been untrue or inaccurate in any respect; or (z) the surrender
or impairment of any security for the performance or observance of any of
the terms hereof.
(b) Notwithstanding any provisions to the contrary in any
Reimbursement Agreement, the Borrower agrees to reimburse the Issuer for
amounts which the Issuer pays under such Facility Letter of Credit no later
than the time specified in this Agreement. If the Borrower does not pay any
such Facility Letter of Credit Reimbursement Obligations when due, the
Borrower shall be deemed to have immediately requested that the Lenders
make a Floating Rate Advance under this Agreement in a principal amount
equal to such unreimbursed Facility Letter of Credit Reimbursement
Obligations. The Agent shall
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promptly notify the Lenders of such deemed request and, without the
necessity of compliance with the requirements of Sections 2.5 and 4.2, each
Lender shall make available to the Agent its Loan in the manner prescribed
for Floating Rate Advances. The proceeds of such Loans shall be paid over
by the Agent to the Issuer for the account of the Borrower in satisfaction
of such unreimbursed Facility Letter of Credit Reimbursement Obligations,
which shall thereupon be deemed satisfied by the proceeds of, and replaced
by, such Floating Rate Advance.
(c) If the Issuer makes a payment on account of any Facility Letter of
Credit and is not concurrently reimbursed therefor by the Borrower and if
for any reason a Floating Rate Advance may not be made pursuant to
paragraph (b) above, then as promptly as practical during normal banking
hours on the date of its receipt of such notice or, if not practicable on
such date, not later than noon (Chicago time) on the Business Day
immediately succeeding such date of notification, each Lender shall deliver
to the Agent for the account of the Issuer, in immediately available funds,
the purchase price for such Lender's interest in such unreimbursed Facility
Letter of Credit Obligations, which shall be an amount equal to such
Lender's Pro-Rata share of such payment. Each Lender shall, upon demand by
the Issuer, pay the Issuer interest on such Lender's Pro-Rata share of such
draw from the date of payment by the Issuer on account of such Facility
Letter of Credit until the date of delivery of such funds to the Issuer by
such Lender at a rate per annum, computed for actual days elapsed based on
a 360-day year, equal to the Federal Funds Effective Rate for such period;
provided, that such payments shall be made by the Lenders only in the event
and to the extent that the Issuer is not reimbursed in full by the Borrower
for interest on the amount of any draw on the Facility Letters of Credit.
(d) At any time after the Issuer has made a payment on account of any
Facility Letter of Credit and has received from any other Lender such
Lender's Pro-Rata share of such payment, such Issuer shall, forthwith upon
its receipt of any reimbursement (in whole or in part) by the Borrower for
such payment, or of any other amount from the Borrower or any other Person
in respect of such payment (including, without limitation, any payment of
interest or penalty fees and any payment under any collateral account
agreement of the Borrower or any Loan Document but excluding any transfer
of funds from any other Lender pursuant to Section 2.20.3(b)), transfer to
such other Lender such other Lender's ratable share of such reimbursement
or other amount; provided, that interest shall accrue for the benefit of
such Lender from the time such Issuer has made a payment on account of any
Facility Letter of Credit; provided, further, that in the event that the
receipt by the Issuer of such reimbursement or other amount is found to
have been a transfer in fraud of creditors or a preferential payment under
the United States Bankruptcy Code or is otherwise required to be returned,
such Lender shall promptly return to the Issuer any portion thereof
previously transferred by the Issuer to such Lender, but without interest
to the extent that interest is not payable by the Issuer in connection
therewith.
2.20.4 Procedure for Issuance. Prior to the issuance of each Facility
Letter of Credit, and as a condition of such issuance, the Borrower shall
deliver to the Issuer (with a
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copy to the Agent) a Reimbursement Agreement signed by the Borrower,
together with such other documents or items as may be required pursuant to
the terms thereof, and the proposed form and content of such Facility
Letter of Credit shall be reasonably satisfactory to the Issuer. Each
Facility Letter of Credit shall be issued no earlier than two (2) Business
Days after delivery of the foregoing documents, which delivery may be by
the Borrower to the Issuer by telecopy, telex or other electronic means
followed by delivery of executed originals within five (5) days thereafter.
The documents so delivered shall be in compliance with the requirements set
forth in Section 2.20.1(b), and shall specify therein (i) the stated amount
of the Facility Letter of Credit requested, (ii) the effective date of
issuance of such requested Facility Letter of Credit, which shall be a
Business Day, (iii) the date on which such requested Facility Letter of
Credit is to expire, which shall be a Business Day which is at least five
Business Days prior to the Facility Termination Date, (iv) the entity for
whose benefit the requested Facility Letter of Credit is to be issued,
which shall be the Borrower or a Subsidiary, which are outstanding and
which will be outstanding after giving effect to the requested Facility
Letter of Credit issuance. The delivery of the foregoing documents and
information shall constitute an "Issuance Request" for purposes of this
Agreement. Subject to the terms and conditions of Section 2.20.1 and
provided that the applicable conditions set forth in Section 4.2 hereof
have been satisfied, the Issuer shall, on the requested date, issue a
Facility Letter of Credit on behalf of the Borrower in accordance with the
Issuer's usual and customary business practices. In addition, any amendment
of an existing Facility Letter of Credit shall be deemed to be an issuance
of a new Facility Letter of Credit and shall be subject to the requirements
set forth above. The Issuer shall give the Agent prompt written notice of
the issuance of any Facility Letter of Credit.
2.20.5 Nature of the Lenders' Obligations. (a) As between the Borrower
and the Lenders, the Borrower assumes all risks of the acts and omissions
of, or misuse of the Facility Letters of Credit by, the respective
beneficiaries of the Facility Letters of Credit. In furtherance and not in
limitation of the foregoing, the Lenders shall not be responsible for (i)
the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the application for
an issuance of a Facility Letter of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (ii) the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign a Facility Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any reason;
(iii) the failure of the beneficiary of a Facility Letter of Credit to
comply fully with conditions required to be satisfied by any Person other
than the Issuer in order to draw upon such Facility Letter of Credit; (iv)
errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise; (v) errors in
the interpretation of technical terms; (vi) the misapplication by the
beneficiary of a Facility Letter of Credit of the proceeds of any drawing
under such Facility Letter of Credit; or (vii) any consequences arising
from causes beyond control of the Issuer; provided, however, that neither
the Agent, the Issuer nor any Lender shall be absolved by the foregoing for
responsibility for its own gross negligence or willful misconduct.
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(b) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuer
under or in connection with the Facility Letters of Credit or any related
certificates, if taken or omitted in good faith and absent gross negligence
or willful misconduct by the Issuer, shall not put the Agent or any Lender
under any resulting liability to the Borrower or relieve the Borrower of
any of its obligations hereunder to the Issuer or any such Person.
2.20.6 Facility Letter of Credit Fees. The Borrower hereby agrees to
pay to the Agent for the account of the Issuer or the Lenders, as
applicable, letter of credit fees with respect to each Facility Letter of
Credit from and including the date of issuance thereof until the date such
Facility Letter of Credit is fully drawn, canceled or expired, (a) for the
account of the Issuer, computed at such rate as may be agreed upon between
the Issuer and the Borrower, on the aggregate initial face amount of such
Facility Letter of Credit payable on the date of issuance, and (b) for the
ratable account of the Lenders, equal to a percentage equal to the
Applicable Margin for Eurodollar Loans of the aggregate amount from time to
time available to be drawn on such Facility Letter of Credit, calculated
with respect to actual days elapsed on the basis of a 360-day year and
payable quarterly in arrears on the Payment Date in each year and upon the
expiration, cancellation or utilization in full of such Facility Letter of
Credit. In addition to the foregoing, the Borrower agrees to pay the Issuer
any other fees customarily charged by it in respect of Letters of Credit
issued by it.
2.20.7 Effectiveness of Existing Letters of Credit. Upon the
effectiveness of this Agreement, notwithstanding any contrary provision
contained in this Agreement or any other Loan Document (a) each Letter of
Credit which is then outstanding under the Existing Credit Agreement and
identified on Schedule 2.20 hereto (each, an "Existing Letter of Credit")
shall be deemed a Facility Letter of Credit issued and outstanding under
this Agreement in accordance with Section 2.20, (b) for purposes of this
Agreement and the other Loan Documents, U.S. Bank National Association, in
its individual capacity, shall be deemed to have irrevocably and
unconditionally purchased and received from such Issuer, without recourse,
representation or warranty, an undivided participation interest equal to
its pro-rata share of the face amount of each Existing Letter of Credit and
each draw paid by such Issuer thereunder.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1 Yield Protection. If, after the Closing Date, the adoption of or any
change in any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
interpretation thereof, or the compliance of any Lender therewith,
(a) subjects such Lender or any applicable Lending Installation to any tax,
duty, charge or withholding on or from payments due from the Borrower (excluding
taxation of the overall net income of such Lender or applicable Lending
Installation imposed by the jurisdiction in which
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such Lender or Lending Installation is incorporated or has its principal place
of business), or changes the basis of taxation of principal, interest or any
other payments to such Lender or Lending Installation in respect of its Loans,
its interest in the Facility Letters of Credit or other amounts due it
hereunder, or
(b) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, such Lender or any
applicable Lending Installation (other than reserves and assessments taken into
account in determining the interest rate applicable to Eurodollar Advances), or
(c) imposes any other condition the result of which is to increase the cost
to such Lender or any applicable Lending Installation of making, funding or
maintaining Loans or issuing Facility Letters of Credit or reduces any amount
receivable by such Lender or any applicable Lending Installation in connection
with any Loans or Facility Letters of Credit, or requires such Lender or any
applicable Lending Installation to make any payment calculated by reference to
the amount of Loans held, Facility Letters of Credit issued or participated in
or interest received by it, by an amount deemed material by such Lender,
then, within 20 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or resulting in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans, its interest in the Facility Letters of Credit and its
Commitment.
3.2 Changes in Capital Adequacy Regulations. If a Lender determines the
amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change, then, within 30 days of demand by such
Lender, the Borrower shall pay such Lender the amount necessary to compensate
for any shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans, its
interest in the Facility Letters of Credit or its obligation to make Loans or
participate in or issue Facility Letters of Credit hereunder (after taking into
account such Lender's policies as to capital adequacy). "Change" means (a) any
change after the Closing Date in the Risk-Based Capital Guidelines, or (b) any
adoption of or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the Closing Date which affects the amount of
capital required or expected to be maintained by any Lender or any Lending
Installation or any corporation controlling any Lender. "Risk-Based Capital
Guidelines" means (a) the risk-based capital guidelines in effect in the United
States on the Closing Date and (b) the corresponding capital regulations
promulgated by regulatory authorities outside the United States implementing the
July 1988 report of the Basle Committee on Banking Regulation and Supervisory
Practices entitled "International Convergence of Capital Measurements and
Capital Standards" and any amendments to such regulations adopted prior to the
Closing Date.
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3.3 Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (a) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available, or (b) the interest rate applicable to a Eurodollar Advance does not
accurately or fairly reflect the cost of making or maintaining such Eurodollar
Advance, then the Agent shall suspend the availability of the affected
Eurodollar Advance until such circumstance no longer exists and require any
Eurodollar Advances of the affected Type to be repaid. In such event the Lenders
and the Borrower shall in good faith negotiate towards establishing an alternate
interest rate.
3.4 Funding Indemnification. If any payment of a Eurodollar Advance occurs
on a date which is not the last day of the applicable Interest Period, whether
because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not
made on the date specified by the Borrower for any reason other than default by
the Lenders, the Borrower will indemnify the Agent and each Lender for any loss
or cost incurred by it resulting therefrom, including, without limitation, any
loss or cost in liquidating or employing deposits acquired to fund or maintain
the Eurodollar Advance as set forth in Lender's written claim therefor as
described in Section 3.5.
3.5 Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of
Advance under Section 3.3, so long as such designation is not disadvantageous to
such Lender. Each Lender shall deliver a written statement of such Lender to the
Borrower (with a copy to the Agent) as to the amount due, if any, under Section
3.1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding to
the deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement of any Lender shall be
payable on demand after receipt by the Borrower of the written statement. The
obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive
payment of the Obligations and termination of this Agreement. The Borrower shall
not be required to indemnify any Lender pursuant to Section 3.1 or 3.2 for any
amounts paid or losses incurred by such Lender as to which such Lender has not
made demand hereunder within 180 days after the date such Lender has actual
knowledge of such amounts or losses and their applicability to the lending
transactions contemplated hereby.
3.6 Substitution of Lenders. Any Lender claiming any additional amounts
payable pursuant to Section 3.1 or 3.2 shall, so long as no Default or Unmatured
Default has occurred and is continuing, upon the written request of the Borrower
delivered to such Lender and the Agent, assign, pursuant to and in accordance
with the provisions of Section 12.3, all of its rights and obligations under
this Agreement and under the Loan Documents to another Lender or to a commercial
bank, other financial institution, commercial finance company or other business
lender
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selected by the Borrower and reasonably acceptable to the Agent that has agreed
not to claim any additional amounts under Section 3.1 or 3.2 with respect to
some or all of the costs or regulatory charges that gave rise to such assigning
Lender's claim for such compensation, in consideration for (a) the payment by
such assignee to such assigning Lender of the principal of, and interest accrued
and unpaid to the date of such assignment on, the Notes held by such assigning
Lender and (b) the payment by the Borrower to such assigning Lender of any and
all other amounts owing to such assigning Lender under any provision of this
Agreement accrued and unpaid to the date of such assignment.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Effectiveness of This Agreement. The amendments to the Existing Credit
Agreement embodied in this Agreement shall not be effective (in which case the
Existing Credit Agreement shall remain in full force and effect) and the Lenders
shall have no obligation to make Advances hereunder and the Issuer shall have no
obligation to issue any Facility Letter of Credit hereunder unless and until the
Borrower has furnished the following to the Agent with sufficient copies for the
Lenders and the other conditions set forth below have been satisfied:
(a) Charter Documents; Good Standing Certificates. Copies of the
certificate of incorporation of the Borrower, together with all amendments
thereto, both certified by the appropriate governmental officer in its
jurisdiction of incorporation, together with a good standing certificate issued
by the Secretary of State of the jurisdiction of its incorporation and such
other jurisdictions as shall be requested by the Agent.
(b) By-Laws and Resolutions. Copies, certified by the Secretary or
Assistant Secretary of the Borrower, of its by-laws and of its Board of
Directors' resolutions (and resolutions of other bodies, if any are deemed
necessary by counsel for the Agent) authorizing the execution, delivery and
performance of the Loan Documents to which the Borrower is a party.
(c) Secretary's Certificate. An incumbency certificate, executed by the
Secretary or Assistant Secretary of the Borrower, which shall identify by name
and title and bear the signature of the officers of the Borrower authorized to
sign the Loan Documents and to make borrowings hereunder, upon which certificate
the Agent and the Lenders shall be entitled to rely until informed of any change
in writing by the Borrower.
(d) Officer's Certificate. A certificate, dated the initial Borrowing Date
signed by an Authorized Officer of the Borrower, in form and substance
satisfactory to the Agent, to the effect that: (i) on the Restatement Date no
Default or Unmatured Default has occurred and is continuing; (ii) each of the
representations and warranties set forth in Article V of this Agreement is true
and correct on and as of the Restatement Date (both before and after giving
effect to the transactions under the Loan Documents and the Senior Subordinated
Debt Documents (collectively,
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the "Closing Transactions")); and (iii) since January 4, 1998, no event or
change has occurred that has caused or evidences a Material Adverse Effect.
(e) Legal Opinions. A written opinion of Dorsey & Whitney LLP, counsel to
the Borrower, addressed to the Agent and the Lenders in form and substance
acceptable to the Agent and its counsel.
(f) Notes. Notes payable to the order of each of the Lenders duly executed
by the Borrower.
(g) Loan Documents. Executed originals of this Agreement and each of the
Loan Documents executed in connection herewith, which shall be in full force and
effect, together with all schedules, exhibits, certificates, instruments,
opinions, documents and financial statements required to be delivered pursuant
hereto and thereto.
(h) Solvency Certificate. A written solvency certificate from the chief
financial officer of the Borrower in form and content satisfactory to the Agent,
dated the Restatement Date, with respect to the value, Solvency and other
factual information of, or relating to, as the case may be, the Borrower on a
consolidated basis.
(i) Payment of Term Loans. All principal, interest and other amounts due
under the Existing Credit Agreement with respect to Term Loan A and Term Loan B
thereunder shall have been paid in full, and the Borrower shall have executed
and delivered to the Agent such documents as the Agent shall require in
connection therewith.
(j) Year 2000 Information. Information satisfactory to the Agent and the
Required Lenders regarding the Borrower's Year 2000 Program.
(k) Senior Subordinated Notes.
(i) The Borrower shall have delivered to the Agent complete and
correct copies of the Senior Subordinated Debt Documents, which Senior
Subordinated Debt Documents shall be in form and substance acceptable to
the Agent and the Required Lenders.
(ii) The Senior Subordinated Notes shall have been issued
substantially simultaneously herewith in accordance with the Senior
Subordinated Debt Documents and all applicable laws.
(iii) The Borrower shall have received at least $90 million in gross
proceeds from the issuance of the Senior Subordinated Notes.
(iv) The Senior Subordinated Notes shall have been subordinated to
payment of the Obligations to the written satisfaction of the Required
Lenders.
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(l) State of Ohio Default. Evidence satisfactory to the Agent that the
State of Ohio has waived compliance for the Borrower's fiscal year 1998 with the
net worth covenant under the loan agreements between the Borrower and the State
of Ohio.
(m) Fees. The Borrower shall have paid all accrued and unpaid fees, costs
and expenses due under the Existing Credit Agreement including, but not limited
to, all accrued and unpaid Commitment Fees (as defined in the Existing Credit
Agreement).
(n) Other. Such other documents as the Agent, any Lender or their -----
counsel may have reasonably requested.
4.2 Each Future Advance and Facility Letter of Credit. The Lenders shall
not be required to make any Advance and the Issuer shall not be obligated to
issue any future Facility Letter of Credit unless on the applicable Borrowing
Date:
(a) There exists no Default or Unmatured Default and none would result from
such Advance or issuance of such Facility Letter of Credit;
(b) The representations and warranties contained in Article V are true and
correct as of such Borrowing Date except to the extent any such representation
or warranty is stated to relate solely to an earlier date, in which case such
representation or warranty shall have been true and correct on and as of such
earlier date;
(c) A Borrowing Notice or Issuance Request, as applicable, shall have been
properly submitted; and
(d) All legal matters incident to the making of such Advance or issuance of
such Facility Letter of Credit shall be satisfactory to the Lenders and their
counsel.
Each Borrowing Notice with respect to each such Advance and each Issuance
Request with respect to each such Facility Letter of Credit shall constitute a
representation and warranty by the Borrower that the conditions contained in
Section 4.2 have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1 Corporate Existence and Standing. Each of the Borrower and each
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
duly qualified and in good standing as a foreign corporation and
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is duly authorized to conduct its business in each jurisdiction in which its
material business is conducted or proposed to be conducted.
5.2 Authorization and Validity. The Borrower has all requisite power and
authority (corporate and otherwise) and legal right (a) to execute and deliver
(or file, as the case may be) each of the Loan Documents and to perform its
obligations thereunder and (b) to assign, pledge and grant a pledge of and
security interest in the Collateral which it owns in the manner and for the
purpose contemplated in any of the Loan Documents to which it is a party. The
execution and delivery (or filing, as the case may be) by the Borrower of the
Loan Documents and the performance of its obligations thereunder have been duly
authorized by proper corporate proceedings and the Loan Documents constitute
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
5.3 Compliance with Laws and Contracts. The Borrower and its Subsidiaries
have complied in all material respects with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
their respective businesses or the ownership of their respective properties,
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. Neither the execution and delivery by the Borrower of
the Loan Documents, the application of the proceeds of the Loans and the
Facility Letters of Credit, the consummation of any transaction contemplated in
the Loan Documents nor compliance with the provisions of the Loan Documents
will, or at the relevant time did, (a) violate any law, rule, regulation
(including Regulations T, U and X), order, writ, judgment, injunction, decree or
award binding on the Borrower or any Subsidiary or the Borrower's or any
Subsidiary's charter, articles or certificate of incorporation or by-laws, (b)
violate the provisions of or require the approval or consent of any party to any
indenture, instrument or agreement to which the Borrower or any Subsidiary is a
party or is subject, or by which it, or its property, is bound, or conflict with
or constitute a default thereunder, or result in the creation or imposition of
any Lien (other than Liens permitted by, and created under, the Loan Documents)
in, of or on the property of the Borrower or any Subsidiary pursuant to the
terms of any such indenture, instrument or agreement, or (c) require any consent
of the stockholders of any Person, except for approvals or consents which will
be obtained on or before the Restatement Date and are disclosed on Schedule 5.3.
5.4 Governmental Consents. No order, consent, approval, qualification,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, or other action in respect of, any court, governmental or
public body or authority, or any subdivision thereof, any securities exchange or
other Person is or at the relevant time was required to authorize, or is or at
the relevant time was required in connection with the execution, delivery,
consummation or performance of, or the legality, validity, binding effect or
enforceability of, any of the Loan Documents the application of the proceeds of
the Loans or the Facility Letters of Credit or any other transaction
contemplated in the Loan Documents. Neither the Borrower nor any Subsidiary is
in default under or in violation of any foreign, federal, state or local law,
rule, regulation, order, writ, judgment, injunction, decree or award binding
upon or applicable to the Borrower or such
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Subsidiary, in each case the consequences of which default or violation could
reasonably be expected to have a Material Adverse Effect.
5.5 Financial Statements. The Borrower has heretofore furnished to each of
the Lenders (a) the January 4, 1998 audited consolidated financial statements of
the Borrower and its Subsidiaries, and (b) the unaudited consolidated financial
statements of the Borrower and its Subsidiaries through October 11, 1998
(collectively, the "Financial Statements"). Each of the Financial Statements was
prepared in accordance with Agreement Accounting Principles and fairly presents
the consolidated financial condition and operations of the Borrower and its
Subsidiaries at such dates and the consolidated results of their operations for
the respective periods then ended (except, in the case of such unaudited
statements, for normal year-end audit adjustments).
5.6 Material Adverse Change. No material adverse change in the business,
Property, condition (financial or otherwise), performance, prospects or results
of operations of the Borrower and its Subsidiaries taken as a whole has occurred
since January 4, 1998.
5.7 Taxes. The Borrower and its Subsidiaries have filed or caused to be
filed on a timely basis and in correct form all United States federal and
applicable foreign, state and local tax returns and all other tax returns which
are required to be filed and have paid all taxes due pursuant to said returns or
pursuant to any assessment received by the Borrower or any Subsidiary, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles and as to which no Lien exists. No tax liens have been filed and no
claims are being asserted with respect to any such taxes which could reasonably
be expected to have a Material Adverse Effect. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of any
taxes or other governmental charges are in accordance with Agreement Accounting
Principles.
5.8 Litigation and Contingent Obligations. There is no litigation,
arbitration, proceeding, inquiry or governmental investigation (including,
without limitation, by the Federal Trade Commission) pending or, to the
knowledge of any of their officers, threatened against or affecting the Borrower
or any Subsidiary or any of their respective Properties which could reasonably
be expected to have a Material Adverse Effect or to prevent, enjoin or unduly
delay the making of the Loans, or the issuance of Facility Letters of Credit
under this Agreement. Neither the Borrower nor any Subsidiary has any material
contingent obligations except as set forth on Schedule 5.8.
5.9 Capitalization. Schedule 5.9 hereto contains an accurate description of
the Borrower's capitalization as of the Restatement Date after giving effect to
the Closing Transactions. The Borrower is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock. As of the Restatement Date the Borrower has no
Subsidiaries and, except as set forth on Schedule 5.9, does not own or hold,
directly or indirectly, any capital stock or equity security of, or any equity
or partnership interest in any Person.
5.10 ERISA. Except as disclosed on Schedule 5.10, neither the Borrower nor
any other member of the Controlled Group maintains any Single Employer Plans,
and no Single Employer Plan
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has any Unfunded Liability. Neither the Borrower nor any other member of the
Controlled Group maintains, or is obligated to contribute to, any Multiemployer
Plan or has incurred, or is reasonably expected to incur, any withdrawal
liability to any Multiemployer Plan. Each Plan complies in all material respects
with all applicable requirements of law and regulations. Neither the Borrower
nor any member of the Controlled Group has, with respect to any Plan, failed to
make any contribution or pay any amount required under Section 412 of the Code
or Section 302 of ERISA or the terms of such Plan. There are no pending or, to
the knowledge of the Borrower, threatened claims, actions, investigations or
lawsuits against any Plan, any fiduciary thereof, or the Borrower or any member
of the Controlled Group with respect to a Plan which could reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any member
of the Controlled Group has engaged in any prohibited transaction (as defined in
Section 4975 of the Code or Section 406 of ERISA) in connection with any Plan
which would subject such Person to any material liability. Within the last five
years neither the Borrower nor any member of the Controlled Group has engaged in
a transaction which resulted in a Single Employer Plan with an Unfunded
Liability being transferred out of the Controlled Group. No Termination Event
has occurred or is reasonably expected to occur with respect to any Plan which
is subject to Title IV of ERISA.
5.11 Defaults. No Default or Unmatured Default has occurred and is
continuing.
5.12 Federal Reserve Regulations. Neither the Borrower nor any Subsidiary
is engaged, directly or indirectly, principally, or as one of its important
activities, in the business of extending, or arranging for the extension of,
credit for the purpose of purchasing or carrying Margin Stock. No part of the
proceeds of any Loan will be used in a manner which would violate, or result in
a violation of, Regulation T, Regulation U or Regulation X. Neither the making
of any Advance or issuance of any Facility Letters of Credit hereunder, the use
of the proceeds thereof will violate or be inconsistent with the provisions of
Regulation T, Regulation U or Regulation X. Following the application of the
proceeds of the Loans, less than 25% of the value (as determined by any
reasonable method) of the assets of the Borrower and its Subsidiaries which are
subject to any limitation on sale, pledge, or other restriction hereunder taken
as a whole have been, and will continue to be, represented by Margin Stock.
5.13 Investment Company; Public Utility Holding Company. Neither the
Borrower nor any Subsidiary is, or after giving effect to any Advance will be,
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under the Public Utility Holding Company
Act of 1935, as amended.
5.14 Certain Fees. No broker's or finder's fee or commission was, is or
will be payable by the Borrower with respect to any of the transactions
contemplated by this Agreement. The Borrower hereby agrees to indemnify the
Agent and the Lenders against and agrees that it will hold each of them harmless
from any claim, demand or liability for broker's or finder's fees or commissions
alleged to have been incurred by the Borrower in connection with any of the
transactions contemplated by this Agreement and any expenses (including, without
limitation, attorneys' fees and time charges of attorneys for the Agent or any
Lender, which attorneys may be
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employees of the Agent or any Lender) arising in connection with any such claim,
demand or liability.
5.15 Solvency. As of the Restatement Date, after giving effect to the
consummation of the Closing Transactions and the payment of all fees, costs and
expenses payable by the Borrower with respect to thereto, the Borrower is
Solvent.
5.16 Ownership of Properties. Except as set forth on Schedule 5.16 hereto,
the Borrower and its Subsidiaries have a subsisting leasehold interest in, or
good and marketable title, free of all Liens, other than those permitted by
Section 6.18 or by any of the other Loan Documents, to all of the properties and
assets reflected in the Financial Statements as being owned by it, except for
assets sold, transferred or otherwise disposed of in the ordinary course of
business since the Restatement Date. Schedule 5.16 hereto contains a true,
complete and accurate list of all real property owned or leased by the Borrower
on the Restatement Date and indicates whether such property is owned or leased.
To the knowledge of the Borrower, there are no actual, threatened or alleged
defaults with respect to any leases of real property under which the Borrower or
any Subsidiary is lessee or lessor which could reasonably be expected to have a
Material Adverse Effect. The Borrower and its Subsidiaries own or possess rights
to use all licenses, patents, patent applications, copyrights, service marks,
trademarks and trade names necessary to continue to conduct their business as
heretofore conducted, and no such license, patent or trademark has been declared
invalid, been limited by order of any court or by agreement or is the subject of
any infringement, interference or similar proceeding or challenge, except for
proceedings and challenges which could not reasonably be expected to have a
Material Adverse Effect.
5.17 Security. The provisions of the Security Documents are effective to
create and give the Agent, for the benefit of the Lenders, as security for the
repayment of the obligations secured thereby, a legal, valid, perfected and
enforceable Lien (which priority is subject only to prior Liens permitted by
such agreements) upon all right, title and interest of the Borrower in any and
all of the Collateral described therein.
5.18 Indebtedness. Attached hereto as Schedule 5.18 is a complete and
correct list of all Indebtedness of the Borrower outstanding on the Restatement
Date (other than Indebtedness in a principal amount not exceeding $100,000 for a
single item of Indebtedness and $500,000 in the aggregate for all such
Indebtedness listed), showing the aggregate principal amount which was
outstanding on such date after giving effect to the Closing Transactions.
5.19 Employee Controversies. There are no strikes, work stoppages or
controversies pending or threatened between the Borrower or any Subsidiary and
any of its employees, other than employee grievances arising in the ordinary
course of business, which, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
5.20 Material Agreements. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect or which restricts or imposes conditions
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upon the ability of any Subsidiary to (a) pay dividends or make other
distributions on its capital stock, (b) make loans or advances to the Borrower,
(c) repay loans or advances from the Borrower or (d) grant Liens to the Agent to
secure the Obligations. Neither the Borrower nor any Subsidiary is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect.
5.21 Environmental Laws. Except as disclosed on Schedule 5.21, there are no
claims, investigations, litigation, administrative proceedings, notices,
requests for information (each a "Proceeding") known to the Borrower, whether
pending or threatened, or judgments or orders asserting violations of applicable
federal, state and local environmental, health and safety statutes, regulations,
ordinances, codes, rules, orders, decrees, directives and standards
("Environmental Laws") or relating to any toxic or hazardous waste, substance or
chemical or any pollutant, contaminant, chemical or other substance defined or
regulated pursuant to any Environmental Law, including, without limitation,
asbestos, petroleum, crude oil or any fraction thereof ("Hazardous Materials")
asserted against the Borrower or any of its Subsidiaries which, in any case,
could reasonably be expected to have a Material Adverse Effect. As of the
Restatement Date, there are no Proceedings pending, or to the Borrower's
knowledge threatened, except as disclosed on Schedule 5.21. Neither the Borrower
nor any Subsidiary has caused or permitted any Hazardous Materials to be
released, either on or under real property, currently or formerly, legally or
beneficially owned or operated by the Borrower or any Subsidiary or on or under
real property to which the Borrower or any of its Subsidiaries transported,
arranged for the transport or disposal of, or disposed of Hazardous Materials,
which release could reasonably be expected to have a Material Adverse Effect. To
the knowledge of the Borrower, no real property currently or formerly owned or
operated by the Borrower or any Subsidiary has ever been used as a dump or
disposal site or as a treatment or storage site for Hazardous Materials. The
Borrower and each of its Subsidiaries have obtained and are in compliance in all
material respects with all material permits, certificates, licenses, approvals
and other authorizations ("Environmental Permits") required for the operation of
their business and have filed all required notifications or reports relating to
chemical substances, air emissions, effluent discharges and the storage,
treatment, transport and disposal of Hazardous Materials. To the knowledge of
the Borrower, no asbestos containing materials, polychlorinated biphenyls or
underground storage tanks are or have been located in, on or under real property
owned or operated by the Borrower or any of its Subsidiaries. As of the
Restatement Date, the Borrower and its Subsidiaries do not have liabilities
exceeding $100,000 in the aggregate for all of them with respect to compliance
with applicable Environmental Laws and Environmental Permits or related to the
generation, treatment, storage, disposal, release, investigation or cleanup of
Hazardous Materials, and to the Borrower's knowledge, no facts or circumstances
exist which could give rise to such liabilities with respect to compliance with
applicable Environmental Laws and Environmental Permits and the generation,
treatment, storage, disposal, release, investigation or cleanup of Hazardous
Materials. The operation and production of the Borrower and its Subsidiaries to
the Borrower's knowledge will not be materially impacted or affected by the
compliance by any such Person with existing applicable Environmental Laws and
Environmental Permits or related to the generation, treatment, storage,
disposal, release, investigation or cleanup of Hazardous Materials.
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5.22 Insurance. Schedule 5.22 completely and accurately summarizes the
property and casualty insurance in existence and carried by the Borrower and its
Subsidiaries, and such insurance is adequate to protect the Borrower and its
Subsidiaries. The summary on Schedule 5.22 includes the insurer's or insurers'
name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of
coverage, exclusion(s), and deductibles. This summary also includes similar
information, and describes any reserves, relating to any self-insurance program
that is in effect.
5.23 Year 2000. The Borrower has made a full and complete assessment of the
Year 2000 Issues and has a realistic and achievable program for remediating the
Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such
assessment and on the Year 2000 Program, the Borrower does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.
5.24 Subordinated Indebtedness. The Obligations constitute senior
indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Indebtedness including, without limitation, the
Senior Subordinated Notes.
5.25 Disclosure. None of the (a) information, exhibits or reports furnished
or to be furnished by the Borrower or any Subsidiary in writing to the Agent or
to any Lender in connection with the negotiation of the Loan Documents, or (b)
representations or warranties of the Borrower or any Subsidiary contained in
this Agreement, the other Loan Documents or any other document, certificate or
written statement furnished to the Agent or the Lenders by or on behalf of the
Borrower or any Subsidiary for use in connection with the transactions
contemplated by this Agreement, when taken as a whole, contained, contains or
will contain any untrue statement of a material fact or omitted, omits or will
omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made. The pro forma financial information contained in such
materials is based upon good faith estimates and assumptions believed by the
Borrower to be reasonable at the time made. There is no fact known to the
Borrower (other than matters of a general economic nature) that has had or could
reasonably be expected to have a Material Adverse Effect and that has not been
disclosed herein or in such other documents, certificates and statements
furnished to the Lenders for use in connection with the transactions
contemplated by this Agreement.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1 Financial Reporting. The Borrower will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, consistently applied, and will
furnish to the Lenders:
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(a) As soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, the annual audit report of the Borrower,
consisting of at least statements of operations and retained earnings, cash
flows, and a balance sheet as at the end of such year, setting forth in each
case in comparative form corresponding figures from the previous annual audit,
certified without qualification by independent certified public accountants of
recognized standing selected by the Borrower and acceptable to the Lenders,
together with any management letters, management reports or other supplementary
comments or reports to the Borrower or its board of directors furnished by such
accountants.
(b) As soon as available and in any event within 30 days after the end of
each Accounting Period of each fiscal year, a copy of the unaudited financial
statement of the Borrower prepared in a manner consistent with the form of
current period statements being prepared by the Borrower as of the Restatement
Date, signed by the Borrower's chief financial officer, consisting of at least
statements of operations and retained earnings and cash flows for the Borrower
for such Accounting Period and for the period from the beginning of such fiscal
year to the end of such Accounting Period, and a balance sheet of the Borrower
as at the end of such Accounting Period.
(c) Together with the financial statements required under Section 6.1(b)
for each Accounting Period ending on a Quarterly Measurement Date, a compliance
certificate in the form of Exhibit B attached hereto (a "Compliance
Certificate"), signed by the chief financial officer of the Borrower stating
that as of the last date of each such period there did not exist any Default or
Unmatured Default or, if such Default or Unmatured Default existed, specifying
the nature and period of existence thereof and what action the Borrower proposes
to take with respect thereto and demonstrating in reasonable detail compliance
(or noncompliance, as the case may be) with each of the financial covenants
contained in Section 6.27.
(d) Immediately upon becoming aware of any Default or Unmatured Default, a
notice describing the nature thereof and what action the Borrower proposes to
take with respect thereto.
(e) Immediately upon becoming aware of the occurrence, with respect to any
Plan, of any Reportable Event or any "prohibited transaction" (as defined in
Section 4975 of the Code), a notice specifying the nature thereof and what
action the Borrower proposes to take with respect thereto, and, when received,
copies of any notice from PBGC of intention to terminate or have a trustee
appointed for any Plan.
(f) Immediately upon becoming aware of the occurrence thereof, notice of
the institution of any litigation, arbitration or governmental proceeding
against the Borrower or any of its property which, if determined adversely to
the Borrower, would constitute an Adverse Event, or the rendering of a judgment
or decision in such litigation or proceeding which constitutes an Adverse Event,
and the steps being taken by the Borrower with respect thereto.
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(g) Immediately upon becoming aware of the occurrence thereof, notice of
any violation as to any environmental matter by the Borrower and of the
commencement of any judicial or administrative proceeding relating to health,
safety or environmental matters: (i) in which an adverse determination or result
could result in the revocation of or have a Material Adverse Effect on any
operating permits, air emission permits, water discharge permits, hazardous
waste permits or other permits held by the Borrower which are material to the
operations of the Borrower; or (ii) which will or could reasonably be expected
to have a Material Adverse Effect.
(h) By not later than January 31 of each year, projections for the
Borrower's then current fiscal year consisting of monthly balance sheets and
monthly and year-to-date income statements together with the assumptions
underlying such projections certified by the Borrower's chief financial officer
or treasurer as being the most probable course of the Borrower's business based
on such assumptions.
(i) Within 10 days after the filing thereof, a copy of the Borrower's "U.S.
Income Tax Return for an S Corporation" and related Schedules K-1 for the
immediately preceding calendar year.
(j) Together with the financial statements required under Section 6.1(a)
for each fiscal year of Borrower, a compliance certificate (the "ADP Compliance
Certificate") signed by the chief financial officer of the Borrower
demonstrating in reasonable detail compliance (or noncompliance, as the case may
be) with the Cash Flow Leverage Ratio covenant contained in Section 6.27.1.
(k) From time to time, such other information regarding the business,
operation and financial condition of the Borrower as the Agent may reasonably
request.
6.2 Use of Proceeds. The Borrower will use the proceeds of the Advances to
meet the working capital and general corporate needs of the Borrower and its
Subsidiaries. The Borrower will not, nor will it permit any Subsidiary to, use
any of the proceeds of the Advances or any Facility Letters of Credit to (a)
purchase or carry any "Margin Stock" or (b) to finance the Purchase of any
Person which has not been approved and recommended by the Board of Directors (or
functional equivalent thereof) of such Person.
6.3 Notice of Default. The Borrower will give prompt notice in writing to
the Lenders of the occurrence of (a) any Default or Unmatured Default and (b) of
any other event or development, financial or other (including, without
limitation, developments with respect to Year 2000 Issues), relating
specifically to the Borrower or any of its Subsidiaries (and not of a general
economic or political nature) which could reasonably be expected to have a
Material Adverse Effect.
6.4 Conduct of Business. The Borrower will, and will cause each Subsidiary
to, carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted and to
do all things necessary to remain duly incorporated, validly existing and in
good standing as a domestic corporation in its jurisdiction of incorporation
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and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
6.5 Taxes. The Borrower will, and will cause each Subsidiary to, timely
file complete and correct United States federal and applicable foreign, state
and local tax returns required by applicable law and pay when due all taxes,
assessments and governmental charges and levies upon it or its income, profits
or Property, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside.
6.6 Insurance. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business practice, and the Borrower will furnish to the Agent and any
Lender upon request full information as to the insurance carried.
6.7 Compliance with Laws. The Borrower will, and will cause each Subsidiary
to, comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject, the failure to comply
with which could reasonably be expected to have a Material Adverse Effect.
6.8 Maintenance of Properties. The Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times.
6.9 Inspection. Upon reasonable notice, the Borrower will, and will cause
each Subsidiary to, permit the Agent and the Lenders, by their respective
representatives and agents, to inspect any of the Inventory or other Property,
corporate books and financial records of the Borrower and each Subsidiary, to
examine and make copies of the books of accounts and other financial records of
the Borrower and each Subsidiary, and to discuss the affairs, finances and
accounts of the Borrower and each Subsidiary with, and to be advised as to the
same by, their respective officers at such reasonable times and intervals as the
Lenders may designate. The Borrower will keep or cause to be kept, and cause
each Subsidiary to keep or cause to be kept, appropriate records and books of
account in which complete entries are to be made reflecting its and their
business and financial transactions, such entries to be made in accordance with
Agreement Accounting Principles consistently applied.
6.10 Capital Stock and Dividends. The Borrower will not, nor will it permit
any Subsidiary to, (a) issue any preferred stock, other capital stock (other
than common stock) or any equity securities of any Subsidiary of any kind, or
(b) declare or pay any dividends or make any distributions on its capital stock
(other than dividends payable in its own capital stock) or redeem, repurchase or
otherwise acquire or retire any of its capital stock or any options or other
rights in respect thereof at any time outstanding, except that (i) any
Subsidiary may declare and pay dividends or make distributions to the Borrower
or to a Wholly-Owned Subsidiary of the Borrower, (ii) so long as no Default
under Section 7.2 or Unmatured Default under Section 7.2 is pending before or
after
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giving effect to the declaration or payment of such dividends or repurchase or
redemption of such stock, the Borrower may make Tax Distributions up to the
maximum amount permitted by the definition of Tax Distributions, (iii) so long
as no Default or Unmatured Default is pending before or after giving effect to
the declaration or payment of such dividends or repurchase or redemption of such
stock, the Borrower may declare and pay dividends to its shareholders or redeem
or repurchase its stock in an amount not in excess of the Dividend Availability
Amount at the time of such declaration or payment, and (iv) on the Restatement
Date the Borrower may pay dividends aggregating up to $15,000,000. Tax
Distributions may be paid in estimated quarterly installments contemporaneously
with the Borrower's shareholders' obligations to pay estimated income taxes
based upon the Borrower's income through the end of its fiscal quarter
immediately preceding such tax installment's due date and also contemporaneously
with any such shareholder's filing of his or her federal and state income tax
returns if the estimated Tax Distributions paid for any of the Borrower's fiscal
years are not sufficient to pay such shareholder's actual income tax liability
arising from such shareholder's share of the Borrower's income for such fiscal
year as disclosed by copies of the Borrower's tax returns and related Schedules
K-1 for such fiscal year delivered to the Lenders pursuant to this Agreement;
provided, however, that if the Tax Distributions actually paid with respect to
any of the Borrower's fiscal years exceed the Tax Distributions permitted by
this Section based upon the Borrower's actual taxable net income as disclosed by
copies of such tax returns and schedules described above, then the Borrower
shall either (x) reduce by such excess amount the amount of the immediately
following Tax Distributions in the order of their payment dates so long as (i)
no Unmatured Default under Section 7.2 has occurred prior to the Tax
Distribution to be reduced, and (ii) the Facility Termination Date will not
occur prior to the Tax Distribution to be reduced, or (y) immediately recover
the excess amount from the recipient and not pay any further Tax Distribution to
any person until such excess amount is recovered if any of the events described
in clause (x)(i) or (ii) is applicable.
6.11 Indebtedness. The Borrower will not, nor will it permit any Subsidiary
to, create, incur or suffer to exist any Indebtedness, except:
(a) the Loans;
(b) Indebtedness existing on the Restatement Date and described in Schedule
5.18 hereto;
(c) Rate Hedging Obligations in respect of Rate Swap Agreements with
notional amounts not to exceed $5,000,000 in the aggregate;
(d) purchase money or other Indebtedness of up to $5,000,000 in aggregate
outstanding principal amount incurred by the Borrower in connection with Capital
Expenditures permitted under this Agreement;
(e) the Indebtedness evidenced by the Senior Subordinated Notes; and
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(f) other Indebtedness at no time exceeding $1,000,000 in the aggregate
principal amount.
6.12 Merger. The Borrower will not, nor will it permit any Subsidiary to,
merge or consolidate with or into any other Person, except that (a) a Wholly-
Owned Subsidiary may merge into the Borrower or any Wholly-Owned Subsidiary of
the Borrower, (b) the Borrower or any Subsidiary may merge or consolidate with
any other Person so long as the Borrower or such Subsidiary is the continuing or
surviving corporation and, prior to and after giving effect to such merger or
consolidation, no Default or Unmatured Default shall exist and be continuing,
and (c) any Subsidiary may enter into a merger or consolidation as a means of
effecting a disposition permitted by Section 6.13.
6.13 Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary to, lease, sell, transfer or otherwise dispose of its Property, to
any other Person except for (a) sales of inventory in the ordinary course of
business, (b) disposition of obsolete or unusable equipment, (c) disposition of
Collateral as permitted under the Security Documents, and (d) leases, sales,
transfers or other dispositions of its Property (other than Collateral) that,
together with all other Property of the Borrower and its Subsidiaries previously
leased, sold or disposed of (other than inventory sold in the ordinary course of
business) as permitted by this Section 6.13 since the Restatement Date, do not
constitute a Substantial Portion of the Property of the Borrower and its
Subsidiaries.
6.14 Sale of Accounts. The Borrower will not, nor will it permit any
Subsidiary to, sell or otherwise dispose of any Accounts or notes receivable,
with or without recourse.
6.15 Sale and Leaseback. The Borrower will not, nor will it permit any
Subsidiary to, sell or transfer any of its Property in order to concurrently or
subsequently lease as lessee such or similar Property.
6.16 Investments and Purchases. The Borrower will not, nor will it permit
any Subsidiary to, make or suffer to exist any Investments (including, without
limitation, loans and advances to, and other Investments in, Subsidiaries), or
commitments therefor, or to create any Subsidiary or to become or remain a
partner in any partnership or joint venture, or to make any Purchases, except:
(a) Short-term obligations of, or fully guaranteed by, the United States of
America;
(b) Commercial paper rated A-l or better by Standard and Poor's Corporation
or P-l or better by Moody's Investors Service, Inc.;
(c) Demand deposit accounts maintained in the ordinary course of business;
(d) Certificates of deposit issued by and time deposits with commercial
banks (whether domestic or foreign) having capital and surplus in excess of
$100,000,000;
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(e) Existing Investments in Subsidiaries and other Investments in existence
on the Restatement Date and described in Schedule 6.16 hereto;
(f) Shares of stock or other securities received in settlement of claims
arising in the ordinary course of business;
(g) Shareholder Loans existing on the date hereof and other Shareholder
Loans which, together with the amount of dividends permitted under Section
6.10(iii) hereof shall not exceed the amount of dividends permitted under
Section 6.10(iii);
(h) Other Investments up to an aggregate amount not in excess of $250,000;
(i) Other Purchases up to an aggregate amount not to exceed $1,500,000; and
(j) Purchases other than those referred to in clause (i) above up to an
aggregate amount not to exceed $3,500,000; provided, however, that at least 5
Business Days before any such Purchase, the Borrower shall submit to the Agent
satisfactory evidence of pro forma compliance (after giving effect to such
Purchase) with Section 6.27 hereof for the four most recently ended fiscal
quarters of the Borrower.
6.17 Contingent Obligations. The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Contingent Obligation (including,
without limitation, any Contingent Obligation with respect to the obligations of
a Subsidiary), except for (a) Contingent Obligations in respect of Facility
Letters of Credit, (b) Contingent Obligations of Subsidiaries in respect of the
Senior Subordinated Notes and (c) Contingent Obligations of Subsidiaries under
Section 6.30 in respect of the Obligations.
6.18 Liens. The Borrower will not, nor will it permit any Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the Property of the
Borrower or any of its Subsidiaries, except:
(a) Liens for taxes, assessments or governmental charges or levies on its
Property if the same shall not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted principles of accounting shall have been set aside on its books;
(b) Liens imposed by law, such as carriers', warehousemen's and mechanics'
liens and other similar liens arising in the ordinary course of business which
secure the payment of obligations not more than 60 days past due or which are
being contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books;
(c) Liens arising out of pledges or deposits under worker's compensation
laws, unemployment insurance, old age pensions, or other social security or
retirement benefits, or similar legislation;
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(d) Utility easements, building restrictions and such other encumbrances or
charges against real property as are of a nature generally existing with respect
to properties of a similar character and which do not in any material way affect
the marketability of the same or materially interfere with the use thereof in
the business of the Borrower or the Subsidiaries;
(e) Liens existing on the Restatement Date and described in Schedule 6.18
hereto;
(f) Liens in favor of the Agent or the Lenders granted pursuant to any
Security Documents;
(g) Liens incurred or deposits or pledges made or given in connection with,
or to secure payment of indemnity, performance or other similar bonds in the
ordinary course of business;
(h) Purchase money Liens and Liens created in connection with Capitalized
Lease Obligations which are incurred in the ordinary course of business secure
Indebtedness incurred in connection with permitted Capital Expenditures;
provided, that (i) any such Lien attaches to such property concurrently with or
within 20 days after the acquisition thereof, (ii) such Lien attaches solely to
the property so acquired in such transaction and (iii) the principal amount of
the Indebtedness secured by any and all such purchase money security interests
shall not at any time exceed $5,000,000; and
(i) Other Liens securing aggregate principal Indebtedness at no time
exceeding $250,000.
6.19 Capital Expenditures. The Borrower will not, nor will it permit any
Subsidiary to, expend, or be committed to expend for, Capital Expenditures
(including, without limitation, for the acquisition of fixed assets) on a non-
cumulative basis in the aggregate for the Borrower and its Subsidiaries more
than (a) $10,000,000 in the Borrower's fiscal year 1999 (excluding Capital
Expenditures made by the Borrower in connection with the Borrower's buyback of
that certain Lease Agreement (Equipment), dated as of August 4, 1994, between
FBS Business Finance Corporation, as lessor, and the Borrower, as lessee), or
(b) $12,000,000 in any fiscal year of the Borrower occurring after fiscal year
1999.
6.20 Lease Rentals. The Borrower will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist obligations for Rentals
(exclusive of any obligations for Rentals in existence on the date hereof and
extensions and renewals thereof) in excess of $1,000,000 payable during any one
of the Borrower's fiscal years on a non-cumulative basis in the aggregate for
the Borrower and its Subsidiaries.
6.21 Affiliates. The Borrower will not, and will not permit any Subsidiary
to, enter into any transaction (including, without limitation, the purchase or
sale of any Property or service) with, or make any payment or transfer to, any
Affiliate except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and upon
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fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than the Borrower or such Subsidiary would obtain in a comparable arms-length
transaction.
6.22 Subordinated Indebtedness; Other Indebtedness. The Borrower will not,
and will not permit any Subsidiary to, make any amendment or modification to the
indenture, note or other agreement evidencing or governing any Subordinated
Indebtedness (including, without limitation, the Senior Subordinated Debt
Documents), or directly or indirectly voluntarily prepay, defease or in
substance defease, purchase, redeem, retire or otherwise acquire, any
Subordinated Indebtedness (including, without limitation, the Senior
Subordinated Notes). The Borrower will not, and will not permit any Subsidiary
to, directly or indirectly voluntarily prepay, defease or in substance defease,
purchase, redeem, retire or otherwise acquire, any Indebtedness prior to the
date when due (other than the Loans) while a Default or Unmatured Default has
occurred and is continuing.
6.23 Year 2000. The Borrower will take and will cause each of its
Subsidiaries to take all such actions as are reasonably necessary to
successfully implement the Year 2000 Program and to assure that Year 2000 Issues
will not have a Material Adverse Effect. At the reasonable request of the Agent
or any Lender, the Borrower will provide a description of the Year 2000 Program,
together with any updates or progress reports with respect thereto.
6.24 Environmental Matters. The Borrower shall and shall cause each of its
Subsidiaries to (a) at all times comply in all material respects with all
applicable Environmental Laws and (b) promptly take any and all necessary
remedial actions in response to the presence, storage, use, disposal,
transportation or Release of any Hazardous Materials on, under or about any real
property owned, leased or operated by the Borrower or any of its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect. In the
event that the Borrower or any Subsidiary undertakes any remedial action with
respect to any Hazardous Material on, under or about any real property, the
Borrower or such Subsidiary shall conduct and complete such remedial action in
compliance with all applicable Environmental Laws and in accordance with the
policies, orders and directives of all federal, state and local governmental
authorities, except when the Borrower's or such Subsidiary's liability for such
presence, storage, use, disposal, transportation or Release of any Hazardous
Material is being contested in good faith by the Borrower or such Subsidiary and
appropriate reserves therefor have been established. If the Agent or any Lender
at any time has a reasonable basis to believe that there may be a material
violation of any Environmental Law by the Borrower or any of its Subsidiaries,
or any material liability arising thereunder or related to a Release of
Hazardous Materials on any real property owned, leased or operated by the
Borrower or any of its Subsidiaries or a Release on real property adjacent to
such real property, then the Borrower shall, upon the request of the Agent or
such Lender, provide the Agent and each Lender with all such reports,
certificates, engineering studies and other written material or data relating
thereto as the Agent or any Lender may reasonably require.
6.25 Change in Corporate Structure; Fiscal Year. The Borrower shall not,
nor shall it permit any Subsidiary to, (a) permit any amendment or modification
to be made to its certificate or articles of incorporation or by-laws which is
materially adverse to the interests of the Lenders
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(provided that the Borrower shall notify the Agent of any other amendment or
modification thereto as soon as practicable thereafter) or (b) change its fiscal
year.
6.26 Inconsistent Agreements. The Borrower shall not, nor shall it permit
any Subsidiary to, enter into any indenture, agreement, instrument or other
arrangement which (a) directly or indirectly prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence of the Obligations, the granting of Liens to secure the
Obligations, the amending of the Loan Documents or the ability of any Subsidiary
to (i) pay dividends or make other distributions on its capital stock, (ii) make
loans or advances to the Borrower or (iii) repay loans or advances from the
Borrower or (b) contains any provision which would be violated or breached by
the making of Advances, by the issuance of Facility Letters of Credit or by the
performance by the Borrower or any Subsidiary of any of its obligations under
any Loan Document.
6.27 Financial Covenants. The Borrower shall not permit:
6.27.1 Cash Flow Leverage Ratio. As of any Quarterly Measurement Date,
the Cash Flow Leverage Ratio to be greater than the ratio specified in the
following table for any Quarterly Measurement Date occurring in the
specified period:
Period Ratio
------ -------
Beginning of first fiscal quarter of fiscal year 1999 4.75:1
through third Quarterly Measurement Date of fiscal
year 2000
Beginning of fourth fiscal quarter of fiscal year 2000 4.25:1
and all times thereafter
6.27.2 Interest Coverage Ratio. As of any Quarterly Measurement Date,
the Interest Coverage Ratio to be less than the ratio specified in the
following table for any Quarterly Measurement Date occurring in the
specified period:
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Period Ratio
------ -------
Beginning of first fiscal quarter of fiscal year 1999 1.50:1
through second Quarterly Measurement Date of fiscal
year 1999
Third fiscal quarter of fiscal year 1999 1.25:1
Fourth fiscal quarter of fiscal year 1999 1.00:1
First fiscal quarter of fiscal year 2000 1.50:1
Second fiscal quarter of fiscal year 2000 2.00:1
Third fiscal quarter of fiscal year 2000 2.25:1
Beginning of fourth fiscal quarter of fiscal year 2000 2.50:1
and all times thereafter
6.27.3 Fixed Charge Coverage Ratio. As of any Quarterly Measurement
Date, the Fixed Charge Coverage Ratio to be less than the ratio specified
in the following table for any Quarterly Measurement Date occurring in the
specified period:
Period Ratio
------ -------
Beginning of fiscal year 1999 through fourth 1.25:1
Quarterly Measurement Date of fiscal year 1999
Beginning of fiscal year 2000 and all times thereafter 1.50:1
6.28 ERISA Compliance.
With respect to any Plan, neither the Borrower nor any Subsidiary shall:
(a) engage in any "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) for which a civil penalty
pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the
Code in excess of $100,000 could be imposed;
(b) incur any "accumulated funding deficiency" (as such term is defined in
Section 302 of ERISA) in excess of $100,000, whether or not waived, or permit
any Unfunded Liability to exceed $100,000;
(c) permit the occurrence of any Termination Event which could result in a
liability to the Borrower or any other member of the Controlled Group in excess
of $100,000;
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(d) be an "employer" (as such term is defined in Section 3(5) of ERISA)
required to contribute to any Multiemployer Plan or a "substantial employer" (as
such term in defined in Section 4001(a)(2) of ERISA) required to contribute to
any Multiple Employer Plan; or
(e) permit the establishment or amendment of any Plan or fail to comply
with the applicable provisions of ERISA and the Code with respect to any Plan
which could result in liability to the Borrower or any other member of the
Controlled Group which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
6.29 Other Matters. Within sixty days after the date requested by the
Agent, the Borrower shall provide the Agent with such landlord waivers and
consents with respect to the Borrower's leased facilities (excluding public
warehouses) as the Agent may reasonably request; provided that such period shall
be extended with respect to the Borrower's "Plant A" in Jackson, Ohio as the
Borrower may reasonably request.
6.30 Subsidiary Guaranties and Personal Property Pledges. Effective upon
any Person becoming a Subsidiary, the Borrower shall cause such Person to (i)
execute and deliver to the Agent for the benefit of the Lenders a guaranty of
the Obligations and (ii) pledge to the Agent for the benefit of the Lenders a
first priority security interest in all personal property owned by such Person,
all pursuant to documentation (including related certificates, opinions and
financing statements) reasonably acceptable to the Agent; provided, that a
foreign Subsidiary shall be required to provide the foregoing guaranty and
pledge to the maximum amount which does not have adverse tax consequences upon
the Borrower and is legally permissible. The Borrower shall promptly notify the
Agent at any time at which a Person becomes a Subsidiary.
6.31 Subsidiary Stock Pledge. Effective upon any Person becoming a
Subsidiary, the Borrower shall pledge, or shall cause to be pledged, all of the
stock or other equity interests thereof owned by the Borrower or any Subsidiary
to the Agent for the benefit of the Lenders pursuant to documentation (including
related certificates, opinions and financing statements) reasonably acceptable
to the Agent; provided, that a foreign Subsidiary shall be required to provide
the foregoing pledge to the maximum amount which does not have adverse tax
consequences upon the Borrower and is legally permissible. The Borrower shall
promptly notify the Agent at any time at which a Person becomes a Subsidiary.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
7.1 Any representation or warranty made or deemed made pursuant to Section
4.2 by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or
the Agent under or in connection with this Agreement, any other Loan Document,
any Loan, any Facility Letter of Credit
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or any certificate or information delivered in connection with this Agreement or
any other Loan Document shall be false in any material respect on the date as of
which made or deemed made.
7.2 Nonpayment of (a) any principal of any Note or any Reimbursement
Obligation when due, or (b) any interest upon any Note or any Commitment Fee or
other fee or obligations under any of the Loan Documents within five days after
the same becomes due.
7.3 The breach by the Borrower of any of the terms or provisions of Section
6.2, Section 6.3(a) or Sections 6.10 through 6.29.
7.4 The breach by the Borrower (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within thirty (30) days after written notice
from the Agent or any Lender.
7.5 Failure of the Borrower or any of its Subsidiaries to pay any
Indebtedness aggregating in excess of $1,000,000 when due; or the default by the
Borrower or any of its Subsidiaries in the performance of any term, provision or
condition contained in any agreement or agreements under which any such
Indebtedness was created or is governed, or the occurrence of any other event or
existence of any other condition, the effect of any of which is to cause, or to
permit the holder or holders of such Indebtedness to cause, such Indebtedness to
become due prior to its stated maturity; or any such Indebtedness of the
Borrower or any of its Subsidiaries shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled payment) prior to
the stated maturity thereof; provided, however, that unless and until such
Indebtedness is accelerated, the breaches and defaults described on Schedule 7.5
hereto with respect to the Indebtedness therein described shall not constitute a
Default or Unmatured Default hereunder.
7.6 The Borrower or any of its Subsidiaries shall (a) have an order for
relief entered with respect to it under the Federal bankruptcy laws as now or
hereafter in effect, (b) make an assignment for the benefit of creditors, (c)
apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
Substantial Portion of its Property, (d) institute any proceeding seeking an
order for relief under the Federal bankruptcy laws as now or hereafter in effect
or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (e)
take any corporate action to authorize or effect any of the foregoing actions
set forth in this Section 7.6, (f) fail to contest in good faith any appointment
or proceeding described in Section 7.7 or (g) become unable to pay, not pay, or
admit in writing its inability to pay, its debts generally as they become due.
7.7 Without the application, approval or consent of the Borrower or any of
its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official
shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section 7.6(d)
shall be instituted against the Borrower or any of its Subsidiaries and
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such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of sixty (60) consecutive days.
7.8 Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a "Condemnation"),
all or any portion of the Property of the Borrower and its Subsidiaries which,
when taken together with all other Property of the Borrower and its Subsidiaries
so condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such Condemnation occurs,
constitutes a Substantial Portion.
7.9 The Borrower or any of its Subsidiaries shall fail within thirty days
to pay, bond or otherwise discharge any judgment or order for the payment of
money in excess of $1,000,000 (or multiple judgments or orders for the payment
of an aggregate amount in excess of $1,000,000), which is not stayed on appeal
or otherwise being appropriately contested in good faith and as to which no
enforcement actions have been commenced.
7.10 Any Change in Control shall occur.
7.11 The occurrence of any "default", as defined in any Loan Document
(other than this Agreement or the Notes) or the breach of any of the terms or
provisions of any Loan Document (other than this Agreement or the Notes), which
default or breach continues beyond any period of grace therein provided.
7.12 Nonpayment by the Borrower of any Rate Hedging Obligation in excess of
$1,000,000 or the breach by the Borrower of any term, provision or condition
contained in any agreement, device or arrangement giving rise to any Rate
Hedging Obligation.
7.13 Any Security Document shall for any reason fail to create a valid and
perfected, first priority security interest in any collateral purported to be
covered thereby, except as permitted by the terms of such Security Document, or
any Security Document shall fail to remain in full force or effect or any action
shall be taken (other than by the Agent or the Lenders) to discontinue or to
assert the invalidity or unenforceability of any Security Document.
7.14 Without the consent of the Lenders, the subordination provisions of
the Senior Subordinated Debt Documents are for any reason revoked or
invalidated, or otherwise cease to be in full force and effect or the
Obligations hereunder are for any reason subordinated or do not have the
priority contemplated by this Agreement or such subordination provisions.
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ARTICLE VII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1 Acceleration. If any Default described in Section 7.6 or 7.7 occurs
with respect to the Borrower, the obligations of the Lenders to make Loans or
issue Facility Letters of Credit hereunder shall automatically terminate and the
Obligations shall immediately become due and payable without any election or
action on the part of the Agent or any Lender. If any other Default occurs, the
Required Lenders (or the Agent with the consent of the Required Lenders) may by
written notice to the Borrower terminate or suspend the obligations of the
Lenders to make Loans or issue Facility Letters of Credit hereunder, or by
written notice to the Borrower declare the Obligations to be due and payable, or
both, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
the Borrower hereby expressly waives. In addition to the foregoing, following
the occurrence and during the continuance of a Default, so long as any Facility
Letter of Credit has not been fully drawn and has not been canceled or expired
by its terms, upon demand by the Agent, the Borrower shall deposit in an account
(the "Letter of Credit Cash Collateral Account") maintained with First Chicago
in the name of the Agent, for the ratable benefit of the Lenders and the Agent,
cash in an amount equal to the aggregate undrawn face amount of all outstanding
Facility Letters of Credit and all fees and other amounts due or which may
become due with respect thereto. The Borrower shall have no control over funds
in the Letter of Credit Cash Collateral Account, which funds shall be invested
by the Agent in certificates of deposit of First Chicago having a maturity not
exceeding thirty days. Such funds shall be promptly applied by the Agent to
reimburse the Issuer for drafts drawn from time to time under the Facility
Letters of Credit. Such funds, if any, remaining in the Letter of Credit Cash
Collateral Account following the payment of all Obligations in full or the
earlier cure of all Defaults shall, unless the Agent is otherwise directed by a
court of competent jurisdiction, be promptly paid over to the Borrower.
8.2 Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of each Lender:
(a) Extend the final maturity of any Loan or Note or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest or
fees thereon;
(b) Reduce the percentage specified in the definition of Required Lenders;
(c) Reduce the amount of or extend the date for the mandatory payments
required under Section 2.7, or increase the amount of the Commitment of any
Lender hereunder;
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(d) Extend the Facility Termination Date, permit any Facility Letter of
Credit to have an expiry date beyond the Facility Termination Date; or reduce
the amount or extend the time of any mandatory commitment reduction required by
Section 2.7;
(e) Amend this Section 8.2;
(f) Permit any assignment by the Borrower of its Obligations or its rights
hereunder; or
(g) Release of any material Collateral.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3.2 without obtaining the consent of any
other party to this Agreement.
8.3 Preservation of Rights. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Representations. All representations and warranties of the
Borrower contained in this Agreement or of the Borrower or any Subsidiary
contained in any Loan Document shall survive delivery of the Notes and the
making of the Loans herein contemplated; provided, that such representations and
warranties shall relate solely to the date as of which made.
9.2 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3 Taxes. Any stamp, documentary or similar taxes, assessments or charges
payable or ruled payable by any governmental authority in respect of the Loan
Documents shall be paid by the Borrower, together with interest and penalties,
if any.
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9.4 Headings. Section headings in the Loan Documents are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of the Loan Documents.
9.5 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof other than the fee letter dated
January 5, 1999 in favor of First Chicago.
9.6 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns.
9.7 Expenses; Indemnification. (a) The Borrower shall reimburse the Agent
and the Arranger for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent and the
Arranger, which attorneys may be employees of the Agent or the Arranger) paid or
incurred by the Agent or the Arranger in connection with the preparation,
negotiation, execution, delivery, review, amendment, modification or syndication
of the Loan Documents and the monitoring of the Collateral. Without limiting the
foregoing, the Borrower agrees to pay all of the Agent's costs, fees and
expenses (including, without limitation, travel expenses and the cost of any
allocated fees of internal auditors) incurred in connection with such
inspections and audits of the Collateral. The Borrower also agrees to reimburse
the Agent, the Arranger and the Lenders for any costs, internal charges and
out-of-pocket expenses (including attorneys' fees and time charges of attorneys
for the Agent, the Arranger and the Lenders, which attorneys may be employees of
the Agent, the Arranger or the Lenders) paid or incurred by the Agent, the
Arranger or any Lender in connection with the collection and enforcement of the
Loan Documents. The Borrower further agrees to indemnify the Agent, the Arranger
and each Lender, its directors, officers and employees against all losses,
claims, damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation therefor whether
or not the Agent, the Arranger or any Lender is a party thereto) which any of
them may pay or incur arising out of or relating to this Agreement, the other
Loan Documents, the transactions contemplated hereby or thereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder or the use or intended use of any Facility Letter of Credit, except to
the extent that they arise out of the gross negligence or willful misconduct of
the party seeking indemnification. The obligations of the Borrower under this
Section 9.7(a) shall survive the termination of this Agreement.
(b) The Borrower shall indemnify, pay and hold the Agent and each Lender
harmless from and against any and all losses, costs (including, without
limitation, court costs and attorneys' fees), liabilities, injuries, expenses,
claims and damages whatsoever incurred or suffered by or asserted against the
Agent or such Lender by reason of any violation of any applicable Environmental
Law for which the Borrower or any of its Subsidiaries is liable or which is
related
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to any real estate owned, leased or operated by the Borrower or any of its
Subsidiaries, or by reason of the imposition of any governmental lien for the
recovery of environmental cleanup or response costs expended by reason of any
such violation, or by reason of any breach of any representation, warranty or
affirmative or negative covenant of this Agreement, including, without
limitation, by reason of any matter disclosed in Schedule 5.21 hereto; provided,
however, that, to the extent that the Borrower or any of its Subsidiaries is
strictly liable under any such statute, order or regulation, the Borrower's
obligation to the Agent and each Lender under this indemnity shall likewise be
without regard to fault on the part of the Borrower or any of its Subsidiaries
with respect to the violation of law which results in liability to the Agent or
any Lender. The provisions of and undertakings and indemnification set out in
this Section 9.7(b) shall survive the termination of this Agreement and the
payment and satisfaction of the Obligations and shall continue to be the
liability, obligation and indemnification of the Borrower, binding upon the
Borrower.
9.8 Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.
9.9 Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles.
9.10 Severability of Provisions. Any provision in any Loan Document that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.11 Nonliability of Lenders. The relationship between the Borrower and the
Lenders and the Agent shall be solely that of borrower and lender. Neither the
Agent nor any Lender shall have any fiduciary responsibilities to the Borrower.
Neither the Agent nor any Lender undertakes any responsibility to the Borrower
to review or inform the Borrower of any matter in connection with any phase of
the Borrower's business or operations. The Borrower shall rely entirely upon its
own judgment with respect to its business, and any review, inspection or
supervision of, or information supplied to the Borrower by the Agent or the
Lenders is for the protection of the Agent and the Lenders and neither the
Borrower nor any other Person is entitled to rely thereon. The Borrower agrees
that neither the Agent nor any Lender shall have any liability with respect to,
and the Borrower hereby waives, releases and agrees not to sue for, any punitive
damages suffered by the Borrower in connection with, arising out of, or in any
way related to the Loan Documents or the transactions contemplated thereby or
the relationship established by the Loan Documents, or any act, omission or
event occurring in connection therewith.
9.12 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS, WITHOUT REGARD
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TO CONFLICT OF LAWS PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS; PROVIDED, THAT SUCH PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF
JURISDICTION MAY NOT BE OBTAINED IN A COURT IN CHICAGO, ILLINOIS.
9.14 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
9.15 Disclosure. The Borrower and each Lender hereby (a) acknowledge and
agree that First Chicago and/or its Affiliates from time to time may hold other
investments in, make other loans to or have other relationships with the
Borrower, including, without limitation, in connection with any interest rate
hedging instruments or agreements or swap transactions, and (b) waive any
liability of First Chicago or such Affiliate to the Borrower or any Lender,
respectively, arising out of or resulting from such investments, loans or
relationships other than liabilities arising out of the gross negligence or
willful misconduct of First Chicago or its Affiliates.
9.16 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Borrower, the Agent and the Lenders and each party has notified the Agent that
it has taken such action.
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9.17 Release of Stock Pledge. The Borrower, the Agent and the Lenders
hereby agree that, contemporaneously with the effectiveness of this Agreement,
the Stock Pledge Agreement (as defined in the Existing Credit Agreement) shall
be terminated and all Collateral pledged pursuant thereto shall be released by
the Agent. The Agent shall deliver such Collateral by overnight courier as
directed by JFP as soon as practicable after this Agreement becomes effective.
9.18 Effect of Amendment and Restatement upon Security Documents. The
Borrower hereby ratifies and reaffirms the terms of each Security Document
executed and delivered in connection with the Existing Credit Agreement. Upon
the effectiveness of this Agreement, each reference to the Existing Credit
Agreement in each Security Document shall mean and be a reference to the
Existing Credit Agreement as amended and restated hereby, and each reference to
the "Obligations" in each Security Document shall mean and be a reference to the
Obligations as herein defined. Except as specifically amended or waived above,
all of the terms, conditions and covenants of the Security Documents shall
remain unaltered and in full force and effect and shall be binding upon the
Borrower in all respects and are hereby ratified and confirmed.
ARTICLE X
THE AGENT
10.1 Appointment. First Chicago is hereby appointed Agent hereunder and
under each other Loan Document, and each of the Lenders authorizes the Agent to
act as the agent of such Lender. The Agent agrees to act as such upon the
express conditions contained in this Article X. The Agent shall not have a
fiduciary relationship in respect of the Borrower or any Lender by reason of
this Agreement, any Loan Document or any transaction contemplated hereby or
thereby.
10.2 Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder, except any action specifically provided
by the Loan Documents to be taken by the Agent.
10.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower or any Lender for
any action taken or omitted to be taken by it or them hereunder or under any
other Loan Document or in connection herewith or therewith except for its or
their own gross negligence or willful misconduct.
10.4 No Responsibility for Loans, Recitals, etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (a) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder, (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document; including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender, (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent and not waived
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at closing, or (d) the validity, effectiveness, sufficiency, enforceability or
genuineness of any Loan Document or any other instrument or writing furnished in
connection therewith. The Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by the Borrower to the Agent at
such time, but is voluntarily furnished by the Borrower to the Agent (either in
its capacity as Agent or in its individual capacity).
10.5 Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders (or, to the extent required by Section 8.2, all Lenders), and
such instructions and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders and on all holders of Notes. The Agent shall be
fully justified in failing or refusing to take any action hereunder and under
any other Loan Document unless it shall first be indemnified to its satisfaction
by the Lenders pro rata against any and all liability, cost and expense that it
may incur by reason of taking or continuing to take any such action.
10.6 Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7 Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8 Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (a) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (b) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents, and
(c) for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of the Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby, or
the enforcement of any of the terms thereof or of any such other documents;
provided, that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Agent. The
obligations of the
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Lenders under this Section 10.8 shall survive payment of the Obligations and
termination of this Agreement.
10.9 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Unmatured Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring to
this Agreement describing such Default or Unmatured Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders.
10.10 Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a
Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries in which the Borrower or such
Subsidiary is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender.
10.11 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
10.12 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, such resignation to be effective
upon the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Lenders shall have
the right to appoint, on behalf of the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty days after the resigning Agent's
giving notice of resignation, then the resigning Agent may appoint, on behalf of
the Borrower and the Lenders, a successor Agent. If the Agent has resigned and
no successor Agent has been appointed, the Lenders may perform all the duties of
the Agent hereunder and the Borrower shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. Any successor Agent shall be a commercial bank having
capital and retained earnings of at least $50,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the resigning or removed Agent, and the resigning or
removed Agent shall be discharged from its duties and obligations hereunder and
under the other Loan Documents. After the effectiveness of the
59
<PAGE>
resignation of an Agent, the provisions of this Article X shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent hereunder and under the other Loan
Documents.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1 Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs and is continuing, any and
all deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any time
held or owing by any Lender to or for the credit or account of the Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due,
and written notice of such setoff shall be promptly provided to the Borrower.
11.2 Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
Section 3.1, 3.2 or 3.4) in a greater proportion than its Pro-Rata share of such
Loans, such Lender agrees, promptly upon demand, to purchase a portion of the
Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made. If an
amount to be setoff is to be applied to Indebtedness of the Borrower to a
Lender, other than Indebtedness evidenced by any of the Notes held by such
Lender, such amount shall be applied ratably to such other Indebtedness and to
the Indebtedness evidenced by such Notes.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 Successors and Assigns. The terms and provisions of the Loan Documents
shall be binding upon and inure to the benefit of the Borrower and the Lenders
and their respective successors and assigns, except that (a) the Borrower shall
not have the right to assign its rights or obligations under the Loan Documents,
and (b) any assignment by any Lender must be made in compliance with Section
12.3. Notwithstanding clause (b) of the preceding sentence, any Lender may at
any time, without the consent of the Borrower or the Agent, assign all or any
portion of its
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rights under this Agreement and its Notes to a Federal Reserve Bank; provided,
however, that no such assignment to a Federal Reserve Bank shall release the
transferor Lender from its obligations hereunder. The Agent may treat the payee
of any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 12.3 in the case of an assignment thereof or, in the
case of any other transfer, a written notice of the transfer is filed with the
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
12.2 Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at
any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held by
such Lender, any Lender's interest in any Facility Letter of Credit
Obligation, any Commitment of such Lender or any other interest of such
Lender under the Loan Documents. In the event of any such sale by a Lender
of participating interests to a Participant, such Lender's obligations
under the Loan Documents shall remain unchanged, such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Borrower
under this Agreement shall be determined as if such Lender had not sold
such participating interests, and the Borrower and the Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver which effects any of the
modifications referenced in clauses (a) through (g) of Section 8.2.
12.2.3. Benefit of Setoff. The Borrower agrees that each Participant
shall be deemed to have the right of setoff provided in Section 11.1 in
respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under the Loan Documents; provided,
that each Lender shall retain the right of setoff provided in Section 11.1
with respect to the amount of participating interests sold to each
Participant. The Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in Section 11.1,
agrees to share with each Lender, any amount received pursuant to the
exercise of its right of setoff, such amounts to be shared in accordance
with Section 11.2 as if each Participant were a Lender.
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12.3 Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time assign
to one or more banks or other entities ("Purchasers") all or any part of
its rights and obligations under the Loan Documents; provided, however,
that (a) in the case of an assignment to an entity which is not a Lender or
an Affiliate of a Lender, such assignment shall be in a minimum amount of
$5,000,000 and (b) any such assignment shall include a ratable portion of
the assigning Lender's Commitment and Loans. Such assignment shall be
substantially in the form of Exhibit C hereto or in such other form as may
be agreed to by the parties thereto. The consent of the Agent and, so long
as no Default is continuing, the Borrower shall be required prior to an
assignment becoming effective with respect to a Purchaser which is not a
Lender or an Affiliate thereof. Such consent shall not be unreasonably
withheld. The consent of the Agent or the Borrower will not be required
prior to an assignment becoming effective with respect to a Purchaser which
is a Lender or an Affiliate thereof.
12.3.2. Effect; Effective Date. Upon (a) delivery to the Agent of a
notice of assignment, substantially in the form attached as Exhibit I to
Exhibit C hereto (a "Notice of Assignment"), together with any consents
required by Section 12.3.1, and (b) payment of a $3,500 fee to the Agent
for processing such assignment, such assignment shall become effective on
the effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, (a) such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Loan Document
executed by the Lenders and shall have all the rights and obligations of a
Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and (b) the transferor Lender shall be released with
respect to the percentage of the Aggregate Commitment and Loans assigned to
such Purchaser without any further consent or action by the Borrower, the
Lenders or the Agent. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent
and the Borrower shall make appropriate arrangements so that replacement
Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case
in principal amounts reflecting the relevant loan or commitment amount, as
adjusted pursuant to such assignment and prior Notes so replaced shall be
returned to the Borrower marked "Paid by Replacement".
12.4 Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries.
12.5 Tax Treatment. If any interest in any Loan Document is transferred to
any Transferee which is organized under the laws of any jurisdiction other than
the United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 2.18.
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ARTICLE XII
NOTICES
13.1 Giving Notice. Except as otherwise permitted by Section 2.13 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing, by facsimile, first class U.S. mail or overnight courier and addressed
or delivered to such party at its address set forth below its signature hereto
or at such other address as may be designated by such party in a notice to the
other parties. Any notice, if mailed and properly addressed with first class
postage prepaid, return receipt requested, shall be deemed given three (3)
Business Days after deposit in the U.S. mail; any notice, if transmitted by
facsimile, shall be deemed given when transmitted; and any notice given by
overnight courier shall be deemed given when received by the addressee.
13.2 Change of Address. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
[signature pages follow]
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
LUIGINO'S, INC.
By: /s/ Joel C. Kozlak
-------------------------------
Print Name: Joel C. Kozlak
-----------------------
Title: Chief Financial Officer
----------------------------
Address: Luigino's, Inc.
525 Lake Avenue S
Duluth, Minnesota 55802
Attn: Joel C. Kozlak
Telecopy: (218) 723-5565
Telephone: (218) 723-5448
with a copy to:
Dorsey & Whitney LLP
Pillsbury Center South
220 South 6th Street
Minneapolis, Minnesota
Attn: L. Joseph Genereux
Telecopy: (612) 340-2643
Telephone: (612) 340-2888
S-1
<PAGE>
Commitments:
$25,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ Dennis J. Redpath
-------------------------------
Print Name: Dennis J. Redpath
-----------------------
Title: Vice President
----------------------------
Address: One First National Plaza
Chicago, Illinois 60670
Attn: J. Garland Smith
Telecopy: (312) 732-1117
Telephone: (312) 732-2735
S-2
<PAGE>
$25,000,000 U.S. BANK NATIONAL ASSOCIATION
(f/k/a FIRST BANK NATIONAL
ASSOCIATION), Individually
By: /s/ William J. Umscheid
-------------------------------
Print Name: William J. Umscheid
-----------------------
Title: Vice President
----------------------------
Address: U.S. Bank Place
601 Second Avenue South
Minneapolis, MN 55402
Attn: William J. Umscheid
Telecopy: (612) 973-0823
Telephone: (612) 973-0589
Aggregate Commitments:
$50,000,000.00
S-3
<PAGE>
EXHIBIT 10.2
AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment (this "Amendment") is entered into as of March 12, 1999 by
and among Luigino's, Inc., a Minnesota corporation (the "Borrower"), The First
National Bank of Chicago, individually and as agent ("Agent") and the financial
institutions signatory hereto (the "Lenders").
RECITALS
A. The Borrower, the Agent, and the Lenders are party to that certain
Amended and Restated Credit Agreement dated as of February 4, 1999 (the "Credit
Agreement"). Unless otherwise specified herein, capitalized terms used in this
Amendment shall have the meanings ascribed to them by the Credit Agreement.
B. The Borrower, the Agent, and the Lenders wish to amend the Credit
Agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual execution hereof and other
good and valuable consideration, the parties hereto agree as follows:
1. Amendment to Credit Agreement. The Credit Agreement is hereby amended as
follows:
(a) Article I of the Credit Agreement is amended by adding a new definition
to read as follows:
"Cash Management Fund" means a money market fund that invests in short-term
money market obligations, including securities issued or guaranteed by the
United States of America or its agencies or instrumentalities, certificates of
deposit, time deposits, bankers' acceptances and other short-term obligations
issued by domestic banks, foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign banks
and thrift institutions, guaranteed investment contracts, repurchase agreements,
high quality domestic and foreign commercial paper and other eligible short-term
obligations, including those with floating or variable rates of interest.
(b) Section 6.16 of the Credit Agreement is amended and replaced in its
entirety to read as follows:
<PAGE>
The Borrower will not, nor will it permit any Subsidiary to, make or suffer
to exist any Investments (including, without limitation, loans and advances to,
and other Investments in, Subsidiaries), or commitments therefor, or to create
any Subsidiary or to become or remain a partner in any partnership or joint
venture, or to make any Purchases, except:
(a) Short-term obligations of, or fully guaranteed by, the United States of
America;
(b) Commercial paper rated A-l or better by Standard and Poor's Corporation
or P-l or better by Moody's Investors Service, Inc.;
(c) Demand deposit accounts maintained in the ordinary course of business;
(d) Certificates of deposit issued by and time deposits with commercial
banks (whether domestic or foreign) having capital and surplus in excess of
$100,000,000;
(e) Existing Investments in Subsidiaries and other Investments in existence
on the Restatement Date and described in Schedule 6.16 hereto;
(f) Shares of stock or other securities received in settlement of claims
arising in the ordinary course of business;
(g) Shareholder Loans existing on the date hereof and other Shareholder
Loans which, together with the amount of dividends permitted under Section
6.10(b)(iii) hereof shall not exceed the amount of dividends permitted under
Section 6.10(b)(iii);
(h) Other Investments up to an aggregate amount not in excess of $250,000;
(i) Other Purchases up to an aggregate amount not to exceed $1,500,000;
(j) Purchases other than those referred to in clause (i) above up to an
aggregate amount not to exceed $3,500,000; provided, however, that at least 5
Business Days before any such Purchase, the Borrower shall submit to the Agent
satisfactory evidence of pro forma compliance (after giving effect to such
Purchase) with Section 6.27 hereof for the four most recently ended fiscal
quarters of the Borrower; and
(k) Investments in Cash Management Funds rated Aaa by Moody's Investors
Service, Inc. or AAAm by Standard & Poor's Rating Group, a division of The
McGraw-Hill Companies, Inc.
2. Representations and Warranties of the Borrower. The Borrower represents
and warrants that:
<PAGE>
(a) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate action and this
Amendment is a legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, except as the enforcement
thereof may be subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally;
(b) Each of the representations and warranties contained in the Credit
Agreement is true and correct in all material respects on and as of the date
hereof as if made on the date hereof;
(c) After giving effect to this Amendment, no Default or Unmatured Default
has occurred and is continuing.
3. Effective Date. This Amendment shall become effective upon the execution
and delivery hereof by the Borrower and the Lenders.
4. Reference to and Effect Upon the Credit Agreement.
(a) Except as specifically amended or waived above, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Agent or any Lender
under the Credit Agreement or any Loan Document, nor constitute a waiver of any
provision of the Credit Agreement or any Loan Document, except as specifically
set forth herein. Upon the effectiveness of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of similar import shall mean and be a reference to the Credit Agreement as
amended hereby.
5. Costs and Expenses. The Borrower hereby affirms its obligation under
Section 9.7 of the Credit Agreement to reimburse the Agent for any costs,
internal charges and out-of-pocket expenses (including attorneys' fees and time
charges of attorneys for the Agent, which attorneys may be employees of the
Agent) paid or incurred by the Agent in connection with the preparation,
negotiation, execution and delivery of this Amendment.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS)
OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.
<PAGE>
7. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purposes.
8. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
such counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
and year first above written.
LUIGINO'S, INC.
By: /s/ Joel C. Kozlak
----------------------------
Print Name: Joel C. Kozlak
---------------------
Title: Chief Financial Officer
--------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ Dennis J. Redpath
----------------------------
Print Name: Dennis J. Redpath
---------------------
Title: Vice President
--------------------------
U.S. BANK NATIONAL ASSOCIATION
(f/k/a FIRST BANK NATIONAL ASSOCIATION),
Individually
By: /s/ William J. Umscheid
-------------------------------
Print Name: William J. Umscheid
--------------------
Title: Vice President
-------------------------
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of September 1, 1992, by and between
LUIGINO'S, INC., a Minnesota corporation (the "Company"), and RONALD BUBAR, an
individual resident of the State of Minnesota ("Executive").
WHEREAS, the Company wishes to continue the employment of Executive on
the terms and conditions set forth in this agreement, and Executive wishes to be
retained and employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the Company and Executive set forth below, the Company and
Executive agree as follows:
1. Employment. The Company hereby employs Executive, and Executive
accepts such employment and agrees to perform services for the Company for the
period and upon the other terms and conditions set forth in this agreement.
2. Term. Unless terminated at an earlier date in accordance with
section 7 of this agreement, the term of Executive's employment hereunder shall
be until December 31, 1996 commencing on the date of this agreement.
3. Position and Duties.
3.01 Service with Company. During the term of this agreement,
Executive agrees to perform such reasonable employment duties as the Board of
Directors of the Company shall assign to him from time to time, including, the
current assignment of, and no assignment less than, Executive Vice President of
Operations of the Company.
3.02 Performance of Duties. Executive agrees to serve the
Company faithfully and to the best of his ability and to devote his full time,
attention and efforts to the business and affairs of the Company during the term
of this agreement. Executive hereby confirms that he is under no contractual
commitments inconsistent with his obligations set forth in this agreement, and
that during the term of this agreement, he will not render or perform services
for any other corporation, firm, entity or person which are inconsistent with
the provisions of this agreement.
4. Compensation.
4.01 Base Salary. As compensation in full for all services to
be rendered by the Executive under this agreement during the period commencing
on the date of this agreement and ending on December 31, 1993, the Company shall
pay to Executive a base salary at the rate of $125,000 per annum, which salary
shall be paid on a periodic basis in accordance with the Company's normal
payroll procedures and policies. The base salary payable to Executive during
each subsequent calendar year during the term of this Agreement shall be
reviewed annually by
<PAGE>
the Board of Directors of the Company, but shall in no event be less than
$125,000; provided, however, that increases in such base salary shall be subject
to the sole and absolute discretion of the Board of Directors. In no event shall
the salary be less than the previous year's salary.
4.02 Bonus Compensation. In addition to the base salary
described in section 4.01 the Company shall pay to Executive for each calendar
year beginning 1992 a bonus equal in amount to 75% of base salary. In the event
the Marketing Department reaches 100% Plan Goal for 1992 as provided in Exhibit
A hereto, the amount of the bonus shall be 100% of base salary.
This same agreement will prevail each year of the contract.
4.03 Participation in Benefit Plans. Executive shall also be
entitled to participate in all employee benefit plans or programs (including
vacation time) of the Company to the extent that his position, title, tender,
salary, age, health and other qualifications make him eligible to participate.
The Company does not guarantee the adoption or continuance of any particular
employee benefit plan or program during the term of this agreement, and
Executive's participation in any such plan or program shall be subject to the
provisions, rules and regulations applicable thereto.
5. Confidentiality. The Company and Executive agree that this agreement
shall be kept absolutely confidential between Executive, Jeno F. Paulucci,
Chairman of the Company, James F. Kostal, Executive Vice President of Sales and
Marketing, and counsel.
6. Noncompetition Covenant. Executive agrees that, during the term of
his employment by the Company and for a period of eighteen (18) months after the
termination of such employment (whether such termination is with or without
cause, or whether such termination is occasioned by Executive or the Company),
he shall not, directly or indirectly, engage in competition with the Company in
any manner or capacity (e.g., as an advisor, principal, agent, partner, officer,
director, stockholder, employee, member of any association, or otherwise) in any
phase of the business which the Company is conducting during the term of this
agreement, including the design, development, manufacture, distribution,
marketing, leasing or selling of accessories, devices, or systems related to the
products or services being sold by the Company; provided, that the geographical
scope of this covenant not to compete shall be limited to those geographical
areas in which the Company has engaged in business during the term of this
agreement.
7. Termination.
7.01 Grounds for Termination. This agreement shall terminate
prior to the expiration of the term set forth in section 2 in the event that at
any time during such term:
(a) Executive shall die or shall have become disabled,
-2-
<PAGE>
(b) Executive's employment shall be terminated by the
Company for "cause" (as defined in Section 7.05
hereof),
(c) Executive shall terminate his employment for "Good
Reason" (as defined in Section 7.06 hereof),
(d) Executive's employment shall be terminated by the
Company without cause" on ninety (90) days written
notice given by the Company to Executive,
(e) Executive's employment shall be terminated by
Executive without "Good Reason" on ninety (90) days
written notice given by the Executive to the Company
or
(f) The parties shall mutually agree in writing to such
termination.
7.02 Payments to Employee. Upon any termination pursuant to
Section 7.01(a), (b), (c), (d) or (e), the Company shall pay to Executive (or
his heirs and representatives) W the base salary provided for in Section 4.01
hereof through the date of termination, (ii) except in the case of termination
of employment pursuant to Section 7.01(b) or (e), the amount of bonus
compensation referred to in Section 4.02 hereof for the calendar year in which
such termination occurs multiplied by a fraction, the numerator of which is
number of calendar months (including any partial month) during which the
Executive was employed by the Company during such calendar year and the
denominator of which is twelve (12), and (iii) any amounts payable pursuant to
that certain Luigino's, Inc. Phantom Stock Plan Bonus Award and Agreement
("Phantom Stock Agreement") in accordance with the terms and conditions therein.
In the case of termination of employment pursuant to Section 7.01(c), the amount
payable pursuant to clause (iii) hereof shall constitute payment in full of any
and all claims by Executive arising from such termination of employment. The
proportionate share of bonus compensation referred to in Section 4.02 shall be
payable within one hundred eighty (180) business days from and after the date
the amount thereof is determined.
7.03 Continuing Obligation of Employee. Notwithstanding any
termination of this agreement, Executive, in consideration of his employment
hereunder to the date of such termination, shall remain bound by the provisions
of this agreement which specifically relate to periods, activities or
obligations upon or subsequent to the termination of Executive's employment.
7.04 "Disability" Defined. The Executive shall have become
disabled, for the purpose of this agreement, in the event that Executive shall
fail, because of illness or incapacity, to render services of the character
contemplated by this agreement over a period of ninety (90) days during any
three hundred sixty-five (365) day period.
-3-
<PAGE>
7.05 "Cause" Defined. For purposes of this agreement, "cause"
shall mean:
(a) An act or acts of personal dishonesty taken by
Executive which result in material loss to the
Company,
(b) Executive's refusal to comply with or implement
reasonable policies established by the Company's
Board of Directors,
(c) Executive's engaging in illegal or fraudulent conduct
that is materially injurious to the Company,
(d) The misappropriation or wrongful disclosure of the
Company's trade secrets or confidential information,
or
(e) The failure by Executive to meet "industry standards"
in performing his duties and obligations under this
agreement. For this purpose, "industry standards"
shall be determined with reference to executives who
perform comparable duties and functions for companies
comparable, in size and other respects, to the
Company for compensation and incentives comparable to
that provided by the Company to Executive.
7.06 Termination by Executive for Good Reason. Executive may
terminate his employment under this agreement for good reason ("Good Reason") in
accordance with the provisions of this Section 7.06. Termination by Executive
for "Good Reason" shall mean termination of employment based on the failure by
the Company to comply with any material provision of this agreement which has
not been cured within a reasonable period of time after written notice of such
noncompliance has been given by Executive to the Company. Good Reason shall
include, but not be limited to, the following:
(a) A material, adverse change in Executive's status or
position as an executive officer of the Company,
which is not remedied within a reasonable period of
time after the Company's receipt of written notice of
such adverse change from the Executive; or
(b) The Company's requiring Executive to be based
anywhere other than wherever the Company's offices
may be located at anytime during the term of this
agreement, except for required travel on the
Company's business to an extent substantially
consistent with the business travel obligations which
Executive undertook on behalf of the Company prior to
the date of this agreement.
7.07 Surrender of Records and Property. Upon termination of
his employment with the Company, Executive shall deliver promptly to the Company
all records, manuals, books,
-4-
<PAGE>
blank forms, documents, letters, memoranda, notes, notebooks, reports, data,
tables, calculations or copies thereof, which are the property of the Company or
which relate in any way to the business, products, practices or techniques of
the Company, and all other property, trade secrets and confidential information
of the Company, including, but not limited to, all documents which in whole or
in part contain any trade secrets or confidential information of the Company,
which in any of these cases are in his possession or under his control.
8. Miscellaneous.
8.01 Governing Law. This agreement is made under and shall be
governed by and construed in accordance with the laws of the State of Minnesota.
8.02 Complete Agreement. This agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
all prior agreements and understandings with respect to such subject matter,
including without limitation that certain employment agreement dated as of
January 1, 1992 between the Company and the Executive, and the parties hereto
have made no agreements, representations or warranties relating to the subject
matter of this agreement which are not set forth herein. Without limiting the
generality of the foregoing, Executive specifically acknowledges and agrees that
the Company shall have no obligation to provide Executive with any salary, bonus
or other form of compensation or benefit whatsoever which is not specifically
provided for in this agreement or in the Phantom Stock Agreement referred to in
Section 7.02 hereof and the provision of any such salary, bonus or other form of
compensation or benefit not so specifically provided for shall be at the sole
and absolute discretion of the Company.
8.03 Withholding Taxes. The Company may withhold from any
benefits payable under this agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
8.04 Amendments. No amendment or modification of this
agreement, including without limitation any extension of the term beyond
December 31, 1996, shall be deemed effective unless made in writing and signed
by the parties hereto.
8.05 No Waiver. No term or condition of this agreement shall
be deemed to have been waived, nor shall there be any estoppel to enforce any
provisions of this agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
8.06 Equality. It is understood and here stated that through
the term of Executive's employment hereunder and so long as James F. Kostal is
employed by the Company,
-5-
<PAGE>
Executive and James F. Kostal will have the same exact compensation program no
matter what title each holds.
8.07 Arbitration.
(a) Except as provided in Section 8-07(b) below, any
claims or disputes of any nature between the parties
arising from or related to the performance, breach or
termination of this agreement or the meaning or
application of its terms shall be resolved
exclusively by arbitration before the American
Arbitration Association in Minneapolis, Minnesota
pursuant to the Association's rules for commercial
arbitration. The decision of the arbitrator shall be
final and binding upon both parties.
(b) For purposes of any arbitration involving Section
7-05(e), there shall be three independent
arbitrators, each having experience as a senior
executive in the food industry. One such arbitrator
shall be selected by each of the Company .and
Executive and the two arbitrators so selected shall
select the third arbitrator.
(c) This Section shall have no application to claims by
the Company asserting violations of or seeking to
enforce, by injunction or otherwise, the terms of
this agreement. Such claims may be maintained by the
Company in a suit in any court of competent
jurisdiction.
IN WITNESS WHEREOF, Executive and the Company have executed this
agreement as of the date set forth in the first paragraph.
LUIGINO'S, INC.
By: /s/Joel C. Kozlak
---------------------------------
Print Name: Joel C. Kozlak
-------------------------
Title: Chief Financial Officer
-----------------------------
[the "Company"]
/s/Ronald Bubar
------------------------------------
RONALD BUBAR
["Executive"]
-6-
<PAGE>
EXHIBIT 10.4
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into
effective January 1, 1999, by and between PAULUCCI INTERNATIONAL LTD., INC., a
Florida corporation with its principal place of business in Sanford, Florida
("Paulucci International"), and LUIGINO'S, INC., a Minnesota corporation with
offices in Duluth, Minnesota and Sanford, Florida ("Luigino's").
WITNESSETH THAT:
WHEREAS, Luigino's is engaged in the business of manufacturing,
distributing and selling frozen entrees and frozen pizza and snack products;
WHEREAS, the employees of Paulucci International have for many years been
directly involved with the business of manufacturing, distributing and selling
frozen foods and frozen snacks; and
WHEREAS, Luigino's is desirous of obtaining Paulucci International's
services in an advisory capacity for a period of seven years following the
effective date of this Agreement, and Paulucci International is willing to agree
to render consulting services to Luigino's for such five-year period as
hereinafter set forth;
NOW, THEREFORE, it is hereby agreed by the parties hereto as follows:
1. Consulting Services. Luigino's hereby retains Paulucci International as
a consultant and Paulucci International hereby agrees to accept such retainer,
upon the terms and conditions hereinafter set forth, for a period of seven years
from and after the date of this Agreement. During such seven-year period,
Paulucci International shall render services of an advisory or consultive
nature, including, without limitation, operational, marketing and financial and
tax advice, upon reasonable request by Luigino's and at times mutually agreeable
to the parties, so that Luigino's may have the benefit of Paulucci
International's business experience and knowledge of the frozen entree and
frozen pizza and snack businesses. Paulucci International agrees to make its
personnel and services available for advice and counsel to Luigino's upon
reasonable request at mutually agreeable times, by telephone, letter or in
person; however, Luigino's acknowledges that Paulucci International is engaged
in other businesses and has other commitments, and Luigino's agrees to use its
best efforts to avoid scheduling conflicts with Paulucci International's other
activities.
2. Compensation for Consulting Services. As compensation for Paulucci
International's agreement to render the consulting services provided for under
paragraph 1,
<PAGE>
Luigino's shall pay to Paulucci International fees in accordance with Schedule A
hereto, as the same may be amended from time to time with the mutual consent of
the parties hereto.
3. Reimbursement of Expenses. In addition to the amount referred to in
Section 2, Luigino's agrees to reimburse Paulucci International for any
out-of-pocket expenses, including without limitation, travel, entertainment,
telephone and miscellaneous expenses, incurred by Paulucci International in the
performance of such consulting services, upon presentation by Paulucci
International of proper vouchers therefor.
4. Other Activities. It is understood and agreed by Luigino's that during
the seven-year consulting period hereunder, Paulucci International may
participate in any other business activity or endeavor so long as such
participation does not materially interfere with its duties to Luigino's under
this Agreement and Paulucci International agrees to use its best efforts to
avoid scheduling conflicts with Luigino's.
5. Release of Liability. Luigino's understands and agrees that the services
of Paulucci International hereunder are of a general advisory nature and that
Luigino's is under no obligation whatsoever to follow any advice from Paulucci
International. Luigino's hereby forever releases Paulucci International and its
officers, directors, shareholders, employees and agents and agrees to hold each
of them harmless from and against any damages whatsoever that may occur as a
result of advice given to Luigino's by Paulucci International or any of such
officers, directors, shareholders, employees and agents or the failure of
Paulucci International to advise Luigino's of any matter hereunder.
6. Termination. After January 1, 2001, this Agreement may be terminated by
either party hereto upon ninety (90) days advance written notice, such
termination to be effective at the end of such ninety (90) days or such earlier
or later date as is agreed to by the parties (the "Termination Date"). If this
Agreement is terminated by Luigino's, there shall be payable to Paulucci
International on the Termination Date an amount equal to a percentage of the
aggregate fees paid or payable to Paulucci International for the twelve (12)
month period immediately preceding the Termination Date determined as follows:
(i) Termination Date on or before December 31, 2002 - 100%
(ii) Termination Date from January 1, 2003 to December 31, 2003 - 75%
(iii) Termination Date from January 1, 2004 to December 31, 2004 - 50%
(iv) Termination Date after December 31, 2004 - 0%
7. Waiver of Breach. A waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
2
<PAGE>
8. Assignment. The rights and obligations of Luigino's under this Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
Luigino's. The rights and obligations of Paulucci International under this
Agreement are personal to it and may not be assigned by it.
9. Entire Agreement. This Agreement contains the entire agreement between
the parties hereto pertaining to the rendition of services by Paulucci
International to Luigino's. This Agreement may be altered or amended only by an
instrument in writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LUIGINO'S, INC.
By /s/ Jeno F. Paulucci
---------------------------------
Its Chairman & CEO
---------------------------------
PAULUCCI INTERNATIONAL LTD., INC.
By /s/ Jeno F. Paulucci
---------------------------------
Its Owner
---------------------------------
3
<PAGE>
SCHEDULE A
TO
CONSULTING AGREEMENT
Date: January 1, 1999
Amount of Annual Consulting Fee: $3,000,000
LUIGINO'S, INC.
By /s/ Jeno F. Paulucci
---------------------------------
Its Chairman & CEO
---------------------------------
PAULUCCI INTERNATIONAL LTD., INC.
By /s/ Jeno F. Paulucci
---------------------------------
Its Owner
---------------------------------
4
<PAGE>
EXHIBIT 10.5
TAX DISTRIBUTION AGREEMENT
This Tax Distribution Agreement (the "Agreement"), dated as of February 4,
1999, is by and among Luigino's, Inc., a Minnesota corporation (the "Company"),
and all of the stockholders of the Company as listed on the signature pages
hereto (collectively, the "Stockholders"). Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Indenture (as
defined below).
RECITALS
A. The Company is a "S corporation" for federal and certain state income
tax purposes and, accordingly, the Stockholders are directly subject to tax on
their respective proportionate shares of the taxable income of the Company for
federal and certain state income tax purposes.
B. Pursuant to that certain Indenture between the Company and U.S. Bank
Trust National Association, as Trustee thereunder, dated as of February 4, 1999,
relating to the Notes, the Company is prohibited from making distributions to
its Stockholders except in certain circumstances as provided in the Indenture.
C. The Indenture provides, among other things, that the Company may make
certain distributions to its Stockholders in accordance with the provisions of
this Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. As used herein, the terms below shall have the
following meanings. Any of these terms, unless the context otherwise requires,
may be used in the singular or plural depending upon the reference.
"Estimation Period" means the period for which an Owner is required to
estimate for federal income tax purposes its allocation of taxable income from a
calendar year in connection with determining its estimated federal income tax
liability for such period.
"Owner" shall mean a stockholder of the Company if the Company is a S
corporation, or a partner, member or other such owner of the Company if the
Company is another substantially similar type of pass-through entity for income
tax purposes.
<PAGE>
"Permitted Quarterly Tax Distributions" means quarterly distributions of
Tax Amounts determined on the basis of the estimated taxable income of the
Company, for the related Estimation Period, provided, however, that (A) prior to
any distributions of Tax Amounts, the Company shall deliver to the Trustee an
officer's certificate certifying that the Tax Amounts to be distributed were
determined in accordance with the terms hereof and stating to the effect that
the Company qualifies as an S corporation or substantially similar pass-through
entity for federal income tax purposes and (B) at the time of such
distributions, the most recent audited financial statements of the Company
reflect that the Company was treated as an S corporation or substantially
similar pass-through entity for federal income tax purposes for the period
covered by such financial statements.
"Quarterly Payment Period" means the period commencing on the fifth (5th)
day and ending on and including the fifteenth (15th) day of each month in which
federal individual estimated tax payments are due provided that payments in
respect of estimated state income taxes due in January may instead, at the
option of the Company, be paid during the last ten (10) days of the immediately
preceding December.
"Tax Amounts" with respect to any taxable period shall be equal to (A) the
product of (x) the taxable income of the Company for such period as determined
by the Tax Amounts CPA and (y) the Tax Percentage.
"Tax Amounts CPA" means any nationally recognized certified public
accounting firm.
"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of federal and state income tax applicable to
any Owner. The rate of "state income tax" to be taken into account for purposes
of determining the Tax Percentage for a particular taxable year shall be deemed
to be the highest state marginal tax rate applicable to any Owner.
"True-up Amount" means, in respect of a particular taxable year, an amount
determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such taxable year and (ii) the Tax Amounts for such year. For purposes of
this Agreement, the amount equal to the excess, if any, of the amount described
in clause (i) over the amount described in clause (ii) above shall be referred
to as the "True-up Amount due to the Company" and the excess, if any, of the
amount described in clause (ii) over the amount described in clause (i) above
shall be referred to as the "True-up Amount due to the Owners."
ARTICLE II
PERMITTED TAX DISTRIBUTIONS
2.1. Permitted Quarterly Tax Distribution. For so long as the Company is an
S corporation or a substantially similar pass-through entity for federal income
tax purposes, the Company may make cash distributions to its Owners, during each
Quarterly Payment Period, in an aggregate amount not to exceed the Permitted
Quarterly Tax Distribution in respect of the
2
<PAGE>
related Estimation Period. If any portion of a Permitted Quarterly Tax
Distribution is not distributed during such Quarterly Payment Period, the
Permitted Quarterly Tax Distribution payable during the immediately following
Quarterly Payment Period shall be increased by such undistributed portion.
2.2. True-up Amount. Within thirty (30) days following the Company's filing
of an Internal Revenue Service Form 1120S (or other similar Company tax return)
for the immediately preceding taxable year, the Tax Amounts CPA shall file with
the Trustee a written statement indicating in reasonable detail the calculation
of the True-up Amount. In the case of a True-up Amount due to the Owners, the
Permitted Quarterly Tax Distribution payable during the immediately following
Quarterly Payment Period shall be increased by such True-up Amount. In the case
of a True-up Amount due to the Company, the Permitted Quarterly Tax Distribution
payable during the immediately following Quarterly Payment Period shall be
reduced by such True-up Amount and the excess, if any, of the True-up Amount
over such Permitted Quarterly Tax Distribution shall be applied to reduce the
immediately following Permitted Quarterly Tax Distributions until such True-up
Amount is entirely offset. If the amount of the Company's taxable income used to
calculate a True-Up Amount for a tax year is subsequently modified (pursuant to
an adjustment by a taxing authority or otherwise), the Tax Amounts CPA shall
promptly file with the Trustee a written statement indicating in reasonable
detail the calculation of the adjustment to the True Amount (the "Adjustment"),
and such Adjustment shall be given effect when calculating subsequent Permitted
Quarterly Tax Distributions in accordance with the terms of the preceding
sentence.
ARTICLE III
MISCELLANEOUS
3.1. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original but all of which counterparts
collectively shall constitute one instrument representing the Agreement among
the parties hereto.
3.2. Construction of Terms. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto or their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
3.3. Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the
substantive laws of the State of Florida.
3.4. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, nor is
this Agreement intended to confer upon any other person except the parties any
rights or remedies hereunder.
3
<PAGE>
3.5. Interpretation. The title, article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
3.6. Severability. In the event that any one or more of the provisions of
this Agreement shall be held to be illegal, invalid, or unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and the parties shall use
their best efforts to replace such illegal, invalid or unenforceable provisions
with an enforceable provision approximating, to the extent possible, the
original intent of the parties.
3.7. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and the
understandings between the parties with respect to such subject matter.
3.8. Notice. Any communication to be delivered hereunder shall be delivered
to the Company at its principal office, with a copy to each Stockholder at its
address set forth beneath its signature hereinbelow; provided, that a
Stockholder may change its address by written notice to the Company.
3.9. Gender. Whenever any pronoun is used in this Agreement, it shall be
construed to include the masculine pronoun, the feminine pronoun or the neuter
pronoun as shall be appropriate.
[Signature pages follow]
4
<PAGE>
THE COMPANY: LUIGINO'S, INC.
By: /s/ Jeno F. Paulucci
---------------------------------
Jeno F. Paulucci
---------------------------------
Its: Chief Executive Officer
---------------------------------
STOCKHOLDERS: /s/ Jeno F. Paulucci
------------------------------------
Jeno F. Paulucci, individually
/s/ Michael J. Paulucci
------------------------------------
Michael J. Paulucci, individually
/s/ Larry W. Nelson
------------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
------------------------------------
William H. Hippee, Jr.
As trustees of the Michael J. Paulucci
Trust under Paragraph 4.01 of the
Irrevocable Trust Agreement of Jeno F.
Paulucci dated August 31, 1996 (Jeno F.
Paulucci 1996 Two-Year Annuity Trust),
and not personally
/s/ Larry W. Nelson
------------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
------------------------------------
William H. Hippee, Jr.
S-1
<PAGE>
As trustees of the Cynthia J. Selton
Trust under Paragraph 4.01 of the
Irrevocable Trust Agreement of Jeno F.
Paulucci dated August 31, 1996 (Jeno F.
Paulucci 1996 Two-Year Annuity Trust),
and not personally
/s/ Larry M. Scanlon
------------------------------------
Larry M. Scanlon
/s/ William H. Hippee, Jr.
------------------------------------
William H. Hippee, Jr.
As trustees of the Michael J. Paulucci
1996 Twelve-Year Annuity Trust under
Irrevocable Trust Agreement dated
August 31, 1996
/s/ Larry W. Nelson
------------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
------------------------------------
William H. Hippee, Jr.
As trustees of the Cynthia J. Selton
1996 Ten-Year Annuity Trust under
Irrevocable Trust Agreement dated
August 30,
/s/ Larry W. Nelson
------------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
------------------------------------
William H. Hippee, Jr.
As trustees of the Cynthia J. Selton
1996 Twelve-Year Annuity Trust under
Irrevocable Trust Agreement dated
August 30, 1996
S-2
<PAGE>
EXHIBIT 10.6
TWENTIETH SUPPLEMENTAL TRUST AGREEMENT
Pertaining to
STATE OF OHIO
$6,715,000 STATE ECONOMIC DEVELOPMENT REVENUE BONDS
(OHIO ENTERPRISE BOND FUND)
SERIES 1991-10
(LUIGINO'S, INC. PROJECT)
This Twentieth Supplemental Trust Agreement, dated as of September 1, 1991
(the "Supplement Number Twenty"), by and between the STATE OF OHIO (the
"State"), and THE PROVIDENT BANK, a bank organized and existing under and by
virtue of the laws of the State and authorized to exercise corporate trust
powers in the State, with its principal place of business located in Cincinnati,
Ohio (the "Trustee"), as trustee under the Trust Agreement, dated as of April 1,
1988 (the "Trust Agreement"), between the State and the Trustee.
W I T N E S S E T H:
WHEREAS, the State, pursuant to direction of the Director of Development
under Section 166.09 of the Revised Code and the General Bond order of the
Treasurer of the State (the "Treasurer") dated April 11, 1988, entered into the
Trust Agreement providing for the issuance from time to time of State Economic
Development Revenue Bonds (Ohio Enterprise Bond Fund) (the "Bonds"), with each
issue of Bonds to be authorized by a Series Bond Order of the Treasurer which
Series Bond Order shall authorize a Supplemental Trust Agreement, supplementing
the Trust Agreement, pertaining to that issue of Bonds; and
WHEREAS, pursuant to the certification of the Director of Development under
Section 166.08(B) oi the Revised Code, the Treasurer issued Series Bond order
No. R10-91 dated September 18, 1991 providing for the issuance and sale of
$6,715,000 State Economic Development Revenue Bonds (Ohio Enterprise Bond Fund),
Series 1991-10 (Luigino's, Inc. Project) (the "Series 1991-10 Bonds") and this
Supplement Number Twenty, which Series Bond Order No. R10-91 is incorporated
herein, constitutes an integral part of this Supplement Number Twenty, and
provides in its entirety as follows:
<PAGE>
STATE OF OHIO
STATE ECONOMIC DEVELOPMENT REVENUE BONDS
(OHIO ENTERPRISE BOND FUND)
SERIES BOND ORDER NO. R10-91
Providing for the authorization, issuance and sale of $6,715,000
State Economic Development Revenue Bonds (Ohio Enterprise
Bond Fund), Series 1991-10 (Luigino's, Inc. Project), pursuant to
Trust Agreement dated as of April 1, 1998.
WHEREAS, the Treasurer of State of the State of Ohio (the "Treasurer"), by
the General Bond order dated April 11, 1988 and included in a Trust Agreement,
dated as of April 1, 1988 (the "Trust Agreement"), between the State of Ohio
(the "State") and The Provident Bank, as trustee (the "Trustee"), has provided
for the issuance from time to time of State Economic Development Revenue Bonds
(Ohio Enterprise Bond Fund) of the State, with each issue of Bonds to be
authorized by a Series Bond Order of-the Treasurer pursuant to the General Bond
Order; and
WHEREAS, the General Bond Order was issued and the Trust Agreement was
entered into by the Treasurer pursuant to Chapter 166 of the Revised Code (the
"Act") enacted under authority of the Constitution of Ohio, particularly Section
13 of Article VIII thereof, which authorizes the Treasurer to issue obligations
of the State as from time to time authorized by the General Assembly or
otherwise required or permitted by the Act to provide moneys for the Facilities
Establishment Fund, including authorized transfers from that Fund, and for
funding reserves, as provided in the Act and this Order; and
WHEREAS, the Director of Development of the State has certified to the
Treasurer, pursuant to Section 166-08 (B) of the Revised Code, the need for the
sum of $6,715,000 to be allocated as provided in Section 7 of this Order; and
WHEREAS, pursuant to the foregoing and for the purposes stated in Section 4
of this Order, the Treasurer has determined to issue $6,715,000 principal amount
of Bonds and to provide the security and source of payment therefor by this
order;
NOW, THEREFORE, THE TREASURER OF STATE OF THE STATE OF OHIO HEREBY ORDERS
as follows.
Section 1. Definitions and Interpretations. Where used in this order, and
in addition to words and terms defined elsewhere in this order and in the
General Bond order the following terms shall have the following meanings:
-2-
<PAGE>
"Bond Purchase Agreement" means the Bond Purchase Agreement among the
State, the Company and the Original Purchaser, providing for the sale of the
Series 1991-10 Bonds to the Original Purchaser.
"Book entry form" or "book entry system" means a form or system under which
(i) the beneficial right to payment of principal of and interest on the Series
1991-10 Bonds may be transferred only through a book entry and (ii) physical
Series 1991-10 Bonds in fully registered form are issued only to a Depository or
its nominee as registered owner, with the Series 1991-10 Bonds "immobilized" to
the custody of the Depository, and the book entry is the record that identifies
the owners of beneficial interests in those Series 1991-10 Bonds.
"Code" means the Internal Revenue Code of 1986, as amended, and references
to the Code and Sections of the code shall include relevant regulations and
proposed regulations thereunder or under the Internal Revenue Code of 1954, as
amended, and any successor provisions to such Sections, regulations or proposed
regulations.
"Collateral Proceeds Account" means the Series 1991-10 Collateral Proceeds
Account, created pursuant to the General Bond Or-der and Section 7 of this
Order, in the Economic Development Bond Service Fund.
"Company" means Luigino's, Inc., a corporation organized under the laws of
the State of Minnesota.
"Depository" means any securities depository that is a clearing agency
under federal law operating and maintaining, together with its participants, a
book entry system to record beneficial ownership of Series 1991-10 Bonds, and to
effect transfers of Bonds, In book entry form, and includes The Depository Trust
Company (a limited purpose trust company), New York, New York.
"Determination of Taxability" means the receipt by the Trustee or a
Bondholder of a ruling or technical advice by the Internal Revenue Service in
which the Company has participated or a written opinion by an attorney or firm
of attorneys of recognized standing on the subject of municipal bonds selected
by the Trustee or a Bondholder and approved by the Company, which approval shall
not be unreasonably withheld, to the effect that interest on the Series 1991-10
Bonds is includable in the gross income for federal income tax purposes of a
holder (other than a holder who Is a "substantial user" of the Project or a
"related person" as such terms are used in Section 147(a) of the Code).
"Federal Income Tax Compliance Agreement" means the Federal Income Tax
Compliance Agreement among the Treasurer, the Trustee and the Company relating
to the Series 1991-10 Bonds.
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"Financing Agreement" means the Lease, dated as of September 1, 1991,
between the Director of Development and the Company, as from time to time
amended.
"Independent Counsel" means any attorney duly admitted to practice before
the highest court of any state and not an officer or a full time employee of the
State or the Company.
"Independent Tax Counsel" means Independent Counsel, selected by the
Treasurer and satisfactory to the Trustee, experienced in matters relating to
the exclusion from gross income for purposes of federal income taxation of
interest on obligations issued by states or their political subdivisions."
"Issuance Expense Account" means the Series 1991-10 Issuance Expense
Account created in Section 7 of this order.
"Original Purchaser" means, as to the Series 1991-10 Bonds, McDonald
Company Securities, Inc. and Brooks Securities Incorporated.
"Primary Reserve Account" means the Series 1991-10 Primary Reserve Account,
created pursuant to the General Bond Order and Section 7 of this Order, in the
Economic Development Bond Service Fund.
"Project" means the Project Equipment, constituting an Eligible Project.
"Project Equipment" means the equipment, machinery and other personal
property described on Exhibit A attached to the Financing Agreement.
"Project Fund" means the Series 1991-10 Project Fund, established pursuant
to Section 8 of this order.
"Project Site" means the Company's frozen food production facility located
in Jackson, Ohio.
"Series 1991-10 Bonds" means the Bonds authorized by this Order.
"Supplement Number Twenty" means the Twentieth Supplemental Trust
Agreement, dated as of September 1, 1991, between the Treasurer and the Trustee,
of which this Order is a part.
Unless the context or use clearly indicates another or different
meaning or intent, all words and terms defined in and all interpretations
provided in Section 1 of the General Bond order shall have the same meanings and
be subject to the same Interpretations as therein provided, except that this
order is referred to herein as "this order" and may be known as "Series
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Bond order No. R10-91", and the terms "hereof", "herein", "hereby", "hereto" and
"hereunder", and similar terms, mean this order.
Section 2. Authority. This Order is issued pursuant to the General Bond
Order, the Trust Agreement and the Act.
Section 3. Findings. The Treasurer finds that the conditions stated in
numbered subparagraphs (1), (2), (3) and (4) of Subsection 3(a) of the General
Bond Order are or will be satisfied at the time of authentication of the Series
1991-10 Bonds. The Treasurer or an Authorized Officer shall confirm these
findings by a certificate in form satisfactory to and to be filed with the
Trustee prior to the authentication of the Series 1991-10 Bonds, and the
Treasurer or that Authorized Officer may provide such other evidence with
respect thereto as the Trustee may reasonably request.
Section 4. Authorization, Designation and Purposes of Series 1991-10 Bonds.
It is necessary to and the State shall issue, sell and deliver, as provided in
this Order, $6,715,000 principal amount of bonds of the State, which shall be
designated "State Economic Development Revenue Bonds (Ohio Enterprise Bond
Fund), Series 1991-10 (Luigino's, Inc. Project)", for the purpose of acquiring
the Project and paying certain costs of issuance of the Series 1991-10 Bonds.
Section 5. Terms and Provisions Applicable to Series 1991-10 Bonds. The
Series 1991-10 Bonds shall be initially issued in fully registered form and
substantially in the form set forth in Supplement Number Twenty. The Series
1991-10 Bonds shall be numbered in such manner so as to distinguish each Series
1991-10 Bond from any other Series 1991-10 Bond and shall be in the denomination
of $5,000 or any integral multiple thereof requested by the bondholder.
Each Series 1991-10 Bond shall be dated as of the interest payment date
next preceding the date of its authentication, unless authenticated on an
interest payment date in which case it shall be dated as of the date of
authentication; provided that if at the time of authentication of any Series
1991-10 Bond interest is in default thereon, such Series 1991-10 Bond shall be
dated as of the date to which interest has been paid; and provided, further,
that Series 1991-10 Bonds authenticated prior to December 1, 1991 shall be dated
September 1, 1991. Interest shall be paid based upon a year of twelve 30 day
months.
The Series 1991-10 Bonds shall bear interest from their respective dates,
payable semiannually on June 1 and December I of each year, beginning December
1, 1991, at the rates and shall mature on the dates and in the principal amounts
set forth in the following table:
Date Amount Rate Date Amount Rate
---- -------- ---- ---- -------- ----
December 1, 1992 $370,000 5.25% December 1, 1996 $375,000 6.20%
June 1, 1993 370,000 5.60 June 1, 1997 375,000 6.40
December 1, 1993 370,000 5.60 December 1, 1997 375,000 6.40
June 1, 1994 370,000 5.80 June 1, 1998 375,000 6.50
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Date Amount Rate Date Amount Rate
---- -------- ---- ---- -------- ----
December 1, 1994 370,000 5.80 December 1, 1998 375,000 6.50
June 1, 1995 370,000 6.00 June 1, 1999 375,000 6.60
December 1, 1995 370,000 6.00 June 1, 2001 1,500,000 6.85
June 1, 1996 375,000 6.20
In the event of exercise by the Company of its option to purchase the
Project upon the occurrence of certain events as described and provided for in
Section 10.2 of the Financing Agreement, the Series 1991-10 Bonds are subject to
redemption by the State in whole at any time at a redemption price of 100% of
the principal amount thereof plus accrued interest to the redemption date.
If, after the occurrence of a Determination of Taxability, (1) the Company
has purchased and paid for the Project in accordance with Section 10.6 of the
Financing Agreement, or (ii) the State has delivered to the Trustee moneys,
received by the Director from the exercise of remedies under the Financing
Agreement, sufficient to provide for redemption of its Series 199110 Bonds, the
Series 1991-10 Bonds are subject to mandatory redemption by the State at a
redemption price of 103% of the principal amount redeemed plus accrued interest
to the redemption date on a date selected by the Trustee but not less than
thirty (30) nor more than sixty (60) days following the earliest date upon which
the Trustee has in its possession moneys sufficient to redeem the Series 1991-10
Bonds. The Series 1991-10 Bonds shall be redeemed in whole unless, in the
opinion of Independent Tax Counsel, the redemption of a portion of the
outstanding principal amount of the Series 1991-10 Bonds would have the result
that the interest payable on the Series 1991-10 Bonds remaining outstanding
after such redemption would not be included in the gross income for federal
income tax purposes of any holder of the Series 1991-10 Bonds (other than a
holder who is a "substantial user" of the Project or a "related person" within
the meaning of Section 147(a) of the Code), in which event only such portion of
the outstanding Series 1991-10 Bonds shall be redeemed.
If, after the occurrence of a Determination of Taxability, the Company has
failed to purchase and pay for the Project in accordance with Section 10.6 of
the Financing Agreement, the interest rates on the Series 1991-10 Bonds shall
increase by 2.25% per annum over rates set forth in the immediately preceding
table effective on the 31st day after the occurrence of the Determination of
Taxability.
The Series 1991-10 Bonds maturing after June 1, 1996 are also subject to
redemption at the option of the State, but if the company is not in default
under the Financing Agreement, only at the direction of the Company, prior to
maturity on or after June 1, 1996, in whole at any time or in part on any
Interest Payment Date, at the redemption prices (expressed as a percentage of
the principal amount) set forth below, plus accrued interest to the redemption
date:
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Redemption Period Redemption Price
----------------- ----------------
June 1, 1996 through May 31, 1997, inclusive 102%
June 1, 1997 through May 31, 1998, inclusive 101
June 1, 1998 and thereafter 100
The Series 1991-10 Bonds maturing an June 1, 2001 are subject to mandatory
redemption by the State at a redemption price equal to 100% of the principal
amount redeemed plus accrued interest to the date of redemption on the dates and
in the principal amounts set forth below:
Date Amount
---- ------
December 1, 1999 $375,000
June 1, 2000 375,000
December 1, 2000 375,000
Unless otherwise retired prior to maturity, the remaining principal amount of
Series 1991-10 Bonds ($375,000), will be payable at their maturity on June 1,
2001.
The State shall have the option to deliver to the Trustee for cancellation
Series 1991-10 Bonds maturing on June 1, 2001, in any aggregate principal amount
and receive a credit against the then current applicable mandatory redemption
requirement as set forth above for such Series 1991-10 Bonds. A credit shall
also be received for any Series 1991-10 Bonds maturing an June 1, 2001, which
prior thereto have been redeemed (other than through the operation of the
mandatory redemption requirements) or purchased for cancellation and canceled
pursuant to Section 2.06 of the Trust Agreement and not theretofore applied as a
credit against any mandatory redemption requirement for such Series 1991-10
Bonds. Each Series 1991-10 Bond maturing on June 1, 2001, so delivered, or
previously redeemed or canceled, shall be credited by the Trustee at 100% of its
principal amount against the applicable mandatory redemption requirement on that
mandatory redemption date, the principal amount of such Series 1991-10 Bonds to
be redeemed by operation of the mandatory redemption requirements on that date
shall be accordingly reduced, and any excess of that amount may be credited
against future applicable mandatory redemption requirements. The Treasurer will
on or before the 45th day preceding each mandatory redemption date furnish the
Trustee with a certificate, signed by the Treasurer or an Authorized Officer,
stating the extent of the credit to be applied with respect to the applicable
mandatory redemption requirement of that payment date. If that certificate is
not timely furnished to the Trustee, the applicable mandatory redemption
requirement shall not be reduced.
If fewer than all of the outstanding Series 1991-10 Bonds are called for
optional or mandatory redemption at one time, the selection of the Series
1991-10 Bonds (including portions thereof) to be called for redemption shall be
made in the manner provided in Section 3.03 of the Trust Agreement. Notice of
call for redemption of Series 1991-10 Bonds shall be given in the manner
provided in Section 5(d) of the General Bond Order.
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Principal of and redemption premium on the Series 1991-10 Bonds when due
shall be payable to the registered owners, as provided in Section 5(e) of the
General Bond Order, upon presentation and surrender thereof, at the office of
the Trustee. Interest on the Series 1991-10 Bonds when due shall be payable,
except as otherwise provided in Section 5(e) of the General Bond Order, to the
registered owners by check or draft mailed by the Trustee as provided in Section
5(e) of the General Bond order.
The Trustee may enter into an agreement with the registered owner of a
Series 1991-10 Bond providing for making all payments to that owner of principal
and interest on that Series 1991-10 Bond or any portion thereof (other than any
payment of the entire unpaid principal amount thereof) at a place and in a
manner (including wire transfer of federal funds) other than as provided above
in this Section 5, without prior presentation or surrender of the Series 1991-10
Bond, upon any conditions which shall be satisfactory to the Trustee and the
Treasurer. That payment in any event shall be made to the person who is the
registered owner of that Series 1991-10 Bond an the date that principal is due,
or, with respect to the payment of interest, as of the applicable date agreed
upon as the case may be. The Trustee will furnish a copy of each of those
agreements, certified to be correct by the Trustee, to other Paying Agents for
the Series 1991-10 Bonds and to the Treasurer. Any payment of principal or
interest pursuant to such an agreement shall constitute payment thereof pursuant
to, and for all purposes of, this order.
The Series 1991-10 Bonds shall be executed and authenticated by the persons
and in the manner provided in the Trust Agreement.
The Series 1991-10 Bonds shall be initially issued to a Depository for use
in a book entry system, and the following provisions of this Section 5 shall
apply notwithstanding any other provision of this order: (i) there shall be a
single Series 1991-10 Bond of each maturity, (ii) those Series 1991-10 Bonds
shall be registered in the name of the Depository or its nominee, as registered
owner, and immobilized in the custody of the Depository; (iii) the beneficial
owners in book entry form shall have no right to receive Series 1991-10 Bonds in
the form of physical securities or certificates; (iv) ownership of beneficial
interests in any Series 1991-10 Bonds in book entry form shall be shown by book
entry on the system maintained and operated by the Depository, and transfers of
the ownership of beneficial interests shall be made only by the Depository and
by book entry; and (v) the Series 1991-10 Bonds as such shall not be
transferable or exchangeable, except for transfer to another Depository or to
another nominee of a Depository, without further action by the State. Debt
Service Charges on series 1991-10 Bonds in book entry form registered in the
name of a Depository or its nominee shall be payable in next day funds delivered
to the Depository or its authorized representative (1) in the case of interest,
on each interest payment date, and (ii) in all other cases, upon presentation
and surrender of Series 1991-10 Bonds as provided in this Order.
The Treasurer and the Trustee shall execute and deliver the letter
agreement among the State, the Trustee and The Depository Trust Company, as
Depository, to be delivered in
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connection with the issuance of the Series 1991-10 Bonds to a Depository for use
in a book entry system.
If any Depository determines not to continue to act as a depository for the
Series 1991-10 Bonds for use in a book entry system, the State and the Trustee
may attempt to have established a securities depository/book entry relationship
with another qualified Depository. If the State and the Trustee do not or are
unable to do so, the State and the Trustee, after the Trustee has made provision
for notification of the beneficial owners by the then Depository, shall permit
withdrawal of the Series 1991-10 Bonds from the Depository, and authenticate and
deliver Series 1991-10 Bond certificates in fully registered form to the assigns
of the Depository or its nominee, all at the cost and expense (including costs
of printing definitive Series 1991-10 Bonds), if the event is not the result of
action or inaction by the State or the Trustee, of those persons requesting such
issuance.
Section 6. Sale of Series 1991-10 Bonds. The Series 1991-10 Bonds shall be
sold pursuant to the terms of the Bond Purchase Agreement, which is hereby
approved in all respects. The Bond Purchase Agreement shall be substantially in
the form now on file with the Treasurer, together with such changes and
insertions therein as may be approved by the Treasurer in executing the Bond
Purchase Agreement with this execution being conclusive evidence of that
approval. The State hereby ratifies the use of the Preliminary official
Statement and consents to the use of the Official Statement, each identified in
the Bond Purchase Agreement, in connection with the initial sale of the Series
1991-10 Bonds. The forms of the Preliminary official Statement and the Official
Statement are hereby approved.
Section.7. Allocation of Proceeds of Series 1991-10 Bonds; Creation of
Accounts. The proceeds from the sale of the Series 1991-10 Bonds, including any
premium and accrued interest, shall be received and receipted by the Treasurer,
and shall be allocated, deposited and credited as follows:
(i) To the Debt Service Account, accrued interest and any premium
received on the sale of the Series 1991-10 Bonds;
(ii) To the Issuance Expense Account, the sum of $73,865;
(iii) To the Primary Reserve Account, the sum of $671,500 (the
"Original Deposit"); and
(iv) To the Program Transfer Account, the balance of the proceeds.
There is hereby created as a separate deposit account in the custody of the
Trustee the Series 1991-10 Issuance Expense Account. Moneys in the Issuance
Expense Account shall be disbursed by the Trustee, upon the written direction of
the Director of Development, for payment of issuance expenses incurred in
connection with the issuance of the Series 1991-10 Bonds,
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including, but not limited to-1 the fees of the Original Purchasers, the
acceptance fee of the Trustee, the fees and disbursements of bond counsel,
printing fees and rating agency fees. On October 31, 1991, the Trustee shall
transfer any balance remaining in the Issuance Expense Account to the Project
Fund. Moneys in the Issuance Expense Account may be invested and reinvested by
the Trustee, at the direction of the Treasurer, In Eligible Investments, which
are not "investment property" within the meaning of Section 148.of the Code, and
the earnings from any such investments shall be credited to the Project Fund.
In accordance with Section 7 of the General Bond order, there are hereby
created as separate deposit accounts in the custody of the Trustee the Series
1991-10 Primary Reserve Account (the "Primary Reserve Account") and the Series
1991-10 Collateral Proceeds Account (the "Collateral Proceeds Account"). Moneys
in the Primary Reserve Account shall be invested and disbursed in accordance
with the provisions of the General Bond Order. Moneys in the Collateral Proceeds
Account shall be invested and disbursed in accordance with the provisions of the
Financing Agreement and the General Bond Order.
Section 8. Project Fund. In accordance with Section 16 of the General Bond
Order, there is hereby created as a separate deposit account in the custody of
the Trustee the series 1991-10 Project Fund (the "Project Fund"). Promptly after
the deposit of Series 1991-10 Bonds proceeds in the Program Transfer Account in
accordance with Section 7 of this order, an amount of money equal to the amount
so deposited shall be transferred from the Program Transfer Account to the
Project Fund. Moneys in the Project Fund shall be invested and disbursed by the
Trustee in accordance with the provisions of the Financing Agreement.
Section 9. Payments to Debt Service Account. The Treasurer hereby
acknowledges and confirms its agreement, pursuant to Section 14 of the General
Bond Order, to pay to the Trustee for deposit in the Debt Service Account at the
times set forth in said section, but only from the sources described in said
Section and only to the extent that such moneys are available from such sources,
moneys, which together with other moneys held by the Trustee and available for
such purpose, will be sufficient to permit the Trustee to pay the Debt Service
Charges on the Series 1991-10 Bonds.
Section 10. Supplement Number Twenty. The Treasurer shall in connection
with the issuance of the Series 1991-10 Bonds execute and deliver to the
Trustee, in the name of and on behalf of the State, Supplement Number Twenty
pursuant to the Trust Agreement and containing provisions as permitted by the
Act ind the Trust Agreement and approved by the Treasurer. Approvals by the
Treasurer shall be conclusively evidenced by the execution of Supplement Number
Twenty by the Treasurer.
Section 11. Federal Income Tax Exemption. The State covenants that it will
restrict the use of the proceeds of the Series 1991-10 Bonds in such manner and
to such extent as may be necessary so that the Series 1991-10 Bonds will not
constitute arbitrage bonds under Section 148 of the Code. The Treasurer or an
Authorized Officer, alone or in conjunction with the Company
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or any officer, employee or agent of or consultant to the Company, shall give an
appropriate certificate of the State for inclusion in the transcript of
proceedings for the Series 1991-10 Bonds, setting forth the reasonable
expectations of the State regarding the amount and use of the proceeds of the
Series 1991-10 Bonds, the facts, estimates and circumstances on which they are
based, and other facts and circumstances relevant to the tax treatment of
interest on the Series 1991-10 Bonds.
The State covenants that it (i) will take, or require to be taken, all
actions that may be required of it for the interest on the Series 1991-10 Bonds
to be and remain excluded from gross income for federal income tax purposes, and
(ii) will not take or authorize to be taken any actions that would adversely
affect that exclusion under the provisions of the Code. The Treasurer or an
Authorized Officer shall take any and all actions and make or give such reports
and certifications as may be appropriate to assure such exclusions of that
interest.
The Treasurer shall join the Company and the Trustee in executing and
delivering the Federal Income Tax Compliance Agreement.
Section 12. Section 144(a)(4) Election. The State hereby elects to have the
$10 million dollar limit in Section 144(a)(4) of the Code apply with respect to
the Series 1991-10 Bonds.
Section 13. General. The appropriate officers of the State will do all
things necessary and proper to implement and carry out the orders and agreements
met forth in or approved In the General Bond order and this Order, for the
proper fulfillment of the purposes thereof. The Treasurer shall furnish to the
Original Purchasers a true certified transcript of all proceedings had with
reference to the authorization and issuance of the Series 1991-10 Bonds- along
with other information as is necessary or proper with respect to the Series
1991-10 Bonds.
Order dated: September 18, 1991 /s/ Mary Ellen Withrow
--------------------------
Mary Ellen Withrow
Treasurer of State
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and
WHEREAS, the text of the Series 1991-10 Bonds, the form of assignment to be
printed thereon, the certificate of authentication to be endorsed thereon and
other provisions to be included therein are to be substantially in the following
forms with appropriate omissions, additions, insertions and variations as in the
Trust Agreement provided or permitted or as requested by the Trustee or
Authenticating Agent:
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BOND FORM
(Form of Series 1991-10 Bond)
REGISTERED NO. REGISTERED
$
United States of America
State of Ohio
State Economic Development Revenue Bond (Ohio Enterprise Bond Fund)
Series 1991-10
(Luigino's, Inc. Project)
Interest Rate Per Annum Maturity Date Dated Date
% (June 1)(December 1, ____ _________
Registered Owner:
Principal Amount: DOLLARS
THE STATE OF OHIO (the "State"), for value received, promises to pay to the
Registered Owner named above, or registered assigns, but solely from the sources
and in the manner hereinafter referred to, the principal amount stated above on
the Maturity Date stated above (subject to applicable provisions for prior
redemption in whole or in part described herein) and interest thereon, from the
Dated Date stated above until the principal amount is paid or provided for at
the Interest Rate stated above on June I and December 1 of each year, commencing
December 1, 1991 (the "Interest Payment Dates"). Interest will be based upon a
year of twelve 30-day months.
Principal, interest and any redemption premium ("Debt Service Charges") are
payable in lawful money of the United States of America, without deduction for
the services of any paying agent, to the person in whose name this Series
1991-10 Bond (or, if applicable, one or more predecessor Series 1991-10 Bonds)
is registered on the applicable record date (the "owner") on the Register
maintained by the Trustee as Bond Registrar. Principal and any redemption
premium are payable upon presentation and surrender of this Bond at the
principal corporate trust office of the Trustee, at present The Provident Bank,
Cincinnati, Ohio (the "Trustee"). Interest payable on each Interest Payment Date
is payable by check or draft mailed by the Trustee to the owner of this Series
1991-10 Bond (or one or more predecessor Series 1991-10 Bonds) as shown on the
Register at the close of business on the 15th day of the calendar month next
preceding that Interest Payment Date (the "Regular Record Date"), at the address
appearing thereon. The Trust Agreement contains provisions for a Special Record
Date in any case of interest not timely paid or provided for by the State.
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DEBT SERVICE CHARGES ARE PAYABLE SOLELY FROM AND THAT PAYMENT IS SECURED BY
A PRIOR PLEDGE OF TEE DEBT SERVICE ACCOUNT AND THE PLEDGED RECEIPTS AS DEFINED
IN AND TO THE EXTENT AND IN THE MANNER PROVIDED IN THE TRUST AGREEMENT. THE
RIGHT OF OWNERS OF THE SERIES 1991-10 BONDS TO PAYMENT OF DEBT SERVICE CHARGES
SHALL BE LIMITED TO THOSE PLEDGED RECEIPTS, AND THOSE OWNERS SHALL HAVE NO RIGHT
TO HAVE MONEYS RAISED BY TAXATION OBLIGATED OR PLEDGED FOR THE PAYMENT OF DEBT
SERVICE CHARGES.
This Series 1991-10 Bond is one of the State Economic Development Revenue
Bonds (Ohio Enterprise Bond Fund) (collectively, the "Bonds")authorized and from
time to time to be authorized in various series under and pursuant to Section 13
of Article VIII of the Ohio Constitution, Chapter 166 of the Ohio Revised Code
(the "Act"), the General Bond Order issued by the Treasurer of State of the
State of Ohio (the "Treasurer") on April 11, 1988, and the Trust Agreement dated
as of April 1, 1988 between the State and the Trustee as the same has been and
may be supplemented or amended in accordance with its terms (collectively, the
"Trust Agreement"), to provide moneys for the purposes of the State's Facilities
Establishment Fund, including transfers from those Funds authorized by the
General Bond Order, to fund reserves and for other Authorized Purposes as
provided for in the Act, all relating to providing capital facilities and
improvements for industry, commerce, research and distribution under the State's
economic development financing program provided for in the Act. As provided in
and subject to the Trust Agreement, the Bonds may be issued from time to time in
one or more series, in various principal amounts, with different maturities and
interest rates, and may otherwise vary. The aggregate principal amount of Bonds
that may be issued under the Trust Agreement is not limited except as provided
in the Trust Agreement and as is or may hereafter be provided by law or a Series
Bond Order, and all Bonds will be equally and ratably secured by the pledges and
covenants made therein except as it otherwise expressly provides or permits.
Reference is made to the Trust Agreement for a more complete description of
the provisions, among others, with respect to the nature and extent of the
security, the rights, duties and obligations of the State, the Trustee, the Bond
Registrar, the Authenticating Agent and the owners, and the terms and conditions
upon which the Bonds are issued and secured. Each owner, by the acceptance
hereof, assents to all of the provisions of the Trust Agreement.
This Series 1991-10 Bond is one of a series of the Bonds (the Series
1991-10 Bonds"), in the aggregate principal amount of $6,715,000, specifically
authorized by and issued pursuant to Series Bond Order No. R10-91 issued by the
Treasurer on September 18, 1991, and the Trust Agreement, including the
Twentieth Supplemental Trust Agreement dated as of September 1, 1991, for the
purpose of providing funds for the acquisition of equipment for a frozen food
production facility (the "Project") and paying a portion of the costs of
issuance of the Series 1991-10 Bonds. The Project will be leased to Luigino's,
Inc. (the "Company") pursuant to a Lease, dated as of September 1, 1991 (the
"Financing Agreement"), between the Director of Development of the State of Ohio
and the Company.
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The Series 1991-10 Bonds are issuable only as fully registered bonds in the
denominations of $5,000 and any integral multiple thereof. This Bond is
transferable, and Is exchangeable for Series 1991-10 Bonds of authorized
denominations in equal aggregate principal amounts, at the office of the
Trustee, by the owner in person or by attorney authorized in writing, upon
presentation and surrender hereof to one of these offices, all subject to the
terms, limitations and conditions provided in the Trust Agreement. The Trustee
and Authenticating Agent are not required to transfer or exchange (i) any Bond
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of Bonds and ending at the close of
business on the day of that mailing, or (ii) any Bonds so selected for
redemption (in whole or in part) within the next succeeding 90 days. The Trustee
shall not record any transfer of this Series 1991-10 Bond nor authenticate or
deliver any Series 1991-10 Bond to a transferee unless and until the Treasurer
has directed the Trustee, in writing, to record such transfer and deliver such
Series 1991-10 Bond. Any such written direction from the Treasurer to the
Trustee shall be accompanied by an opinion of legal counsel satisfactory to the
Treasurer, as indicated in such written direction, addressed to the Treasurer
and the Trustee, to the effect that such transfer is in compliance with all
applicable federal and state securities laws. Such legal opinion shall be
furnished at the expense of the transferor of the Series 1991-10 Bond.
In the event of exercise by the Company of its option to purchase the
Project upon the occurrence of certain events as described and provided for in
Section 10.2 of the Financing Agreement, the Series 199110 Bonds are subject to
redemption by the State in whole at any time at a redemption price of 100% of
the principal amount thereof plus accrued interest to the redemption date.
If, after the occurrence of a Determination of Taxability, (i) the Company
has purchased and paid for the Project in accordance with Section 10.6 of the
Financing Agreement, or (ii) the state has delivered to the Trustee moneys,
received by the Director from the exercise of remedies under the Financing
Agreement, sufficient to provide for redemption of its Series 1991-10 Bonds, the
Series 1991-10 Bonds are subject to mandatory redemption by the State at a
redemption price of 103% of the principal amount redeemed plus accrued interest
to the redemption date on a date selected by the Trustee but not less than
thirty (30) nor more than sixty (60) days following the earliest date upon which
the Trustee has in its possession moneys sufficient to redeem the Series 1991-10
Bonds. The Series 1991-10 Bonds shall be redeemed in whole unless, in the
opinion of Independent Tax Counsel, the redemption of a portion of the
outstanding principal amount of the Series 1991-10 Bonds would have the result
that the interest payable on the Series 1991-10 Bonds remaining outstanding
after such redemption would not be included in the gross income for federal
income tax purposes of any holder of the Series 1991-10 Bonds (other than a
holder who is a "substantial user" of the Project or a "related person" within
the meaning of Section 147(a) of the Code), in which event only such portion of
the outstanding Series 1991-10 Bonds shall be redeemed. "Determination of
Taxability" means the receipt by the Trustee or a Bondholder of a ruling or
technical advice by the Internal Revenue Service in which the Company has
participated or a written opinion by an attorney or firm of attorneys of
recognized standing on the subject of municipal bonds selected by the Trustee or
a Bondholder
-15-
<PAGE>
and approved by the Company, which approval shall not be unreasonably withheld,
to the effect that interest on the Series 1991-10 Bonds is includable in the
gross income for federal income tax purposes of a holder (other than a holder
who is a "substantial user" of the Project or a "related person" as such terms
are used in Section 147(a) of the Internal Revenue Code of 1986, as amended).
If, after the occurrence of a Determination of Taxability, the Company has
failed to purchase and pay for the Project in accordance with Section 10.6 of
the Financing Agreement, the interest rates on the Series 1991-10 Bonds shall
increase by 2.25% per annum over rates set forth in the immediately preceding
table effective on the 31st day after the occurrence of the Determination of
Taxability.
The Series 1991-10 Bonds maturing after June 1, 1996 are also subject to
redemption at the option of the State, but if the Company is not in default
under the Financing Agreement, only at the direction of the Company, prior to
maturity on or after June 1, 1996, in whole at any time or in part on any
Interest Payment Date, at the redemption prices (expressed as a percentage of
the principal amount) set forth below, plus accrued interest to the redemption
date:
Redemption Period Redemption Price
----------------- ----------------
June 1, 1996 through May 31, 1997, inclusive 102%
June 1, 1997 through May 31, 1998, inclusive 101
June 1, 1998 and thereafter 100
The Series 1991-10 Bonds maturing on June 1, 2001 are subject to mandatory
redemption by the State at a redemption price equal to 100% of the principal
amount redeemed plus accrued interest to the date of redemption on the dates and
in the principal amounts set forth below:
Date Amount
---- --------
December 1, 1999 $375,000
June 1, 2000 375,000
December 1, 2000 375,000
Unless otherwise retired prior to maturity, the remaining principal amount of
such Series 1991-10 Bonds ($375,000), will be payable at their maturity on June
1, 2001.
If fewer than all Series 1991-10 Bonds are to be redeemed at one time they
shall be selected by lot by the Trustee. Optional and mandatory redemption will
be exercised by notice mailed by the Trustee at least 30 days prior to the
redemption date to the owner, as shown on the Register on the 15th day preceding
the mailing, of each Series 1991-10 Bond subject to redemption in whole or part
at the owner's address then shown thereon. If Series 1991-10 Bonds or portions
of Series 1991-10 Bonds are called for redemption and if on that redemption date
-16-
<PAGE>
moneys for the redemption thereof are held in an appropriate fund or account so
as to be available therefor, then from and after that redemption date those
Series 1991-10 Bonds or portions of Series 1991-10 Bonds shall cease to bear
interest and shall cease to be secured by and shall not be deemed to be
outstanding under the Agreement.
The owners of the Series 1991-10 Bonds and other bonds issued under the
Trust Agreement (collectively, the "Bonds") will not be entitled to enforce the
provisions of, or to institute, appear in or defend any suit, action or
proceeding to enforce any rights, remedies or covenants granted or contained in,
or to take any action with respect to any event of default under, the Trust
Agreement, except as provided in the Trust Agreement.
The Trust Agreement permits certain amendments to the Trust Agreement to be
made without the consent of or notice to the owners, and other amendments to be
made with the consent of the owners of a majority in aggregate principal amount
of the Bonds then outstanding to be affected thereby.
This Series 1991-10 Bond shall not constitute the personal obligation of
the Treasurer of State.
This Series 1991-10 Bond shall not be entitled to any security or benefit
under the Trust Agreement or become valid or obligatory for any purpose until
the certificate of authentication hereon shall have been signed.
It is hereby certified and recited that all acts and conditions necessary
to be done or to happen or exist precedent to and in the issuance of the Series
1991-10 Bonds in order to make them legal, valid and binding special obligations
of the State, in accordance with their terms, and in the execution and delivery
of the Trust Agreement and Twentieth Supplemental Trust Agreement described
herein, have been done and happened or exist as required by law; that payment in
full for the Series 1991-10 Bonds has been received; and that the Series 1991-10
Bonds do not exceed or violate any constitutional or statutory limitation.
IN WITNESS WHEREOF, the state of Ohio, under the authority described in
this Series 1991-10 Bond, has caused this Series 1991-10 Bond to be executed by
the facsimile signature of the Treasurer of State of the State of Ohio, and a
facsimile of the Great Seal of State of Ohio to be affixed hereon, as of the
date stated above.
--------------------------------------
Treasurer of State
(Great Seal)
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<PAGE>
CERTIFICATE OF AUTHENTICATION
This Series 1991-10 Bond is one of the Series 1991-10 Bonds issued under
the provisions of the within mentioned Trust Agreement and Twentieth
Supplemental Trust Agreement.
The Provident Bank, as Trustee
By
-----------------------------------
Authorized Officer
Date of Registration and
Authentication:
----------------------
[Form of Assignment]
For value received, the undersigned sells, assigns and transfers unto
________________ the within Series 1991-10 Bond and irrevocably constitutes and
appoints __________________ attorney to transfer this Bond on the Register, with
full power of substitution in the premises.
Dated:
- ---------------------------
Signature Guaranteed:
- ---------------------------
Notice: The assignor's signature to this assignment must correspond exactly with
the name as it appears on the face of this Bond.
-18-
<PAGE>
WHEREAS, the State has, or will have, in all respects complied with the
provisions of the Trust Agreement so as to be entitled to execute and to have
authenticated and delivered the Series 1991-10 Bonds.
WHEREAS, pursuant to Section 4 of the General Bond order and the applicable
provisions of Article VIII of the Trust Agreement, the State desires by this
Supplement Number Twenty and the Series Bond Order above to provide for the
issuance pursuant to the Trust Agreement of the Series 1991-10 Bonds;
NOW, THEREFORE, THIS Twentieth SUPPLEMENTAL TRUST AGREEMENT, WITNESSETH
that in order to secure the payment of the principal of and interest on the
Series 1991-10 Bonds according to their true intent and meaning, and to secure
the performance and observance of all covenants and conditions therein, herein,
and in the Trust Agreement contained, and for and in consideration of the
premises and of the purchase and acceptance of the Series 1991-10 Bonds by the
holders thereof from time to time, and the acceptance by the Trustee of the
further trust hereby created, and for other good and valuable consideration, the
receipt of which is acknowledged, the State has executed and delivered this
Supplement Number Twenty.
IN TRUST, NEVERTHELESS, upon the terms and trusts in the Trust Agreement
and this Supplement Number Twenty set forth for the security of all present and
future holders of the Bonds issued or to be issued under and secured by the
Trust Agreement, without priority of any one Bond over any other by reason of
series designation, form, number, date of authorization, issuance, sale,
execution or delivery, or date of the Bond or of maturity, except as may be
otherwise permitted by the Trust Agreement.
Section 1. Incorporation of Order. The terms and provisions of the Series
Bond order No. R10-91, as set forth above, constitute part of this Supplement
Number Twenty as if these terms and provisions were here set forth.
Section 2. Form, Execution, Authentication and Delivery. The Series 1991-10
Bonds shall be executed, authenticated and delivered as provided herein and in
the Trust Agreement, and in the Series 1991-10 Bonds, and the certificate of
authentication to be endorsed thereon shall be substantially In the form
provided herein with any necessary modifications to conform hereto.
Section 3. Transfer, Exchange and Registration. The Series 199110 Bonds are
subject to all the terms and conditions of the Trust Agreement relating to
transfer, exchange and registration.
Section 4. Proceeds of Sale. The proceeds from the sale of the Series
1991-10 Bonds shall be applied as provided in Series Bond Order No. R10-91.
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<PAGE>
Section 5. Concerning the Trustee. The Trustee accepts the trusts herein
declared and provided and agrees to perform the same upon the terms and
conditions in the Trust Agreement and in this Supplement Number Twenty.
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Supplement Number Twenty or the
due execution thereof by the State, or for or in respect of the recitals herein
contained, all of which recitals are made by the State solely.
IN WITNESS WHEREOF, the State has caused this Twentieth Supplemental Trust
Agreement to be executed by its duly authorized Treasurer of State, and The
Provident Bank, Cincinnati, Ohio, as Trustee, in token of its acceptance of the
trusts created hereunder, has caused this Twentieth Supplemental Trust Agreement
to be executed in its name, all as of the date first written above.
STATE OF OHIO
By: /s/ Mary Ellen Withrow
-----------------------------------
Mary Ellen Withrow
Treasurer of State
THE PROVIDENT BANK, Trustee
By: /s/ Craig M. Mann
-----------------------------------
Craig M. Mann, Vice President
By:
-----------------------------------
___________________ , Trust Officer
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<PAGE>
EXHIBIT 10.7
- --------------------------------------------------------------------------------
LEASE
between
THE DIRECTOR OF DEVELOPMENT
OF THE STATE OF OHIO
and
LUIGINO'S, INC.
Dated
as of
September 1, 1991
(OHIO ENTERPRISE BOND FUND PROGRAM)
- --------------------------------------------------------------------------------
<PAGE>
INDEX
(The Index is not a part of this Lease and
is only for convenience of reference.)
Page
----
ARTICLE I - DEFINITIONS .................................................
Section 1.1. Use of Defined Terms.....................................
Section 1.2. Definitions..............................................
Section 1.3. Certain Words and References.............................
ARTICLE II - DETERMINATION AND REPRESENTATIONS...........................
Section 2.1. Determinations of the Director...........................
Section 2.2. Representations of the Company...........................
ARTICLE III - COMMENCEMENT AND COMPLETION OF THE PROJECT.................
Section 3.1. Provision of the Project.................................
Section 3.2. Deposits to the Project Fund and the
Issuance Expense Account.................................
Section 3.3. Disbursements from the Project Fund......................
Section 3.4. Establishment of Completion Date.........................
Section 3.5. Company Required to Pay Acquisition,
Construction and Installation Costs in
Event Project Fund Insufficient..........................
Section 3.6. Remedies to Be Pursued Against Contractors and
Subcontractors and their Sureties........................
Section 3.7. Investment of Project Fund, Primary Reserve
Account or Collateral Proceeds Account...................
Section 3.8. Lease as Security Agreement..............................
Section 3.9. Plans and Specifications; Inspections....................
ARTICLE IV - LEASE OF PROJECT, LEASE TERM AND RENTAL.....................
Section 4.1. Lease of Project.........................................
Section 4.2. Lease Term and Possession................................
Section 4.3. Rents and Other Amounts Payable..........................
Section 4.4. Place of Payments........................................
Section 4.5. Primary Reserve Account..................................
Section 4.6. Obligation of the Company Hereunder Unconditional........
ARTICLE V - MAINTENANCE, TAXES AND INSURANCE.............................
Section 5.1. Maintenance and Modifications of Project by the Company..
Section 5.2. Removal of Project Equipment.............................
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<PAGE>
Section 5.3. Indemnification by the Company...........................
Section 5.4. Taxes, Other Governmental Charges and Utility Charges....
Section 5.5. Insurance Required.......................................
Section 5.6. Additional Provisions Respecting Insurance...............
Section 5.7. Application of Net Proceeds of Insurance.................
Section 5.8. Public Liability Insurance...............................
Section 5.9. Advances.................................................
ARTICLE VI - DAMAGE, DESTRUCTION AND CONDEMNATION........................
Section 6.1. Damage and Destruction...................................
Section 6.2. Eminent Domain...........................................
Section 6.3. Condemnation of Company Owned Property...................
ARTICLE VII - SPECIAL COVENANTS..........................................
Section 7.1. No Warranty of Condition or Suitability..................
Section 7.2. Right of Access to the Project...........................
Section 7.3. through 7.5 [Reserved]...................................
Section 7.6. Information Concerning Operations........................
Section 7.7. Affirmative Covenants of the Company.....................
Section 7.8. Negative Covenants of the Company........................
Section 7.9. Mechanics' and Other Liens...............................
ARTICLE VIII - ASSIGNMENT, SUBLEASING AND SELLING;
REDEMPTION; RENT PREPAYMENT AND ABATEMENT..............................
Section 8.1. Assignment and Subleasing by the Lease...................
Section 8.2. Pledge by the Director...................................
Section 8.3. Restrictions on Transfer and Encumbrance of
Project by the Director..................................
Section 8.4. Redemption of Bonds......................................
Section 8.5. Prepayment of Rents......................................
Section 8.6. Lessee Entitled to Certain Rent Abatements if Bonds
Paid Prior to Maturity...................................
Section 8.7. Installation of the Company's Own Machinery
and Equipment............................................
ARTICLE IX - EVENTS OF DEFAULT AND REMEDIES..............................
Section 9.1. Event of Default.........................................
Section 9.2. Remedies on Default......................................
Section 9.3. No Remedy Exclusive......................................
Section 9.4. Agreement to Pay Attorneys' Fees and Expenses............
Section 9.5. No Additional Waiver Implied by One Waiver...............
Section 9.6. Waiver of Appraisement, Valuation, Etc...................
Section 9.7. Reinstatement............................................
ARTICLE X - OPTIONS AND OBLIGATIONS TO PURCHASE PROJECT..................
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<PAGE>
Section 10.1. Option to Terminate......................................
Section 10.2. Option to Purchase Project Prior to
Payment of the Bonds.....................................
Section 10.3. Agreement to Purchase Project............................
Section 10.4. Conveyance upon Exercise of Option to Purchase...........
Section 10.5. Option to Purchase, Redeem or Defease Bonds..............
Section 10.6. Purchase of Project Upon Determination of Taxability.....
ARTICLE XI - MISCELLANEOUS...............................................
Section 11.1. Surrender of Project.....................................
Section 11.2. Amounts Remaining in Collateral Proceeds Account
and Primary Reserve Account..............................
Section 11.3. Notices..................................................
Section 11.4. Net Lease................................................
Section 11.5. Binding Effect...........................................
Section 11.6. Extent of Covenants of the Director; No Personal
Liability................................................
Section 11.7 Amendments, Changes and Modifications....................
Section 11.8. Execution Counterparts...................................
Section 11.9. Severability.............................................
Section 11.10.Captions.................................................
Section 11.11.Governing Law............................................
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<PAGE>
LEASE
THIS LEASE made and entered into as of September 1, 1991 between the
Director of Development of the State of Ohio (the "Director"), and Luigino's,
Inc., a corporation organized under the laws of the State of Minnesota and
qualified to do business in the State of Ohio (the "Company"), under the
circumstances summarized in the following recitals (the capitalized terms used
in the recitals being used therein as defined in Article I hereof):
A. Pursuant to the Act, the Director is authorized, among other things,
to acquire property, and convey property so acquired, by lease, lease purchase
or other disposition, upon such terms and conditions as the Director determines
to be appropriate to satisfy the objectives of the Act.
B. The Company has requested-that the Director provide financial
assistance for the Project by acquiring and constructing the Project, leasing
the Project to the Company and conveying the Project to the Company upon
termination of the Lease Term, all subject to and in accordance with the terms
of this Lease.
C. The Director has determined that the Project constitutes an Eligible
Project and that the financial assistance to be provided pursuant to this Lease
is appropriate under the Act and will be in furtherance and in implementation of
the public policy set forth in the Act.
D. The financial assistance to be provided, pursuant to this Lease has
been reviewed and approved by the Development Financing Advisory Board and the
Controlling Board, pursuant to the Act.
NOW, THEREFORE, in consideration of the premises and the
representations and agreements hereinafter contained, the Director and the
Company agree as follows (provided, that any obligation of the Director created
by or arising out of this Lease shall not be a general debt on the part of the
Director or the State but shall be payable solely out of the rentals, revenues
and other income, charges and moneys realized from the use, lease, sale or other
disposition of the Project and any insurance and condemnation awards as herein
provided):
ARTICLE I
DEFINITIONS
Section 1.1. Use of Defined Terms. In addition to the words and terms
elsewhere defined in this Lease or by reference to other instruments, the words
and terms set forth in Section 1.2 hereof shall have the meanings therein set
forth unless the context or use expressly indicates different meaning or intent.
Such definitions shall be equally applicable to both the singular and plural
forms of any of the words and terms therein defined.
<PAGE>
Section 1.2. Definitions. As used herein:
"Act" means Chapter 166, Ohio Revised Code, as from time to time
enacted and amended.
"Additional Rent" means the additional rent specified in Section 4.3 of
this Lease.
"Allowable Costs" means "allowable costs of the Project within the
meaning of the Act.
"Application" means the Application of the Company, dated May 8, 1991,
submitted to the Director requesting assistance under the Act.
"Approved Letter of Credit" means an irrevocable letter of credit, in
form satisfactory to the Trustee, issued by a commercial bank organized under
the laws of the United States of America or any state thereof and acceptable to
the Director, which letter of credit may be drawn upon by the Trustee to provide
funds for the Primary Reserve Account pursuant to Section 4.5 of this Lease. An
Approved Letter of Credit must permit drawings thereunder for a period of not
less than one (1) year or until fifteen (15) days after the final maturity of
the Bonds, whichever first occurs.
"Authorized Company Representative" means the person at the time
designated to act on behalf of the Company by written certificate furnished to
the Director and the Trustee, containing the specimen signature of such person
and signed on behalf of the Company by the President or a Vice President of the
Company. Such certificate may designate an alternate or alternates.
"Bonds" means the State Economic Development Revenue Bonds (Ohio
Enterprise Bond Fund), Series 1991-10 (Luigino's, Inc. Project) authorized by
the General Bond Order and the Series Bond Order.
"Code" means the Internal Revenue Code of 1986, as amended, and
references to the Code and Sections of the Code shall include relevant
regulations and proposed regulations thereunder or under the Internal Revenue
Code of 1954, as amended, and any successor provisions to such Sections,
regulations or proposed regulations.
"Collateral Proceeds Account" means the Series 1991-9 Collateral
Proceeds Account, established pursuant to the General Bond Order and the Series
Bond Order, in the Economic Development Bond Service Fund.
"Commitment" means the letter from the Director to the Company, dated
July 23, 1991, pursuant to which the Director, on behalf of the State, agrees to
provide assistance under the Act for the Project.
-2-
<PAGE>
"Company" means Luigino's, Inc., a corporation organized under the laws
of the State of Minnesota.
"Completion Date" means the date of completion of the Project, as
certified by the Company pursuant to Section 3.4 hereof.
"Construction Period" means the period between the beginning of
construction or the date on which this Lease is delivered to the Director,
whichever is earlier, and the Completion Date.
"Controlling Board" means the Controlling Board of the State.
"Cost Certification" means a certification of the Company, as of a
specified date, setting forth in reasonable detail the costs incurred and, if
appropriate, to be incurred in completing the Provision of the Project,
including a detail, by category, of all Allowable Costs.
"Debt Service Account" means the Debt Service Account, established
pursuant to the General Bond Order, in the Economic Development Bond Service
Fund.
"Determination of Taxability" shall have the meaning set forth in the
Series Bond Order.
"Development Financing Advisory Board" means the Development Financing
Advisory Board of the State.
"Director" means the officer of the State, appointed pursuant to
Section 121.03 of the Ohio Revised Code, who administers and is the executive
head of the Department of Development, the officer who by law performs the
functions of that office, and any person acting on behalf of the Director of
Development pursuant to any delegation permitted by law.
"Economic Development Bond Service Fund" means the Economic Development
Bond Service Fund created by Section 166.08(S) of the Ohio Revised Code.
"Eligible Project" means an "eligible project" within the meaning of
the Act.
"Eligible Investments" means Eligible Investments as defined in the
Trust Agreement.
"Event of Default" means any of the events described as an event of
default in Section 9.1 hereof.
"Facilities Establishment Fund" means the Facilities Establishment Fund
created by Section 166.03 of the Ohio Revised Code.
-3-
<PAGE>
"Federal Income Tax Compliance Agreement" means the Federal Income Tax
Compliance Agreement among the Treasurer, the Trustee and the Company relating
to the Bonds.
"General Bond Order" means the General Bond Order of the Treasurer,
dated April 11, 1988, as the same may be amended from time to time in accordance
with its provisions or the provisions of the Trust Agreement.
"Governing Instruments" means the articles of incorporation and bylaws
of the Company.
"Governmental Authority" means, collectively, the State, any political
subdivision thereof, any municipality, and any agency, department, commission,
board or bureau of any of the foregoing having jurisdiction over the Project.
"Guarantors" means the Company and Jeno F. Paulucci.
"Guaranty" means the guaranty agreement of even date herewith between
the Guarantors and the Trustee.
"Independent Engineer" means an engineer or engineering firm or an
architect or architectural firm qualified to practice the profession of
engineering or architecture under the laws of State and who or which is not an
officer or a full time employee of the Company or any sublessee of the Project.
"Interest Rate For Advances" means (a) the interest rate borne by the
Bonds, or (b) a rate which is one percent in excess of the prime or base
interest rate then charged by the Trustee in its lending capacity as a bank,
whichever is greater and lawfully chargeable.
"Issuance Expense Account" means the Series 1991-10 Issuance Expense
Account created in the Series Bond Order.
"Lease" means this Lease, as from time to time amended or supplemented.
"Lease Approval Documents" means, with respect to the Lease, the
Recommendation of the Director to the Development Financing Advisory Board dated
May 22, 1991, the Resolution of the Development Financing Advisory Board dated
May 30,1991, the Approval of the Controlling Board dated July 8, 1991, and the
Commitment.
"Lease Term" or "Term" means the duration of the leasehold estate
created in this Lease as specified in Section 4.2 hereof.
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<PAGE>
"Net Proceeds," when used with respect to any insurance or condemnation
award, means the gross proceeds from the insurance or condemnation award with
respect to which that term is used remaining after payment of all expenses
incurred in the collection of such gross proceeds.
"Notice Address" means:
(a) As to the Director: Department of Development
P.O. Box 1001
Columbus, Ohio 43266-0101
Attn: Director
and
Bricker & Eckler
100 South Third Street
Columbus, Ohio 43215
Attn: Richard Kane, Esq.
(b) As to the Company: Luigino's, Inc.
525 Lake Avenue South
Duluth, Minnesota 55802
Attn: President
(c) As to the Trustee: The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45269
Attn: Corporate Trust Dept.
or such additional or different address, notice of which is given under Section
11.3 hereof.
"Original Deposit" means Six Hundred Seventy One Thousand Five Hundred
Dollars ($671,500), which amount (or an Approved Letter of Credit in such
amount) is to be deposited in the Primary Reserve Account upon delivery of this
Lease, in accordance with Section 4.5 hereof.
"Plans and Specifications" means the plans and specifications or other
appropriate documents describing the Project prepared by or at the direction of
the Company.
"Primary Reserve Account" means the Series 1991-10 Primary Reserve
Account, established pursuant to the General Bond Order and the Series Bond
Order, in the Economic Development Bond Service Fund.
"Project" means the Project Equipment, constituting an Eligible
Project.
-5-
<PAGE>
"Project Equipment" means the equipment, machinery and other personal
property described on Exhibit A attached hereto.
"Project Fund" means the Series 1991-10 Project Fund, established
pursuant to the Series Bond Order.
"Project Purposes" means equipment to be used in the production of
frozen food.
"Project Site" means the Company's frozen food production facility
located in Jackson, Ohio.
"Provision" means, as applicable, the acquiring, constructing,
reconstructing, rehabilitating, renovating, enlarging, improving, equipping or
furnishing of the Project.
"Series Bond Order" means Series Bond Order R10-91 of the-Treasurer,
dated September 18, 1991, as the same may be amended from time to time in
accordance with its provisions or the provisions of the Trust Agreement.
"State" means the State of Ohio.
"Supplement" means the Twentieth Supplemental Trust Agreement, dated as
of September 1, 1991, between the Treasurer and the Trustee, of which the Series
Bond Order is a part.
"Terms and Conditions to Disbursement" means the terms and conditions
which must be satisfied by the Company with respect to each request for
disbursement of moneys from the Project Fund in order to obtain the Director's
approval of such request for disbursement, which terms and conditions are get
forth on Exhibit B attached hereto.
"Treasurer" means the Treasurer of State of the State, or the officer
who by law performs the functions of that office.
"Trustee" means the trustee at the time serving an such under the Trust
Agreement, initially The Provident Bank, Cincinnati, Ohio.
"Trust Agreement" means the Trust Agreement, dated as of April 1, 1988,
between the Treasurer and the Trustee, of which the General Bond Order is a
part, as the same may be amended, modified or supplemented by any amendments or
modifications thereof and any supplements thereto (including, but not limited
to, the supplement) entered into in accordance with the provisions thereof.
Section 1.3. Certain Words and References. Any reference herein to the
Director shall include those succeeding to his functions, duties or
responsibilities pursuant to or by operation of
-6-
<PAGE>
law or lawfully performing such functions. Any reference to a section or
provision of the Constitution of the State or to the Act or to a section,
provision or chapter of the Ohio Revised Code shall include such section,
provision or chapter as from time to time amended, modified, revised,
supplemented or superseded.
The terms "hereof," "hereby,* "herein," "hereto," "hereunder" and
similar terms refer to this Lease; and the term "heretofore" means before, and
the term "hereafter" means after, the date of delivery of this Lease.
ARTICLE II
DETERMINATION AND REPRESENTATIONS
Section 2.1. Determinations of the Director. Pursuant to the Act and on
the basis of the representations and other information provided by the Company,
the Director has heretofore made certain determinations, as set forth in the
Lease Approval Documents, which are hereby confirmed, and the Director hereby
determines that the financial assistance to be provided by the State pursuant to
this Lease will conform to the requirements of the Act, including Section 166.02
thereof, and will further implement the purposes of the Act by creating new jobs
or preserving existing jobs and employment opportunities and improving the
economic welfare of the people of the State.
Section 2.2. Representations of the Company. The Company hereby
represents and warrants that:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota and
qualified to do business in the State.
(b) It has full power and authority to execute, deliver and
perform this Lease and to enter into and carry out the
transactions contemplated hereby. Such execution, delivery and
performance do not, and will not, violate any provision of law
applicable to the Company or the Governing Instruments of the
Company and do not, and will not, conflict with or result in a
default under any agreement or instrument to which the Company
is a party or by which it or any of its property or assets is
or may be bound. This Lease has, by proper action, been duly
authorized, executed and delivered and all necessary actions
have been taken to constitute this Lease a legal, valid and
binding obligation of the Company.
(c) The provision of financial assistance pursuant to the Lease
Approval Documents and this Lease induced the Company to
provide the Project, thereby creating new jobs or preserving
existing jobs and employment opportunities and improving the
economic welfare of the people of the State.
-7-
<PAGE>
(d) It presently intends that the Project will be used and
operated in a manner consistent with the Project Purposes
until the end of the Lease Term, and the Company knows of no
reason why the Project will not be so operated.
(e) There are no actions, suits or proceedings pending or
threatened against or affecting the Company or the Project
which, if adversely determined, would individually or in the
aggregate materially impair the ability of the Company to
perform any of its obligations under this Lease or adversely
affect the financial condition of the Company.
(f) The Company is not in default under this Lease or in the
payment of any indebtedness for borrowed money or under any
agreement or instrument evidencing any such indebtedness, and
no event has occurred which by notice, the passage of time or
otherwise would constitute any such event of default.
(g) Zoning regulations applicable to the Project Site permit the
Provision of the Project thereon in accordance with the Plans
and Specifications and the operation of the Company's business
thereon; and all utilities, including water, storm and
sanitary sewer, gas, electric and telephone, and rights of
access to public ways are available or will be provided to the
Project Site in sufficient locations and capacities to meet
the requirements of operating the Project and of any
applicable Governmental Authority.
(h) The Company has made no contract or arrangement of any kind,
other than this Lease, which has given rise to or the
performance of which by the other party thereto would give
rise to a lien or claim of lien on the Project or other
collateral covered by this Lease, and no materials or labor
have heretofore been supplied to or performed in connection
with the Project.
(i) No representation or warranty of the Company contained in any
of the Lease Approval Documents or this Lease, and no
statement contained in any certificate, schedule, list,
financial statement or other instrument furnished to the
Director by or on behalf of the Company (including, without
limitation, the Application) contains any untrue statement of
a material fact, or omits to state a material fact necessary
to make the statements contained herein or therein not
misleading.
(j) The financial statements of the Company heretofore delivered
to the Director are true and correct, in all respects, have
been prepared in accordance with generally accepted accounting
principles consistently applied, and fairly present the
financial condition and the results of operation of the
Company as of the dates thereof. No materially adverse change
has occurred in the financial condition of the Company since
the respective dates thereof.
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(k) The Company has conveyed, or caused to be conveyed, to the
Director good and marketable title to such portion, if any, of
the Project Equipment heretofore owned by the Company, subject
in all cases to no lien, charge, easement, condition,
restriction or encumbrance except as created by this Lease.
ARTICLE III
COMMENCEMENT AND COMPLETION OF THE PROJECT
Section 3.1. Provision of the Project. The Director agrees that it will
cause to be acquired and installed at the Project Site and for use of the
Company the Project Equipment, all of which acquisitions and installations shall
be made in accordance with the Plans and Specifications.
The Director further agrees that it will enter into, or accept the
assignment of, such contracts as the Company may request in order to effectuate
the purposes of this Section and that it will not make or execute any other
contract or give any order for such construction or for the acquisition and
installation of Project Equipment except in the manner provided in this Lease.
The Director hereby makes, constitutes and appoints the Company as its
true and lawful agent, with full power of substitution in the premises and the
Company hereby accepts such agency, (a) to acquire and install the Project
Equipment in accordance with the Plans and Specifications, (b) to make, execute,
acknowledge and deliver any contracts, orders, receipts, writings and
instructions, either in the name of the Company solely or as the stated agent
for the Director, with any other persons, firms or corporations, and in general
to do all things which ' may be requisite or proper, all for acquiring and
installing the Project Equipment with the same powers and with the same validity
as the Director could do if acting in its own behalf, (c) pursuant to the
provisions of this Lease, to pay all Allowable Costs incurred in the acquisition
and installation of the Project Equipment from funds made available therefor in
accordance with this Lease and (d) to ask, demand, sue for, levy, recover and
receive all such sums of money, debts, dues and other demands whatsoever which
may be due, owing and payable to the Director under the terms of any contract,
order, receipt, writing and instruction in connection with acquisition and
installation of the Project Equipment, and to enforce the provisions of any
contract, agreement, obligation, bond or other performance security. So long as
the Company is not in default under any of the provisions of this Lease, this
appointment of the Company to act as agent and all authority hereby conferred is
granted and conferred irrevocably to the Completion Date and thereafter until
all activities in connection with the acquisition and installation of the
Project Equipment shall have been completed, and shall not be terminated prior
thereto by act of the Director or the Company or by operation of law.
The Director and the Company each agree that acquisition and
installation of the Project Equipment shall proceed with all reasonable
dispatch.
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The Company agrees that all wages paid to laborers and mechanics
employed on the Project by the Company or its contractors or subcontractors
shall be paid at the prevailing rates of wages of laborers and mechanics for the
class of work called for by the Project, which wages shall be determined in
accordance with the requirements of Chapter 4115 of the Ohio Revised Code for
determination of prevailing wage rates.
Section 3.2. Deposits to the Project Fund and the Issuance Expense
Account. In order to provide funds for payment of the Allowable Costs of the
Project, the Director, upon delivery of this Lease, shall cause to be
transferred from the Facilities Establishment Fund to the Project Fund the sum
of Five Million Nine Hundred Nine Thousand Two Hundred Dollars ($5,909,200). In
order to provide funds for payment of costs of issuance of the Bonds in excess
of the amount of Bond proceeds deposited in the Issuance Expense Account, the
Company, upon delivery of this Lease, shall pay to the Trustee for deposit in
the Issuance Expense Fund the sum of Twenty-One Thousand Three Hundred
Forty-Nine Dollars ($21,349).
Section 3.3. Disbursements from the Project Fund. The Treasurer has, in
the Supplement, authorized and directed the Trustee to disburse the moneys in
the Project Fund for Allowable Costs of the Project. Except as otherwise
provided in this Lease, each payment from the Project Fund shall be made only
upon (A) the written direction of the Authorized Company Representative, who
shall certify with respect to each such payment: (i) that each item for which
payment is requested is an Allowable Cost properly payable out of the Project
Fund in accordance with the terms and conditions of this Lease and none of the
items for which the payment is proposed to be made has formed the basis for any
payment theretofore made from the Project Fund, (ii) that each item for which
payment is proposed to be made is or was necessary in connection with the
Project and (iii) that the Company has received from each payee appropriate
waivers of any mechanics' or other liens (or has provided indemnification in
lieu thereof satisfactory to the Director) and (B) the written approval of the
Director. The Director shall not be required to approve any request for
disbursement of moneys from the Project Fund unless the Company has complied
with all of the Terms and Conditions to Disbursement. The Trustee shall be
allowed a reasonable time, not to exceed fifteen (15) days, in view of the
character of any installment or investments required to be liquidated for the
purpose, for the making of any disbursement from the Project Fund authorized by
this Section.
Section 3.4. Establishment of Completion Date. The Company covenants
that the Completion Date shall occur not later than March 1, 1993. The
Completion Date shall be evidenced to the Director and to the Trustee by a
certificate signed by the Authorized Company Representative stating that, except
for amounts retained by the Trustee in the Project Fund for Allowable Costs of
the Project not then due and payable, (i) Provision of the Project has been
completed in accordance with the Plans and Specifications and all labor,
services, materials and supplies used in such acquisition, construction and
installation have been paid for, (ii) all other facilities necessary in
connection with the Project have been constructed, acquired and installed in
accordance with the plans and specifications therefor and all costs and expenses
incurred in connection therewith have been paid, (iii) the Project Equipment, if
any, (which shall be
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described in an exhibit attached to said certificate) has been installed to his
satisfaction, and as so installed is suitable and sufficient for the efficient
operation of the Project for the Project Purposes, and (iv) all materially
significant disputes, controversies or claims arising out of or in connection
with the acquisition, construction and installation of the Project have been
resolved, satisfied or paid in full, as the case may be. Notwithstanding the
foregoing, such certificate shall state that it is given without prejudice to
any rights against third parties which exist at the date of such certificate or
which may subsequently come into being. The Company shall also deliver to the
Director and to the Trustee a Cost Certification. Any amount remaining in the
Project Fund on the Completion Date, except for amounts which the Authorized
Company Representative certifies to the Trustee as being required to pay
Allowable Costs of the Project not then due and payable, shall be transferred by
the Trustee to' the Collateral Proceeds Account.
Section 3.5. Company Required to Pay Acquisition, Construction and
Installation Costs in Event Project Fund Insufficient. In the event the moneys
in the Project Fund available for payment of costs of the Project should not be
sufficient to pay the cost thereof in full, the Company agrees, for the benefit
of the Director, to complete the Project and to pay all the portion of the costs
of the Project as may be in excess of the moneys available therefor in the
Project Fund. The Director does not make any warranty, either express or
implied, that the moneys which will be paid into the Project Fund and which
under the provisions of this Lease will be available for payment of the
Allowable Costs of the Project will be sufficient to pay all the costs which
will be incurred in that connection. The Company agrees that if after exhaustion
of the moneys in the Project Fund the Company should pay any portion of the said
costs of the Project pursuant to the provisions of this Section, it shall not be
entitled to any reimbursement therefor from the Director or the Trustee, nor
shall it be entitled to any diminution in or postponement of the rents payable
under Section 4.3 hereof.
Section 3.6. Remedies to Be Pursued Against Contractors and
Subcontractors and their Sureties. In the event of default of any contractor or
subcontractor under any contract made by it in connection with the Project or in
the event of a breach of warranty with respect to any materials, workmanship, or
performance guaranty, the Company will promptly proceed, either separately or in
conjunction with others, to exhaust the remedies of the Company or the Director
against the contractor or subcontractor so in default and against each such
surety for the performance of such contract. The Company agrees to advise the
Director of the steps it intends to take in connection with any such default. If
the Company shall so notify the Director, the Company may, in its own name or in
the name of the Director, prosecute or defend any action or proceeding or take
any other action involving any such contractor, subcontractor or surety which
the Company deems reasonably necessary, and in such event the. Director hereby
agrees to cooperate fully with the Company and to take all action necessary to
effect the substitution of the Company for the Director in any such action or
proceeding. Any amounts recovered by way of damages, refunds, adjustments or
otherwise in connection with the foregoing, after deduction of expenses incurred
in such recovery, prior to the Completion Date shall be paid into the Project
Fund or, if recovered after the Completion Date and full disposition of the
Project Fund in
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accordance with Section 3.4 hereof, shall be paid to the Trustee for deposit in
the Collateral Proceeds Account.
Section 3.7. Investment of Project Fund. Primary Reserve Account or
Collateral Proceeds Account. Any moneys held as part of the Project Fund, the
Primary Reserve Account or the Collateral Proceeds Account shall be invested by
the Trustee, upon the written or oral direction (but if oral, confirmed promptly
in writing, of the Authorized Company Representative, in Eligible Investments ;
provided, however, that moneys held as part of the Collateral Proceeds Account
shall be invested only in Eligible Investments which are not "investment
property" within the meaning of Section 148(b) of the Code; and provided,
further, that amounts in the Primary Reserve Account in excess of $671,500 shall
not be invested at a yield which is materially higher than the yield on the
Bonds, within the meaning of the Code.
Section 3.8. Lease as Security Agreement. This Lease is intended to
create and does create in the Director a security interest in the Project, and
in each part thereof, under the Ohio Uniform Commercial Code (Chapters 1301 to
1309, inclusive, of the Ohio Revised Code) as security for the payment of rent
required by Section 4.3 hereof.
Section 3.9. Plans and Specifications; Inspections. At his option, the
Director may retain, at the Company's expense, an architect, engineer, appraiser
or other consultant for the purpose of approving the Plans and Specifications,
verifying costs and performing inspections as Provision of the Project
progresses. Such inspections or approvals of Plans and Specifications *hall
impose no responsibility or liability of any nature upon the Director, the
State, their agents, representatives or designees nor, without limitation, carry
any warranty or representation as to the adequacy or safety of the structures or
any of their component parts or any other physical condition or feature
pertaining to the Project. The Company shall, at the request of the Director,
make periodic reports (including, if required, submission of updated Cost
Certifications) to the Director concerning the status of completion and the
expenditure of costs in respect thereof.
The Company may revise the Plans and Specifications from time to time;
provided that no revision shall be made (a) which would change the Project
Purposes to purposes other than those permitted by the Act; (b) without
obtaining, to the extent required by law, the approval of any applicable
Governmental Authority; and (c) without the prior written approval of the
Director if such revision would change the amounts set forth in the most
recently furnished Cost Certification. In any event, all revisions to the Plans
and Specifications shall be promptly filed with the Director.
ARTICLE IV
LEASE OF PROJECT, LEASE TERM AND RENTAL
Section 4.1. Lease of Project. The Director, as lessor hereunder, in
consideration of the rents, covenants and agreements herein stated, agrees to,
and does hereby lease to the Company,
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as lessee hereunder, and the Company agrees to, and does hereby lease from the
Director, subject to the provisions of this Lease, the Project for the Lease
Term.
Section 4.2. Lease Term and Possession. The Lease Term shall commence
on the date of delivery of this Lease and, subject to earlier termination as
provided herein, shall end on December 2, 2001. The Director agrees to deliver
to the Company full possession of the Project (subject to Section 7.2 hereof) at
the commencement of the Lease Term and the Company agrees to accept possession
of the Project upon such delivery. The Director covenants and agrees that it
will not take any action, other than pursuant to Article IX of this Lease, to
prevent the Company from having quiet and peaceable possession and enjoyment of
the Project during the Lease Term and will, at the request of the Company, and
at the Company's cost, cooperate with the Company in order that the Company may
have quiet and peaceable possession and enjoyment of the Project. This provision
shall not be construed to require cooperation by the Director with the Company
in any labor dispute.
Section 4.3. Rents and Other Amounts Payable. Not later than the
fifteenth (15th) day of the months of October 1991 and November 1991, the
Company shall pay as rent an amount equal to one half (1/2) of the difference
between (i) the amount of interest which will be due and payable on the Bonds on
December 1, 1991 and (ii) the amount received by the Trustee as accrued interest
on the Bonds upon their initial delivery. Not later than the fifteenth (15th)
day of each month commencing December 15, 1991 and continuing thereafter until
the principal of and interest on the Bonds shall have been fully paid or
provision for the payment thereof shall have been made in accordance with the
Trust Agreement, the Company shall pay as rent an amount equal to the sum of (i)
one sixth (1/6) of the amount of interest on the Bonds which will be payable on
the next succeeding date on which such interest is due to be paid, and (ii) one
sixth (1/6) of the amount of principal of the Bonds which will be payable
(whether at stated maturity or by redemption) on the next succeeding date on
which such principal is due to be paid; provided, however that rental payments
with respect to principal of the Bonds shall not commence until December 15,
1992. The Company shall receive a credit against the rent payment due in the
month of February of each year to the extent and in the manner provided in the
General Bond Order and the Series Bond Order. If the Company fails to make any
payment required by this paragraph on the due date thereof, the Trustee shall,
to the extent that funds are available therefor, transfer to the Debt Service
Account an amount equal to such payment from the Collateral Proceeds Account
and, if the balance in the Collateral Proceeds Account is insufficient, from the
Primary Reserve Account.
If the interest rate on the Bonds shall have been increased as a result
of the Company's failure to perform its obligations under Section 10.6 hereof
following the occurrence of a Determination of Taxability, the Company shall pay
as an additional rent payment, on the fifteenth (15th) day of the month
preceding the month in which occurs the first date on which interest at the
increased rate is due and payable on the Bonds, an amount equal to the interest
to become due and payable on the Bonds on such interest payment date reduced by
the sum of the
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rental payments allocable to interest on the Bonds made by the Company from the
immediately preceding interest payment date to and including the date of such
additional payment.
If moneys are transferred from the Primary Reserve Account or the
Collateral Proceeds Account to the Debt Service Account pursuant to the
provisions of Section 14 of the General Bond Order, and if no Event of Default
is then existing, the Company shall receive a credit against rental payments
payable hereunder, in inverse order of their maturity, in an amount equal to the
amount so transferred.
If no Event of Default is then existing and if the balance in the
Primary Reserve Account is greater than or equal to the aggregate amount of
rental payments to become due and payable during the remaining term of this
Lease, the Company may direct the Trustee to apply monies in the Primary Reserve
Account to monthly rental payments as they become due and, in such case and
notwithstanding the provisions of Section 4.5 hereof, the Company shall not be
required to deliver moneys to the Trustee to restore the balance in the Primary
Reserve Account to an amount equal to the Original Deposit.
Not later than the fifteenth (15th) day of each month, commencing
October, 1991, the Company shall pay to the Trustee (i) an amount equal to one
twelfth (1/12) of the Trustee's annual administrative fee (which annual
administrative fee shall be calculated at a rate equal to the sum of (A) $1,200
per million dollars for each million dollars or any part thereof of the first
five million dollars of outstanding principal amount of Bonds, and (B) $700 per
million dollars for each million dollars or any part thereof in excess of five
million dollars), constituting the fee of the Trustee in connection with its
administration of the Project Fund, the Primary Reserve Account and the
Collateral Proceeds Account, and (ii) an amount equal to .0104167% of the
outstanding principal amount of the Bonds ("Additional Rent"). The Company and
the Director acknowledge and agree that the Additional Rent is intended to
reimburse the Department of Development for a portion of the cost of
administering the Ohio Enterprise Bond Fund program.
The Company also agrees to pay to the Director reasonable expenses of
the Director related to the Project and requested by the Company or required by
this Lease or the Trust Agreement, or incurred in enforcing the provisions of
this Lease or the Trust Agreement and which are not otherwise required to be
paid by the Company under the terms of this Lease.
In the event Company should fail to make any of the payments required
in this Section 4.3, the item or installment so in default shall continue as an
obligation of the Company until the amount in default shall have been fully
paid, and the Company agrees to pay the same with interest thereon at the rate
of the Interest Rate for Advances. If any payment required by the first
paragraph of this Section 4.3 is not made by the first day of the month
following the month in which such payment is due, the Company shall pay, in
addition to such payment, a late payment charge of five percent (5%) of the
amount of such payment.
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Section 4.4. Place of Payments. The rent provided for in the first
paragraph of Section 4.3 hereof and the late payment charge provided for in the
last paragraph of Section 4.3 hereof shall be paid directly to the Trustee at
its principal corporate trust office for the account of the Director, and the
Trustee shall deposit such payments in the Debt Service Account. Additional Rent
shall be paid to the Trustee, who shall pay such amounts to the Director, not
less frequently than monthly, for deposit in the First Half Account (if received
by the Director between January 1 and June 30) or the Second Half Account (if
received by the Director between July 1 and December 31) created in the Trust
Agreement. The additional payments to be made to the Director under Section 4.3
hereof shall be paid directly to the Director for use as provided in such
Section.
Section 4.5. Primary Reserve Account. Upon delivery of this Lease and
in accordance with the General Bond Order and the Series Bond Order, the Company
shall deliver or cause to be delivered to the Trustee for deposit or credit to
the Primary Reserve Account either a sum of money equal to the Original Deposit
(which sum may, to the extent provided for in the Series Bond Order, be derived
from proceeds of the sale of the Bonds) or an Approved Letter of Credit in the
amount of the Original Deposit. In accordance with the provisions of the General
Bond Order and the Series Bond Order, the Trustee shall transfer moneys from the
Primary Reserve Account to the Debt Service Account (and shall draw on the
Approved Letter of Credit, if necessary, in order to obtain such moneys) if (a)
the Company shall have failed to make a rent payment required by the first
paragraph of Section 4.3 hereof, and (b) the balance in the Collateral Proceeds
Account is insufficient to provide funds for such transfer.
If, as a result of a transfer described in the immediately preceding
paragraph, the balance in the Primary Reserve Account is less than the Original
Deposit, the Trustee shall promptly notify the Company, by telephone and
confirmed in writing, of the amount of such deficiency, and the Company shall,
not later than ten (10) days after receipt of such notice, deliver to the
Trustee for deposit or credit to the Primary Reserve Account moneys or an
Approved Letter of Credit in the amount of such deficiency.
Pursuant to the Supplement, the Trustee is directed to draw upon the
Approved Letter of Credit prior to its expiration for the full amount thereof
and deposit the proceeds of such drawing in the Primary Reserve Account unless,
not later than thirty (30) days prior to the expiration of the Approved Letter
of Credit, the Company shall have delivered to the Trustee a replacement
Approved Letter of Credit in the same amount as the expiring letter of credit,
or evidence that the issuer of the Approved Letter of Credit has extended the
maturity thereof for a period of not less than one year (or to the final
maturity date of the Bonds, if earlier).
Pursuant to Section 14 of the General Bond Order, the Trustee shall,
under the circumstances described in said Section 14, transfer moneys from the
Primary Reserve Account to the Debt Service Account, and the Trustee shall draw
on the Approved Letter of Credit, if necessary, in order to obtain moneys to
make such transfer.
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Section 4.6. Obligation of the Company Hereunder Unconditional. The
obligations of the Company to make the payments required in Section 4.3 and
Section 4.5 hereof and to perform and observe the other agreements on its part
contained herein shall be absolute and unconditional and until such time as the
principal of and interest and premium, if any, on the Bonds shall have been
fully paid or provision for the payment thereof shall have been made in
accordance with the Trust Agreement, the Company (i) will not, subject to the
provisions of Section 8.6 hereof, suspend or discontinue any payments provided
for in Section 4.3 or Section 4.5 hereof, (ii) will perform and observe all of
its other agreements contained in this Lease, and (iii) except as provided in
Article X hereof, will not terminate the Lease for any cause including, without
limiting the generality of the foregoing, failure to complete the Project, any
acts or circumstances that may constitute failure of consideration, destruction
of or damage to the Project, commercial frustration of purpose, any change in
the tax or other laws or administrative rulings of or administrative actions by
the United States of America or the State or any political subdivision of
either, or any failure of the Director to perform and observe any agreement,
whether expressed or implied, or any duty, liability or obligation arising out
of or connected with this Lease or the Trust Agreement. Nothing contained in
this Section shall be construed to release the Director from the performance of
any of the agreements on its part contained in this Lease; and in the event
Director should fail to perform any such agreement on its part, Company may
institute such action against the Director as Company may deem necessary to
compel performance or recover its damages for nonperformance so long as such
action shall not impair the agreements on the part of the Company contained in
the next preceding sentence. The Company may, however, at its own cost and
expense and in its own name or in the name of the Director, prosecute or defend
any action or proceeding or take any other action involving third persons which
the Company deems reasonably necessary in order to secure or protect its right
of possession, occupancy and use hereunder, and in such event the Director
hereby agrees to cooperate fully with the Company and to take all action
necessary to effect the substitution of the Company for the Director in any such
action or proceeding if the Company shall so request. This provision shall not
be construed to require cooperation by the Director with the Company in any
labor dispute.
ARTICLE V
MAINTENANCE, TAXES AND INSURANCE
Section 5.1. Maintenance and Modifications of Project by the Company.
The Company agrees that during the Lease Term it will keep the Project including
all appurtenances thereto and the equipment and machinery therein in good repair
and good operating condition at its own cost.
The Company shall have the privilege of remodeling or making additions,
modifications or improvements to the Project from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes, the cost of
which remodeling, additions, modifications and improvements shall be paid by the
Company, and the same (except any machinery, equipment or
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furniture installed pursuant to Section 8.7. hereof) shall be the property of
the Director and be included under the terms of this Lease as part of the
Project.
Section 5.2. Removal of Project Equipment. The Company shall not be
under any obligation to renew, repair or replace any inadequate, obsolete, worn
out, unsuitable, undesirable or unnecessary Project Equipment. The Company shall
have the privilege from time to time of substituting machinery, equipment and
related property for any Project Equipment; provided that the machinery and
equipment so substituted shall be of a value not less than the value of the
machinery or equipment replaced and shall not make the Project unsuitable for
the Project Purposes. Any such substitute machinery and equipment shall become
the property of the Director and be included under the terms of this Lease, and
the replaced Project Equipment shall become the property of the Company. The
Company shall promptly notify the Director and the Trustee of any substitutions
of machinery or equipment, which notice shall include a description of the
substituted machinery or equipment. The Company shall also have the privilege of
removing any Project Equipment, without substitution therefor; provided, that
the Company pays to the Director a sum equal to the then value of said Project
Equipment, as determined by an Independent Engineer selected by the Company, and
so long as any of the Bonds remain outstanding, the Company shall pay such
amounts directly to the Trustee for deposit in the Collateral Proceeds Account
and shall deliver to the Director and the Trustee a certificate signed by said
Independent Engineer setting forth the value of said Project Equipment and
stating that the removal of such equipment will not make the Project unsuitable
for the Project Purposes.
The Company may at any time while it is not in default under this Lease
remove from the Project any machinery or equipment purchased and installed by it
pursuant to Section 8.7 of this Lease and not included as Project Equipment.
In the event any removal of machinery or equipment under this Section
or Section 8.7 causes damage to existing buildings or structures, the Company
shall restore the same or repair such damage at its sole expense.
Company shall so request. This provision shall not be construed to
require cooperation by the Director with the Company in any labor dispute.
ARTICLE V
MAINTENANCE, TAXES AND INSURANCE
Section 5.1. Maintenance and Modifications of Project by the Company.
The Company agrees that during the Lease Term it will keep the Project including
all appurtenances thereto and the equipment and machinery therein in good repair
and good operating condition at its own cost.
The Company shall have the privilege of remodeling or making additions,
modifications or improvements to the Project from time to time as it, in its
discretion, may deem to be desirable
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for its uses and purposes, the cost of which remodeling, additions,
modifications and improvements shall be paid by the Company, and the same
(except any machinery, equipment or furniture installed pursuant to Section 8.7
hereof) shall be the property of the Director and be included under the terms of
this Lease as part of the Project.
Section 5.2. Removal of Project Equipment. The Company shall not be
under any obligation to renew, repair or replace any inadequate, obsolete, worn
out, unsuitable, undesirable or unnecessary Project Equipment. The Company shall
have the privilege from time to time of substituting machinery, equipment and
related property for any Project Equipment; provided that the machinery and
equipment so substituted shall be of a value not less than the value of the
machinery or equipment replaced and shall not make the Project unsuitable for
the Project Purposes. Any such substitute machinery and equipment shall become
the property of the Director and be included under the terms of this Lease, and
the replaced Project Equipment shall become the property of the Company. The
Company shall promptly notify the Director and the Trustee of any substitutions
of machinery or equipment, which notice shall include a description of the
substituted machinery or equipment. The Company shall also have the privilege of
removing any Project Equipment, without substitution therefor; provided, that
the Company pays to the Director a sum equal to the then value of said Project
Equipment, as determined by an Independent Engineer selected by the Company, and
so long as any of the Bonds remain outstanding, the Company shall pay such
amounts directly to the Trustee for deposit in the Collateral Proceeds Account
and shall deliver to the Director and the Trustee a certificate signed by said
Independent Engineer setting forth the value of said Project Equipment and
stating that the removal of such equipment will not make the Project unsuitable
for the Project Purposes.
The Company may at any time while it is not in default under this Lease
remove from the Project any machinery or equipment purchased and installed by it
pursuant to Section 8.7 of this Lease and not included as Project Equipment.
In the event any removal of machinery or equipment under this Section
or Section 8.7 causes damage to existing buildings or structures, the Company
shall restore the same or repair such damage at its sole expense.
The Director agrees to execute and deliver such documents as the
Company may properly request in connection with any action taken by the Company
in conformity with this Section 5.2. The removal from the Project of any portion
of the Project Equipment pursuant to the provisions of this Section shall not
entitle the Company to any abatement or diminution of the rents payable under
Section 4.3 hereof.
Section 5.3. Indemnification by the Company. The Company shall
indemnify and hold the Director, the Treasurer and the Trustee (including any
member, officer, director or employee thereof) (collectively, the "Indemnified
Parties") harmless against any and all claims, asserted by or on behalf of any
person, firm or corporation, private or public, arising or resulting from, or in
any way connected with (i) financing, installation, operation, use or
maintenance of the Project
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(including, but not limited to, claims relating to compliance with Chapter 4115,
Ohio Revised Code), (ii) any act, failure to act or misrepresentation by any
person, firm, corporation or governmental authority in connection with the
issuance, sale or delivery of the Bonds, (iii) any act, failure to act or
misrepresentation by any other Indemnified Party in connection with, or in the
performance of any obligation related to the issuance, sale and delivery of the
Bonds or under this Lease or the Trust Agreement, and (iv) any act, failure to
act or misrepresentation by the Company in connection with, or in the
performance of any obligation related to, the Federal Income Tax Compliance
Agreement, including all liabilities, costs and expenses, including reasonable
counsel fees, incurred in any action or proceeding brought by reason of any such
claim. In the event any action or proceeding is brought against any Indemnified
Party by reason of any such claim, such Indemnified Party will promptly give
written notice thereof to the Company. In case such notice shall be so given,
the Company shall be entitled to participate at its own expense in the defense
or, if it so elects, to assume at its own expense the defense of such claim,
suit, action or proceeding, in which event such defense shall be conducted by
counsel chosen by the Company and reasonably satisfactory to such Indemnified
Party against whom such action or proceeding is pending; but if the Company
shall elect not to assume such defense, it shall reimburse such Indemnified
Party for the reasonable fees and expenses of any counsel retained by such
Indemnified Party. If at any time the Indemnified Party becomes dissatisfied
with the selection of counsel by the Company, a new mutually agreeable counsel
shall be retained at the expense of the Company. Each Indemnified Party agrees
that the Company shall have the sole right to compromise, settle or conclude any
claim, suit, action or proceeding against any of the Indemnified Parties.
Notwithstanding the foregoing, each Indemnified Party shall have the right to
employ counsel in any such action at its own expense; and provided further that
such Indemnified Party shall have the right to employ counsel in any such action
and the fees and expenses of such counsel shall be at the expense of the Company
if: (i) the employment of counsel by such Indemnified Party has been authorized
by the Company, (ii) there reasonably appears that there is a conflict of
interest between the Company and the Indemnified Party in the conduct of the
defense of such action (in which case the Company shall not have the right to
direct the defense of such action on behalf of the Indemnified Party) or (iii)
the Company shall not in fact have employed counsel to assume the defense of
such action. The Company shall also indemnify the Indemnified Parties from and
against all costs and expenses, including reasonable counsel fees, lawfully
incurred in enforcing any obligations of the Company under this Lease. Anything
herein to the contrary notwithstanding, the foregoing agreements by the Company
to indemnify any Indemnified Party shall not apply to grossly negligent acts or
omissions or acts or omissions of willful misconduct on the part of such
Indemnified Party. The Company shall not be liable for any settlement of any
action or claim effected without its consent. The obligations of the Company
under this Section shall survive the termination of this Lease and shall be in
addition to any other rights, including without limitation, rights to indemnity
which any Indemnified Party may have at law, in equity, by contract or
otherwise.
Section 5.4. Taxes, Other Governmental Charges and Utility Charges. The
Company will pay, as the same respectively become due, all taxes, assessments,
whether general or special, and governmental charges of any kind whatsoever that
may at any time be lawfully assessed or
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levied against or with respect to the Project or any machinery, equipment or
other property installed or brought by the Company therein or thereon
(including, without limiting the generality of the foregoing, any taxes levied
upon or with respect to the receipts, income, or profits of the Director from
the Project which, if not paid, may become or be made a lien on the Project or a
charge on the revenues and receipts therefrom), and all utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of the
Project, provided, that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of
years, the Company shall be obligated to pay only such installments as are
required to be paid during the Lease Term.
Section 5.5. Insurance Required. The Company shall insure the Project
in an aggregate amount equal to the replacement cost of the Project, but in any
event not less than the principal amount of Bonds outstanding from time to time,
against loss or damage by fire, boiler explosion, as well as such other risks as
are covered by the endorsement commonly known as "extended coverage", plus
vandalism and malicious mischief, in insurance companies authorized to issue
such policies in the State. Any insurance policy maintained by the Company
pursuant to this Section 5.5 may provide that the policy does not cover the
first $25,000 or less of loss, or such greater amount as may (with due regard to
insurance practices from time to time current with respect to equipment similar
to the Project Equipment) be approved in writing by the Director, with the
result that the Company is its own insurer to that extent. Any return of
insurance premium or dividends based upon such premium shall be due and payable
solely to the Company unless such premium shall have been paid by the Director
or Trustee.
As an alternative to the above, the Company may insure such property
under a blanket insurance policy or policies which cover not only such property
but other properties.
Section 5.6. Additional Provisions Respecting Insurance. Any insurance
policy issued pursuant to Section 5.5 hereof shall be so written or endorsed as
to make losses, if any, adjustable by the Company and payable to the Company and
the Trustee, for the account of the Director; provided, any such insurance
policy may be so written or endorsed as to make losses not in excess of $25,000
for each occurrence payable directly to the Company as hereinafter provided in
Section 6.1. Each insurance policy provided for in Section 5.5 and Section 5.8
hereof shall contain a provision to the effect that the insurance company shall
not cancel the same without first giving written notice thereof to the Director
and the Trustee at least thirty days in advance of such cancellation, and the
Company shall deliver to the Director and the Trustee duplicate copies or
certificates of insurance pertaining to each such policy of insurance procured
by the Company and shall keep such duplicate copies or certificates up to date.
Section 5.7. Application of Net Proceeds of Insurance. The Net proceeds
of the insurance carried pursuant to the provisions of this Lease shall be
applied as follows: (i) the Net Proceeds of the insurance required in Section
5.5 hereof shall be applied as provided in Section 6.1 hereof, and (ii) the Net
Proceeds of the insurance required in Section 5.8 hereof shall be
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applied toward extinguishment or satisfaction of the liability with respect to
which such insurance proceeds may be paid.
Section 5.8. Public Liability Insurance. The Company agrees that it
will carry public liability insurance with reference to its operations at the
Project with one or more reputable insurance companies duly qualified to do
business in the State, in minimum amounts of $1,000,000 for the death of or
personal injury to one person and $3,000,000 for personal injury or death for
each occurrence in connection with the Project and $500,000 for property damage
of any occurrence in connection with the Project, with a deductible not to
exceed $25,000. The Director and the Trustee shall be made additional insureds
under such policies. The insurance provided by this Section 5.8 may be by
blanket insurance policy or policies.
Section 5.9. Advances. In the event the Company shall fail to maintain
the full insurance coverage required by this Lease or shall fail to keep the
Project in good repair and operating condition, the Director or the Trustee may
(but shall be under no obligation to) take out the required policies of
insurance and pay the premiums on the same or may make such repairs or
replacements as are necessary and provide for payment thereof; and all amounts
so advanced therefor by the Director shall become an additional obligation of
the Company to the Director, which amounts, together with interest thereon at
the Interest Rate for Advances from the date thereof, the Company agrees to pay
on demand.
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 6.1. Damage and Destruction. If prior to full payment of the
Bonds (or provision for payment thereof having been made in accordance with the
provisions of the Trust Agreement), the Project Equipment shall be damaged or
partially or totally destroyed by fire, flood, windstorm, or other casualty at
any time during the Lease Term, there shall be no abatement or reduction in the
rent payable by the Company under this Lease, and, to the extent that the claim
for loss resulting from such damage or destruction is not greater than $25,000
the Company (i) will promptly repair, rebuild or restore the property damaged or
destroyed with such changes, alterations and modifications (including the
substitution and addition of other property) as may be desired by the Company
and as will not make the Project unsuitable for the Project Purposes, and (ii)
will apply for such purpose so much as may be necessary of any Net Proceeds of
insurance policies resulting from claims for such losses not in excess of
$25,000 as well as any additional moneys of the Company necessary therefor. All
Net Proceeds of insurance resulting from claims for any such loss not in excess
of $25,000 shall be paid to the Company.
If prior to full payment of the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Trust Agreement), the
Project Equipment shall be destroyed (in whole or in part) or damaged by fire,
flood, windstorm or other casualty to such extent that the claim for loss
resulting from such destruction or damage is in excess of $25,000
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the Company shall promptly give written notice thereof to the Director and the
Trustee. All Net Proceeds of insurance policies resulting from claims for such
losses in excess of $25,000 shall be paid to and held by the Trustee in the
Collateral Proceeds Account, whereupon, unless the Company shall have elected to
exercise its option to purchase the Project pursuant to the provisions of
Section 10.2(a) of this Lease, (i) the Company will proceed to repair, rebuild
or restore the property damaged or destroyed with such changes, alterations and
modifications (including the substitution and addition of other property) as may
be desired by the Company and as will not make the Project unsuitable for the
Project Purposes, and (ii) the Trustee will disburse moneys in the Collateral
Proceeds Account to or upon the direction of the Company for payment of the
costs of such repair, rebuilding or restoration, either on completion thereof
or, if the Company shall so request, as the work progresses. Any such
disbursements shall be made pursuant to the procedures set forth in Section 3.3
of this Lease for disbursement of moneys in the Project Fund, including, but not
limited to, the requirement that the Company obtain the written approval of the
Director with respect to each disbursement. In the event the moneys in the
Collateral Proceeds Account are not sufficient to pay in full the costs of such
repair, rebuilding or restoration, the Company nonetheless will complete the
work and pay the costs thereof from its own resources. The Company shall not, by
reason of the payment of such excess costs, be entitled to any reimbursement
from the Director or any diminution in or postponement of the rents payable
under Section 4.3 of this Lease.
Section 6.2. Eminent Domain. In the event that title to or the
temporary use of the Project, or any part thereof, shall be taken under the
exercise of the power of eminent domain by any governmental body or by any
person, firm or corporation acting under governmental authority, there shall be
no abatement or reduction in the rent payable by the Company under this Lease
during the balance of the Lease Term, and any Net Proceeds received from any
award made in such eminent domain proceedings shall be paid to and deposited by
the Trustee in the Collateral Proceeds Account and shall be applied by the
Director or the Company in one or more of the following ways as shall be
directed in writing by the Authorized Company Representative:
(a) to the restoration of the improvements located on the
Project Site to substantially the same condition as they existed prior
to the exercise of said power of eminent domain;
(b) to the acquisition, by construction or otherwise, by the
Director or the Company of other improvements suitable for the
Company's operation at the Project (which improvements shall be deemed
a part of the Project and available for use and occupancy by the
Company without the payment of any rent other than herein provided, to
the same extent as if such other improvements were specifically
described herein and demised hereby); or
(c) to the redemption of all of the Bonds pursuant to the
Trust Agreement, together with accrued interest thereon to the date of
redemption upon exercise of the option to purchase authorized by
Section 10.2(b) of this Lease.
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Within ninety days from the date of entry of a final order in an eminent domain
proceeding granting condemnation, the Authorized Company Representative shall
direct the Director and the Trustee in writing as to which of the ways specified
in this Section the Company elects to have the Net Proceeds of the condemnation
award applied. Any balance of the Net Proceeds remaining after such application
shall be retained in the Collateral Proceeds Account.
The Director shall cooperate fully with the Company in the handling and
conduct of any prospective or pending condemnation proceedings with respect to
the Project or any part thereof and, to the extent it may lawfully do so, will
permit the Company to litigate in any such proceedings in its own name or in the
name and on behalf of the Director (except as such proceedings are instigated by
the Director, in which event the Company shall have the right to proceed as if
it were the owner of the Project). In no event will the Director voluntarily
settle or consent to the settlement of any prospective or pending condemnation
proceedings with respect to the Project or any part thereof without the written
consent of the Company.
Section 6.3. Condemnation of Company Owned Property. The Company shall
be entitled to the Net Proceeds of any condemnation award or portion thereof
made for damages to or takings of its own property.
ARTICLE VII
SPECIAL COVENANTS
Section 7.1. No Warranty of Condition or Suitability. The Director does
not make any warranty, either express or implied, as to the condition,
workmanship, merchantability or capacity of the Project or any part thereof or
as to its or any part's suitability or operation for the Project Purposes.
At any time, upon request of the Company, so long as it is not in
default hereunder, the Director will assign to the Company all warranties and
guarantees of all contractors, subcontractors, manufacturers, suppliers and
engineers for the furnishing of labor, materials, supervision or design in
connection with the Project and any rights or causes of action against any of
the foregoing.
Section 7.2. Right of Access to the Project. The Company agrees that
the Director and any of the Director's duly authorized agents shall have the
right at all reasonable times to enter upon the Project Site and to examine and
inspect the Project. The Company further agrees that the Director and the
Director's duly authorized agents shall have such rights of access to the
Project as may be reasonably necessary to cause to be completed the construction
and installation provided for in Section 3.1 hereof, and thereafter for the
proper maintenance of the Project in the event of failure by the Company to
perform its obligations under Sections 3.1 or 5.1 hereof.
Sections 7.3. through 7.5 [Reserved]
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Section 7.6. Information Concerning Operations. At the request of the
Director and, in any event, within seventy-five (75) days after the last day of
each fiscal year of the Company beginning with the fiscal year in which the
Completion Date occurs, the Company shall furnish to the Director a report on
Project operations setting forth the total number of employees then employed on
the Project and such other employment, economic and statistical data concerning
the Project as may reasonably be requested by the Director.
Section 7.7. Affirmative Covenants of the Company. Throughout the Term
of this Lease, the Company shall:
(a) Taxes and Assessments. Pay and discharge promptly, or cause to
be paid and discharged promptly, when due and payable, all
taxes, assessments and governmental charges or levies imposed
upon it, its income or any of its property, or upon any part
thereof, as well as all claims of any kind (including claims
for labor, materials and supplies) which, if unpaid, might by
law become a lien or charge upon its property. Nothing in this
Section shall require the Company to pay or discharge any such
tax, assessment, governmental charge or levy so long as the
validity thereof shall be contested in good faith and by
appropriate legal proceedings, provided that the Company shall
have delivered to the Director an opinion of counsel, selected
by the Company and reasonably acceptable to the Director, to
the effect that nonpayment of any such items during the
pendency of such contest will not adversely affect the
Director's right, title or interest in the Project.
(b) Maintain Existence. Do or cause to be done all things
necessary to preserve and keep in full force and effect its
existence and its material rights and franchises.
(c) Maintain Property. Maintain and keep its property in good
repair, working order and condition, and from time to time
make all repairs, renewals and replacements which, in the
opinion of the Company, are necessary and proper so that the
business carried on in connection therewith may be properly
and advantageously conducted at all time; provided, however,
that nothing in this subsection (c) shall prevent the Company
from selling or otherwise disposing of any property whenever,
in the good faith judgment of the Company, such property is
obsolete, worn out, without economic value or unnecessary for
the conduct of the business of the Company.
(d) Maintain Insurance. Keep all of its insurable property insured
against loss or damage by fire and other risks, maintain
public liability insurance against claims for personal injury,
death, or property damage suffered by others upon, in or about
any premises occupied by the Company; and maintain all such
worker's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which it may be
engaged in business. All insurance for which
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provision has been made in this subsection (d) shall be
maintained against such risks and in at least such amounts
(but subject to such deductibles) as such insurance is usually
carried by persons engaged in the same or similar businesses,
and all insurance herein provided for ' shall be effected and
maintained in force under a policy or policies issued by
insurers of recognized responsibility, except that it may
effect worker's compensation or similar insurance in respect
of operations in any state or other jurisdiction either
through an insurance fund operated by such state or other
jurisdiction or by causing to be maintained a system or
systems of self-insurance which is in accordance with
applicable law.
(e) Furnish Information. Furnish to the Director:
(i) Quarterly Reports. Within forty-five (45) days after
the end of each quarterly period of each fiscal year
of the Company, the balance sheet of the Company as
at the end of such quarterly period, together with
related statements of income and retained earnings
(or accumulated deficit) and changes in financial
position for such quarterly period, setting forth in
comparative form the corresponding figures as at the
end of or for the corresponding quarter of the
previous fiscal year, all in reasonable detail,
prepared in accordance with generally accepted
accounting principles applied on a consistent basis,
subject to usual year-end audit adjustments.
(ii) Annual Reports. Within ninety (90) days after the
last day of each fiscal year of the Company, a copy
of its audit report containing a balance sheet of the
Company as at the end of such fiscal year, together
with related statements of income and retained
earnings (or accumulated deficit) and changes in
financial position for such fiscal year, setting
forth in comparative form the corresponding figures
as at the end of or for the previous fiscal year, all
in reasonable detail and all examined by and
accompanied by a review letter or opinion of its
independent certified public accountants to the
effect that such financial statements were prepared
in accordance with generally accepted accounting
principles consistently applied, and present fairly
the Company's financial position at the close of such
period and the results of its operations for such
period.
(iii) Certificates No Default. With the financial reports
required to be furnished under this Section, a
certificate of the Company's chief executive officer
or chief financial officer stating that (a) no Event
of Default has occurred and is continuing and no
event or circumstance which would constitute an Event
of Default, but for the requirement that notice be
given or time elapse or both, has occurred and is
continuing, or, if such an Event of Default or such
event or circumstance has occurred and is continuing,
a statement as to the nature thereof and the action
which the
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Company proposes to take with respect thereto, and
that (b) no action, suit or proceeding by it or
against it at law or in equity, or before any
governmental instrumentality or agency, is pending or
threatened, which, if adversely determined, would
materially impair the right or ability of the Company
to carry on the business which is contemplated in
connection with the Project or would materially
impair the right or ability of the Company to perform
the transactions contemplated by this Lease or would
materially and adversely affect its business,
operations, assets or condition, all as of the date
of such certificate, except as disclosed in such
certificate.
(iv) Other Information. Such other information respecting
the business, properties or the condition or
operations, financial or otherwise, of the Company as
the Director may reasonably request, provided that
reasonable provision is made for protecting
proprietary information of the Company.
(f) Deliver Notice. Forthwith upon learning of any of the
following, deliver written notice thereof to the Director,
describing the same and the steps being taken by the Company
with respect thereto:
(i) the occurrence of an Event of Default or an event or
circumstance which would constitute an Event of
Default, but for the requirement that notice be given
or time elapse or both, or
(ii) any action, suit or proceeding by it or against it at
law or in equity, or before any governmental
instrumentality or agency, instituted or threatened
which, if adversely determined, would materially
impair the right or ability of the Company to carry
on the business which is contemplated in connection
with the Project or would materially impair the right
or ability of the Company to perform the transactions
contemplated by this Lease, or would materially and
adversely affect its business, operations, assets or
condition, or
(iii) the occurrence of a Reportable Event, as defined in
the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), under, or the institution of
steps by the Company to withdraw from, or the
institution of any steps to terminate, any employee
benefit plan as to which the Company may have
liability.
(g) Inspection Rights. At any reasonable time and from time to
time, permit the Director, or any agents or representatives
thereof, to examine and make copies of and abstract from the
records and books of account of, and visit the properties of,
the Company and discuss the general business affairs of the
Company with any of its officers;-provided, however, that the
Company reserves the right to restrict
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access to any of its facilities in accordance with reasonably
adopted procedures relating to safety and security.
(h) Zoning, Planning and Environmental Regulations. The Provision
of the Project will be completed and the Project will be
operated and maintained in such manner as to conform with all
applicable zoning, planning, building, environmental and other
applicable governmental regulations (or variances therefrom)
imposed by any Governmental Authority and as to be consistent
with the purposes of the Act.
(i) Use of Project Fund Moneys. All moneys disbursed from the
Project Fund (except for any amounts transferred to the
Collateral Proceeds Account pursuant to the terms of this
Lease) shall be used for the payment of Allowable Costs
relating to Provision of the Project. No part of any such
moneys shall be knowingly paid to or retained by the Company
or any partner, officer, shareholder, director or employee of
the Company as a fee, kick-back or consideration of any type.
The Company has no identity of interest with, or interest in,
the general contractor or any architect, subcontractor,
laborer or materialman performing work or services of
supplying materials in connection with the Provision of the
Project; provided, however, that the Company may use and
compensate (at prevailing wages, as required by Section 3.1 of
this Lease) its own non- shareholder employees in connection
with the installation of the Project Equipment.
Section 7.8. Negative Covenants of the Company. Throughout the Lease
Term, the Company shall not without the prior written consent of the Director:
(a) Maintain Existence. Sell, transfer or otherwise dispose of
all, or substantially all, of its assets, consolidate with or
merge into any other entity, or permit one or more entities to
consolidate with or merge into it; provided, however, that the
Company may, without violating the agreement contained in this
subsection (a), consolidate with or merge into another entity,
or permit one or more other entities to consolidate with or
merge into it, or sell, transfer or otherwise dispose of all,
or substantially all, of its assets as a entity and thereafter
dissolve if: (i) the prior written consent of the Director is
obtained; or (ii)(A) the surviving, resulting or transferee
entity, as the case may be, assumes in writing all of the
obligations of the Company hereunder (if such surviving,
resulting or transferee entity is other than the Company); and
(B) the surviving, resulting or transferee entity, as the case
may be, is an entity duly organized and validly existing under
the laws of the State or duly qualified to do business
therein, and has a net worth of not less than that of the
Company immediately prior to such disposition, consolidation
or merger, transfer or change of form.
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(b) ERISA. Voluntarily terminate any employee benefit plan or
other plan (a "Plan") maintained for employees of the Company
and covered by Title IV of ERISA, so as to result in any
material liability of the Company to the Pension Benefit
Guaranty Corporation ("PBGC"), enter into any Prohibited
Transaction (as defined in Section 4975 of the Internal
Revenue Code of 1954, as amended, and in ERISA) involving any
Plan which results in any material liability of the Company to
the PBGC, cause any occurrence of any Reportable Event (as
defined in Title IV of ERISA) which results in any material
liability of it to the PBGC, or allow or suffer to exist any
ocher event or condition which results in any material
liability of the Company to the PBGC.
(c) Agreements. Enter into any agreement containing any provision
which would be violated or breached by the performance of its
obligations hereunder or under any instrument or document
delivered or to be delivered by it hereunder or in connection
herewith.
Section 7.9. Mechanics' and Other Liens. The Company shall not suffer
or permit any mechanics' or other liens to be filed or exist against the Project
nor any part thereof, nor against the Company's leasehold interest in the
Project, nor against the Project Fund or the Collateral Proceeds Account, by
reason of work, labor, services, or materials supplied or claimed to have been
supplied to, for or in connection with the Project or any part thereof or to the
Director or the Company or anyone holding the Project or any part thereof
through or under the Company. Nothing in this Section shall require the Company
to pay or discharge any such lien so long as the validity thereof shall be
contested in good faith and by appropriate legal proceedings, provided that the
Company shall have delivered to the Director an opinion of counsel, selected by
the Company and reasonably acceptable to the Director, to the effect that
nonpayment of any such lien during the pendency of such contest will not
adversely affect the Director's right, title or interest in the Project. If any
such liens shall at any time be filed, the Company shall, within one hundred
twenty days after notice of the filing thereof but subject to the right to
contest hereinafter set forth, cause the same to be discharged of record by
payment, deposit, bond, order of a court of competent jurisdiction or otherwise.
If the Company shall fail to cause such lien to be discharged, or to contest the
validity or amount thereof, within the period aforesaid, then, in addition to
any other right or remedy of the Director, the Director may, but shall not be
obligated to, discharge the same either by paying the amount claimed to be due
or by procuring the discharge of such lien by deposit or by bonding. Any amount
paid by the Director shall be reimbursed by the Company to the Director on
demand, and if not so reimbursed on demand shall be paid by the Company with
interest thereof at the Interest Rate for Advances from the date of payment by
the Director, which amounts the Company agrees to pay.
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ARTICLE VIII
ASSIGNMENT, SUBLEASING AND SELLING;
REDEMPTION; RENT PREPAYMENT AND ABATEMENT
Section 8.1. Assignment and Subleasing by the Lessee. This Lease may
not be assigned in whole or in part, nor may the Project be subleased as a whole
or in part, by the Company without the consent of the Director.
Section 8.2. Pledge by the Director. The Director has pledged any
moneys receivable under or pursuant to this Lease (except for reimbursement of
expenses and indemnification by the Company) to the Trustee pursuant to the
Trust Agreement. The Company hereby consents to such assignment and pledge.
Section 8.3. Restrictions on Transfer and Encumbrance of Project by the
Director. The Director agrees that, except as otherwise provided in this Lease,
it will not"sell, assign, transfer, convey or otherwise dispose of the Project
or any portion thereof during the Lease Term and that it will not, to the extent
permitted by law, take any action which may reasonably be construed as tending
to cause or induce the levy of special assessments by others against the Project
Site without the written consent of the Company, nor will it create or suffer to
be created any debt, lien or charge thereon or make any, pledge or assignment of
or create any lien or encumbrance upon the rents, revenues and receipts derived
from the sale, lease or other disposition of the Project other than as provided
in Section 8.2 hereof.
Section 8.4. Redemption of Bonds. The Director, at the written request
at any time of the Company if the Bonds are then callable, shall forthwith take
all steps that may be necessary under the applicable redemption provisions of
the Trust Agreement to effect redemption of all or part of then outstanding
Bonds, as may be specified by the Company, on the earliest redemption date on
which such redemption may be made under such applicable provisions, if the
Company shall then have deposited with the Trustee moneys sufficient to pay the
principal of and premium, if any, and interest due or to become due on such
redemption date with respect to the Bonds as to which such request is made.
Section 8.5. Prepayment of Rents. There is expressly reserved to the
Company the right, and Company is authorized and permitted, at any time it may
choose, to prepay all or any part of the rents payable under Section 4.3 hereof,
and the Director agrees that the Trustee may accept such prepayment of rents
when the same are tendered by the Company. Notwithstanding the provisions of
Section 4.4 of this Lease, prepaid rent shall be deposited to the Collateral
Proceeds Account and transferred to the Debt Service Account as rental payments
in the amounts and on the dates specified for rental payments pursuant to
Section 4.3 of this Lease.
Section 8.6. Lessee Entitled to Certain Rent Abatements if Bonds Paid
Prior to Maturity. If at any time during the Lease Term there shall be no Bonds
outstanding, within the meaning of
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the Trust Agreement, and if the Company is not at the time in default hereunder,
the Company shall be entitled to use and occupy the Project from such time to
the termination of the Lease, without the payment of the rent (but otherwise on
the terms and conditions hereof).
Section 8.7. Installation of the Company's Own Machinery and Equipment.
In addition to the Project Equipment, the Company may from time to time, in its
sole discretion and at its own expense, install additional movable personal
property, machinery, equipment, furniture or fixtures on the Project Site. All
such property so installed by the Company shall remain the sole property of the
Company in which the Director shall have no interest, and may be modified or
removed at any time while the Company is not in default hereunder. Nothing
contained in the preceding provisions of this Section shall prevent the Company
from purchasing, after delivery of this Lease, movable personal property,
machinery, equipment, furniture or fixtures, not constituting Project Equipment,
on conditional sale contract or lease sale contract, or subject to vendor's lien
or security agreement, as security for the unpaid portion of the purchase price
thereof; provided no such lien or security interest shall attach to any part of
the Project.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Event of Default. Each of the following shall be an "Event
of Default":
(a) The Company shall fail to pay any amount payable pursuant to
this Lease on the date on which such payment is due and
payable; or
(b) The Company shall fail to observe and perform any agreement,
term or condition contained in this Lease other than as
required pursuant to subsection (a) above, and such failure
continues for a period of thirty (30) days after notice of
such failure is given to the Company by the Director, or for
such longer period as the Director may agree to in writing;
provided, that if the failure is of such nature that it can be
corrected but not within the applicable period, such failure
shall not constitute an Event of Default so long as the
Company institutes curative action within the applicable
period and diligently pursues such action to completion; or
(c) Any representation or warranty made by the Company (or any of
its officers) herein or in any Lease Approval Document or in
connection herewith or therewith shall prove to have been
incorrect in any material respect when made; or
(d) The Company shall fail to pay any indebtedness of the Company,
or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, by acceleration, on
demand or otherwise) and such failure shall continue after the
applicable grace period, if any specified in the agreement or
instrument relating to such indebtedness; or any other default
under any agreement
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or instrument relating to any such indebtedness, or any other
event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of
such indebtedness; or any such indebtedness shall be declared
to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the
stated maturity thereof; or
(e) The Company commences a voluntary case concerning it under
titles of the United States Code entitled "Bankruptcy" as now
hereafter in effect, or any successor thereto (the "Bankruptcy
Code"); or an involuntary case is commenced against the
Company under the Bankruptcy Code and relief is ordered
against the Company, or the petition is controverted but is
not dismissed within sixty (60) days after the commencement of
the case; or the Company is not generally paying its debts as
such debts become due; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Company; or the
Company commences any other proceeding under any
reorganization, arrangement, readjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction whether now or hereafter in effect; or
there is commenced against the Company any such proceeding
which remains undismissed for a period of sixty (60) days; or
the Company is adjudicated insolvent or bankrupt; or the
Company fails to controvert in a timely manner any such case
under the Bankruptcy Code or any such proceeding or any order
of relief or other order approving any such case or proceeding
or in the appointment of any custodian or the like of or for
it or any substantial part of its property or suffers any such
appointment to continue undischarged or unstayed for a period
of sixty (60) days; or the Company makes a general assignment
for the benefit of creditors; or any action is taken by the
Company for the purpose of effecting any of the foregoing; or
a receiver or trustee or any other officer or representative
of the court or of creditors, or any court, governmental
officer or agency, shall under color of legal authority, take
and hold possession of any substantial part of the property or
assets of the Company for a period in excess of sixty (60)
days; or
(f) A judgment or order for the payment of money in excess of Ten
Thousand Dollars ($10,000) shall be rendered against the
Company and either M enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii)
there shall be any period of thirty (30) 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; or
(g) Any default under the Guaranty shall have occurred and be
continuing; or
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(h) The Company fails to meet its minimum funding requirements
under Section 301 et seq. of ERISA, with respect to any of its
Plans.
Section 9.2. Remedies on Default. Whenever an Event of Default shall
have happened and be subsisting, any one or more of the following remedial steps
may be taken:
(a) The Director may at its option declare all installments of
rent payable under Section 4.3 hereof for the remainder of the
Lease Term to be immediately due and payable, whereupon the
same shall become immediately due and payable.
(b) The Director may reenter and take possession of the Project
without terminating this Lease, and sublease the Project for
the account of the Company, holding the Company liable for the
difference between the rent and other amounts payable by such
sublessee in such subleasing and the rents and other amounts
payable by the Company hereunder.
(c) The Director may terminate the Lease Term, exclude the Company
from possession of the Project and use its best efforts to
lease or sell the Project to another, but holding the Company
liable for all rent and other payments due up to the effective
date of such leasing.
(d) The Director may direct the Trustee, in writing, to transfer
any amounts remaining in the Project Fund to the Collateral
Proceeds Account.
(e) The Director may take whatever action at law or in equity as
may appear necessary or desirable to collect the rent then due
and thereafter to become due, or to enforce performance and
observance of any obligation, agreement or covenant of the
Company under this Lease.
Any amounts collected pursuant to action taken under this Section shall be paid
into the Collateral Proceeds Account and applied in accordance with the
provisions of the Trust Agreement or, if the Bonds have been fully paid (or
provision for payment thereof has been made in accordance with the provisions of
the Trust Agreement) and all other amounts payable thereunder and hereunder have
been paid, as directed by the Company.
Section 9.3. No Remedy Exclusive. No remedy conferred upon or reserved
to the Director by this Lease is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Lease or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the
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Director to exercise any remedy reserved to it in this Article, it shall not be
necessary to give any notice, other than such notice As may be herein expressly
required.
Section 9.4. Agreement to Pay Attorneys' Fees and Expenses. In the
event the Company should default under any of the provisions of this Lease and
the Director should employ attorneys or incur other expenses for the collection
of rent or the enforcement of performance or observance of any obligation or
agreement on the part of the Company contained in this Lease, the Company agrees
that it will on demand therefor reimburse the reasonable fee of such attorneys
and such other expenses so incurred. If any such fees and expenses are not so
reimbursed, the amount thereof, together with interest thereon from the date of
demand for payment at the Interest Rate for Advances, shall, to the extent
permitted by law, constitute indebtedness secured hereby and by the Trust
Agreement, and in any action brought to collect such indebtedness, the Director
shall be entitled to seek the recovery of such fees and expenses in such action
except as limited by law or by judicial order or decision entered in such
proceedings.
Section 9.5. No Additional Waiver implied by One Waiver. In the event
any agreement contained in this Lease should be breached by either party and
thereafter waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
Section 9.6. Waiver of Appraisement, Valuation, Etc. In the event the
Company should default under any of the provisions of this Lease, the Company
agrees to waive, to the extent it may lawfully do so, the benefit of all
appraisement, valuation, stay, extension or redemption laws now or hereafter in
force, and all right of appraisement and redemption to which it may be entitled.
Section 9.7. Reinstatement. Notwithstanding any termination of this
Lease in accordance with the provisions of Section 9.2 hereof, unless and until
the Director shall have entered into a valid and binding agreement providing for
the reletting of the Project, the Company may at any time after such termination
pay all accrued unpaid rent plus any costs to the Director and the Trustee
(including, but not limited to, fees and expenses) occasioned by the default and
fully cure all other defaults then capable of being cured. Upon such payment and
cure, this Lease shall be fully reinstated, as if it had never been terminated,
and the Company shall be restored to the use, occupancy and possession of the
Project.
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ARTICLE X
OPTIONS AND OBLIGATIONS TO PURCHASE PROJECT
Section 10.1. Option to Terminate. The Company shall have the option to
cancel or terminate the term of this Lease at any time when all the Bonds shall
be deemed to have been paid and discharged under the provisions of the Trust
Agreement and all amounts payable by the Company hereunder shall have been paid.
Such option shall be exercised by giving the Director notice in writing of such
cancellation or termination and such cancellation and termination shall
forthwith become effective.
Section 10.2. Option to Purchase Project Prior to Payment of the Bonds.
The Company shall have, and is hereby granted, the option to purchase the
Project prior to the expiration of the Lease and prior to the full payment of
the Bonds (or provision for payment thereof having been made in accordance with
the provisions of the Trust Agreement), if any of the following shall have
occurred:
(a) The Project Equipment shall have been damaged or destroyed
as set forth in Section 6.1 hereof (i) to such extent that they cannot
be reasonably restored within a period of six months to the condition
thereof immediately preceding such damage or destruction, or (ii) to
such extent chat the Company is thereby prevented from carrying on its
normal operations for a period of six consecutive months.
(b) Title to, or the temporary use of, all or substantially
all of the Project shall have been taken under the exercise of the
power of eminent domain by any governmental authority, or person, firm
or corporation acting under governmental authority (including such a
taking or takings as results in the Company being thereby prevented
from carrying on its normal operations therein for a period of six
consecutive months).
(c) As a result of any changes in the Constitution of the
State of Ohio or the Constitution of the United States of America or of
legislative or administrative action (whether state or federal) or by
final decree, judgment or order or any court or administrative body
(whether state or federal) entered after the contest thereof by the
Director in good faith, this Lease shall have become void or
unenforceable or impossible of performance in accordance with the
intent and purpose of the parties as expressed in this Lease, or if
unreasonable burdens or excessive liabilities shall have been imposed
upon the Director or the Company, with respect to the Project or
operation thereof, including without limitation federal, state or other
ad valorem, property, income or other taxes not being imposed on the
date of this Lease other than ad valorem taxes presently levied upon
privately owned property used for the same general purpose as the
Project; provided, that the provisions of this subsection shall in no
way effect the Company's obligation for the continued maintenance of
the Project during the Lease Term.
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To exercise such option, the Company shall, within ninety days following the
event authorizing the exercise of such option, give written notice to the
Director, and to the Trustee if any of the Bonds shall then be unpaid, and shall
specify therein the date of closing such purchase, which date shall be not less
than forty-five nor more than ninety days from the date such notice is mailed,
and in case of a redemption of the Bonds in accordance with the provisions of
the Trust Agreement shall make arrangements satisfactory to the Trustee for the
giving of the required notice of redemption, in which arrangements Director
shall cooperate. The purchase price payable by the Company, in the event of its
exercise of the option granted in this Section, shall be the sum of the
following:
(1) An amount of money which, when added to (i) the moneys and
investments held to the credit of the Collateral Proceeds Account and
the Primary Reserve Account and (ii) the aggregate rental payments made
by the Company and not theretofore applied to the payment of principal
of or interest on the Bonds, will be sufficient pursuant to the
provisions of the Trust Agreement, to pay and discharge all then
outstanding Bonds on the first possible date for redemption, plus
(2) An amount of money equal to the Trustee's fees and expenses, to the
extent payable by the Company pursuant to this Lease, accrued and to
accrue until such final payment and redemption of the Bonds, plus
(3) The sum of One Dollar ($1.00) to the Director.
In the event of the exercise of the option granted in this Section any Net
Proceeds of insurance or condemnation shall be paid to the Company,
notwithstanding any provision of Section 6.1 and 6.2 hereof, and the Director
will deliver to the Company the documents referred to in Section 10.4 hereof.
The mutual agreements contained in this Section 10.2, are independent
of, and constitute an agreement separate and distinct from any and all
provisions of this Lease and shall be unaffected by any fact or circumstance
which might impair or be alleged to impair the validity of any other provisions.
Section 10.3. Agreement to Purchase Project. The Company agrees that it
will purchase and the Director agrees that it will sell the Project for One
Dollar ($1.00) upon full payment of the Bonds or provision for payment thereof
having been made in accordance with the provisions of the Trust Agreement. Upon
sale of the Project to the Company as provided in this Section 10.3, the
Director will deliver to the Company the documents referred to in Section 10.4
hereof.
Section 10.4. Conveyance upon Exercise of Option to Purchase. Upon
exercise of any option to purchase granted herein, the Director will upon
payment of the purchase price deliver or cause to be delivered to the Company
documents conveying to the Company good and marketable title to the property
being purchased, as such property then exists, subject to the
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following: (i) those liens and encumbrances, if any, to which title to said
property was subject when conveyed to the Director; (ii) those liens and
encumbrances created by the Company or to the creation or suffering of which the
Company consented; (iii) those liens and encumbrances resulting from the failure
of the Company to perform or observe any of the agreements on its part contained
in this Lease; and (iv) if the option is exercised pursuant to the provisions of
Section 10.2(b) hereof, the rights and title of the condemning authority.
Section 10.5. Option to Purchase, Redeem or Defease Bonds. Provided no
Event of Default has occurred and is existing, the Company may instruct the
Trustee to apply any moneys on deposit in the Collateral Proceeds Account,
together with any moneys furnished to the Trustee by the Company but not
constituting payments due under Article IV of this Lease, to any of the
following purposes:
(a) Purchase of Bonds in the open market at prices not greater
than their fair market value;
(b) Redemption of Bonds pursuant to the optional redemption
provisions thereof; or
(c) Defeasance of Bonds pursuant to Article IX of the Trust
Agreement.
If the sum of the amounts in the Collateral Proceeds Account and the Primary
Reserve Account, when added to the amount delivered by the Company to the
Trustee for application in accordance with this Section 10.5, is sufficient to
purchase for cancellation, optionally redeem or defease all of the Outstanding
Bonds, the Trustee shall, at the direction of the Company, apply moneys in the
Primary Reserve Account for any of such purposes.
Section 10.6. Purchase of Project Upon Determination of Taxability. Not
later than thirty (30) days after the occurrence of a Determination of
Taxability, the Company shall purchase from the Director, and the Director shall
sell to the Company, the Project. The purchase price shall be determined in the
manner set forth in Section 10.2 of this Lease, except that the amount
determined pursuant to clause (1) of said Section 10.2 shall be determined with
reference to the actual date set for redemption of the Bonds. Upon sale of the
Project to the Company as provided in this Section 10.5, the Director will
deliver to the Company the documents referred to in Section 10.4 hereof.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Surrender of Project. In the event the Company should
default under this Lease and the Lease Term is terminated, the Company agrees to
surrender possession of the Project peaceably and promptly to the Director in as
good condition as prevailed at the time it
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was put in full possession thereof, loss by fire or other casualty covered by
insurance, ordinary wear and tear, obsolescence and acts of God excepted.
Section 11.2. Amounts Remaining in Collateral Proceeds Account and
Primary Reserve Account. It is agreed by the parties hereto that any amounts
remaining in the Collateral Proceeds Account or the Primary Reserve Account upon
expiration or sooner cancellation or termination of this Lease, after payment in
full of the Bonds (or provision for payment thereof having been made in
accordance with the provisions of the Trust Agreement) and the fees, charges and
expenses of the Trustee and all other amounts required to be paid hereunder,
shall belong to and be paid to the Company by the Trustee as overpayment of
rents.
Section 11.3. Notices. All notices, certificates, requests or other
communications hereunder shall be sufficiently given and shall be deemed given
when mailed by registered or certified mail, postage prepaid, addressed to the
recipient at its Notice Address. A duplicate copy of each notice, certificate,
request or other communication given hereunder to the Director, the Company, or
the Trustee shall also be given to the others. The Company, the Director and the
Trustee may, by notice given hereunder, change a Notice Address or designate any
further addresses to which subsequent notices, certificates, requests or ocher
communications shall be sent.
Section 11.4. Net Lease. This Lease shall be deemed and construed to be
a "net lease", and the Company shall pay absolutely net during the Lease Term
the rent and all other payments required hereunder, free of any deductions,
without abatement, deduction or set-off other than those herein expressly
provided.
Section 11.5. Binding Effect. This Lease shall inure to the benefit of
and shall be binding upon the Director, the Company and their respective
successors and assigns, subject, however, to the limitations contained in
Sections 8.1 and 8.3 hereof, and subject to the further limitation, as set forth
on page 1 of this Lease, chat any obligation of the Director created by or
arising out of this Lease shall not be a general debt of the Director or the
State but shall be payable solely out of the proceeds derived from this Lease or
the Net Proceeds of any insurance or condemnation awards as provided herein.
Section 11.6. Extent of Covenants of the Director; No Personal
Liability. All covenants, stipulations, obligations and agreements of the
Director contained in this Lease shall be effective to the extent authorized and
permitted by applicable law. No such covenant, stipulation, obligation or
agreement shall be deemed to be a covenant, stipulation, obligation or agreement
of any present or future Director in other than such Director's official
capacity acting pursuant to the Act.
Section 11.7. Amendments, Changes and Modifications. This Lease may not
be effectively amended, changed or modified except by an instrument in writing
executed by the Director and the Company. No amendment to the Supplement which
has the effect of increasing
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the Company's obligations under this Lease shall become effective without the
written consent of the Company.
Section 11.8. Execution Counterparts. This Lease may be executed in
several counterparts, each of which shall be regarded as an original and all of
which shall constitute but one and the same Lease.
Section 11.9. Severability. If any clause, provision or section of this
Lease be held illegal or invalid by any court, the invalidity of such clause,
provision or section shall not affect any of the remaining clauses, provisions
or sections hereof and this Lease shall be construed and enforced as if such
illegal or invalid clause, provision or section had not been contained herein.
In case any agreement or obligation contained in this Lease be held to be in
violation of law then such agreement or obligation shall be deemed to be the
agreement or obligation of the Director or the Company, as the case may be, to
the full extent permitted by law.
Section 11.10. Captions. The captions or headings in this Lease are for
convenience only and in no way define, limit or describe the scope or intent of
any provisions or sections of this Lease.
Section 11.11. Governing Law. This Lease shall be deemed to be a
contract made under the laws of the State of Ohio and for all purposes shall be
governed by and construed in accordance with the laws of the State of Ohio.
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IN WITNESS WHEREOF, the Director and the Company have caused this Lease
to be executed in their respective names by their duly authorized officers, all
as of the date first above written.
Signed and acknowledged DIRECTOR OF DEVELOPMENT OF THE
in the presence of: STATE OF OHIO
/s/ Sheryl A. Williams By: /s/ Howard F. Wise
- ----------------------------- -------------------------------
Howard F. Wise, Deputy Director
/s/Randall E. Moore
- -----------------------------
Signed and acknowledged LUIGINO'S, INC.
in the presence of:
/s/Bruce A. Langman By: /s/ Ronald O. Bubar
- ----------------------------- -------------------------------
Title: Executive Vice President of
Operations
/s/ Bruce E. Coleman
- -----------------------------
STATE OF OHIO :
: ss.
COUNTY OF FRANKLIN :
On this 18th day of September, 1991, before me, a Notary Public in and
for said County and State, personally appeared Howard F. Wise, Deputy Director
of the Department of Development of the State of Ohio, and acknowledged the
execution of the foregoing instrument and that the same is his voluntary act and
deed on behalf of the Director of Development of the State of Ohio and the
voluntary act and deed of said officer as such.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official
seal on the day and year aforesaid.
/s/ Randall E. Moore
---------------------------
Notary Public
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STATE OF OHIO :
: ss.
COUNTY OF FRANKLIN :
On this 25th day of September, 1991, before me, a Notary Public in and
for said County and State, personally appeared Ronald O. Bubar, Executive Vice
President of Operations of Luigino's, Inc., the corporation which executed the
foregoing instrument, who acknowledged that he did sign said instrument as such
officer, for and on behalf of said corporation; that the same is his free act
and deed as such officer, and the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
seal on the day and year aforesaid.
/s/ Randall E. Moore
----------------------------
Notary Public
This instrument was prepared by Richard F. Kane, Esq., Bricker & Eckler, 100
South Third Street, Columbus, Ohio.
*Filed without exhibits and schedules. Such exhibits will be filed with the
Commission upon request.
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EXHIBIT 10.8
THIRTY-EIGHTH SUPPLEMENTAL TRUST AGREEMENT
Pertaining to
STATE OF OHIO
$8,100,000 STATE ECONOMIC DEVELOPMENT REVENUE BONDS
(OHIO ENTERPRISE BOND FUND)
SERIES 1993-5
(FOREMOST MGMT., INC. PROJECT)
(TAXABLE BONDS)
This Thirty-Eighth Supplemental Trust Agreement, dated as of September
1, 1993 (the "Supplement Number 38") by and between the STATE OF OHIO (the
"State"), and THE PROVIDENT BANK, a bank organized and existing under and by
virtue of the laws of the State and authorized to exercise corporate trust
powers in the State, with its principal place of business located in Cincinnati,
Ohio (the "Trustee"), as trustee under the Trust Agreement, dated as of April 1,
1988 (the "Trust Agreement"), between the State and the Trustee.
WITNESSETH:
WHEREAS, the State, pursuant to direction of the Director of
Development of the State under Section 166.09 of the Revised Code and the
General Bond Order of the Treasurer of the State (the "Treasurer") dated April
11, 1988, entered into the Trust Agreement providing for the issuance from time
to time of State Economic Development Revenue Bonds (Ohio Enterprise Bond Fund)
(the "Bonds"), with each issue of Bonds to be authorized by a Series Bond Order
of the Treasurer which Series Bond Order shall authorize a Supplemental Trust
Agreement, supplementing the Trust Agreement, pertaining to that issue of Bonds;
and
WHEREAS, pursuant to the certification of the Director of Development
of the State under Section 166.08(B) of the Revised Code, the Treasurer issued
Series Bond Order No. R5-93 dated September 1, 1993 providing for the issuance
and sale of $8,100,000 State of Ohio State Economic Development Revenue Bonds
(Ohio Enterprise Bond Fund), Series 1993-5 (Foremost Mgmt., Inc. Project)
(Taxable Bonds) (the "Series 1993-5 Bonds") and this Supplement Number 38, which
Series Bond Order No. R5-93 is incorporated herein, constitutes an integral part
of this Supplement Number 38 and provides in its entirety as follows:
<PAGE>
STATE OF OHIO
STATE ECONOMIC DEVELOPMENT REVENUE BONDS
(OHIO ENTERPRISE BOND FUND)
SERIES BOND ORDER NO. R5-93
Providing for the authorization, issuance and sale of
$8,100,000 State of Ohio State Economic Development Revenue
Bonds (Ohio Enterprise Bond Fund), Series 1993-5 (Foremost
Mgmt., Inc. Project) (Taxable Bonds), pursuant to the Trust
Agreement dated as of April 1, 1988.
WHEREAS, the Treasurer of State of the State of Ohio (the "Treasurer"),
by the General Bond Order dated April 11, 1988 and included in a Trust
Agreement, dated as of April 1, 1988 (the "Trust Agreement"), between the State
of Ohio (the "State") and The Provident Bank, as trustee (the "Trustee"), has
provided for the issuance from time to time of State Economic Development
Revenue Bonds (Ohio Enterprise Bond Fund) of the State, with each issue of Bonds
to be authorized by a Series Bond Order of the Treasurer pursuant to the General
Bond Order;
WHEREAS, the General Bond Order was issued and the Trust Agreement was
entered into by the Treasurer pursuant to Chapter 166 of the Revised Code (the
"Act") enacted under authority of the Constitution of Ohio, particularly Section
13 of Article VIII thereof, which authorizes the Treasurer to issue obligations
of the State as from time to time authorized by the General Assembly or
otherwise required or permitted by the Act to provide moneys for the Facilities
Establishment Fund, including authorized transfers from that Fund, and for
funding reserves, as provided in the Act and this Order; and
WHEREAS, the Director of Development of the State has certified to the
Treasurer, pursuant to Section 166.08 (B) of the Revised Code, the need for the
sum of $8,100,000 to be allocated as provided in Section 7 of this Order; and
WHEREAS, pursuant to the foregoing and for the purposes stated in
Section 4 of this Order, the Treasurer has determined to issue $8,100,000
principal amount of Bonds and to provide the security and source of payment
therefor by this Order;
NOW, THEREFORE, THE TREASURER OF STATE OF THE STATE OF OHIO HEREBY
ORDERS as follows:
Section 1. Definitions and Interpretations. Where used in this Order,
and in addition to words and terms defined elsewhere in this Order and in the
General Bond Order the following terms shall have the following meanings:
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"Called Principal" means, with respect to any Series 1993-5 Bond, the
principal of such Series 1993-5 Bond that is to be redeemed at the option of the
State.
"Collateral Proceeds Account" means the Series 1993-5 Collateral
Proceeds Account, created pursuant to the General Bond Order and Section 7 of
this Order, in the Economic Development Bond Service Fund.
"Company" means Foremost Mgmt., Inc., a corporation organized under the
laws of the State of Ohio.
"Discounted Value" means, with respect to the Called Principal of any
Series 1993-5 Bond, the amount obtained by discounting all Remaining Scheduled
Payments with respect to the Called Principal from their respective scheduled
due dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and, at a discount factor (applied
on a quarterly basis) equal to the Reinvestment Yield with respect to such
Called Principal.
"Financing Agreement" means the Lease, dated as of September 1993
between the Director of Development of the State and the Company, as from time
to time amended.
"Issuance Expense Account" means the Series 1993-5 Issuance Expense
Account created in Section 7 of this Order.
"Original Purchaser" means, as to the Series 1993-5 Bonds, Union
Central Life Insurance Co., Manhattan Life Insurance Co. and Ohio National Life
Insurance Co.
"Placement Agent" means, as to the Series 1993-5 Bonds, The Ohio
Company.
"Private Placement Agreement" means the Private Placement Agreement
among the State, the Company and the Placement Agent providing for the private
placement of the Series 1993-5 Bonds by the Placement Agent.
"Primary Reserve Account" means the Series 1993-5 Primary Reserve
Account, created pursuant to the General Bond Order and Section 7 of this Order,
in the Economic Development Bond Service Fund.
"Project" means the Project Facilities and the Project Site, which
together constitute an Eligible Project.
"Project Facilities" means the improvements to the Project Site
described on Exhibit B attached to the Financing Agreement.
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<PAGE>
"Project Site" means that real property described on Exhibit A attached
to the Financing Agreement.
"Project Fund" means the Series 1993-5 Project Fund, established
pursuant to Section 8 of this Order.
"Reinvestment Yield" shall mean, with respect to the Called Principal
of any Series 1993- 5 Bond, the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace Page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest date for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between reported yields.
"Remaining Average Life" shall mean, with respect to the Called
Principal of any Series 1993-5 Bond, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such Called Principal into
(ii) the sum of the products obtained by multiplying (a) each Remaining
Scheduled Payment of such Called Principal (but not of interest thereon) by (b)
the number of years (calculated to the nearest one-twelfth year) which will
elapse between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the Called
Principal of any Series 1993-5 Bond, all payments of such principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"Series 1993-5 Bonds" means the Bonds authorized by this Order.
"Settlement Date" means with respect to the Called Principal of any
Series 1993-5 Bond, the date on which such Called Principal is to be redeemed at
the option of the State.
"Supplement Number 38" means the Thirty-Eighth Supplemental Trust
Agreement, dated as of September 1, 1993, between the Treasurer and the Trustee,
of which this Order is a part.
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"Yield-Maintenance Premium" shall mean, with respect to any Series
1993-5 Bond, a premium equal to the excess, if any, of the Discounted Value of
the Called Principal of such Series 1993-5 Bond over the sum of (i) such Called
Principal plus (ii) interest accrued thereon as of (including interest due on)
the Settlement Date with respect to such Called Principal. If the State and the
owner of any Series 1993-5 Bond shall, prior to the Settlement Date, designate
in writing a lesser premium from that calculated as set forth in the preceding
sentence, the premium so designated shall be payable on the Settlement Date in
lieu of the Yield-Maintenance Premium as described in the preceding sentence
with respect to such Series 1993-5 Bond.
Unless the context or use clearly indicates another or different
meaning or intent, all words and terms defined in and all interpretations
provided in Section 1 of the General Bond Order shall have the same meanings and
be subject to the same interpretations as therein provided, except that this
Order is referred to herein as "this Order" and may be known as "Series Bond
Order No. R5-93", and the terms "hereof", "herein", "hereby it, "hereto " and
"hereunder", and similar terms, mean this Order.
Section 2. Authority. This Order is issued pursuant to the General Bond
Order, the Trust Agreement and the Act.
Section 3. Findings. The Treasurer finds that the conditions stated in
numbered subparagraphs (1), (2), and (4) of Subsection 3(a) of the General Bond
Order are or will be satisfied at the time of authentication of the Series
1993-5 Bonds. The Treasurer or an Authorized Officer shall confirm these
findings by a certificate in form satisfactory to and to be filed with the
Trustee prior to the authentication of the Series 1993-5 Bonds, and the
Treasurer or that Authorized Officer may provide such other evidence with
respect thereto as the Trustee may reasonably request.
Section 4. Authorization, Designation and Purposes of Series 1993-5
Bonds. It is necessary to and the State shall issue, sell and deliver, as
provided in this Order, $8,100,000 principal amount of bonds of the State, which
shall be designated "State of Ohio State Economic Development Revenue Bonds
(Ohio Enterprise Bond Fund), Series 1993-5 (Foremost Mgmt., Inc. Project)
(Taxable Bonds)", for the purpose of paying a portion of the costs or acquiring
and installing the Project Equipment constituting the Project, make a deposit to
the Primary Reserve Account and paying certain costs of issuance of the Series
1993-5 Bonds.
Section 5. Terms and Provisions Applicable to Series 1993-5 Bonds. The
Series 1993-5 Bonds shall be initially issued in fully registered form and
substantially in the form set forth in Supplement Number 33. The Series 1993-5
Bonds shall be numbered in such manner so as to distinguish each Series 1993-5
Bond from any other Series 1993-5 Bond and shall be in the denomination of
$100,000 or any integral multiple of $5,000 in excess thereof requested by the
bondholder.
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Each Series 1993-5 Bond shall be dated as of the interest payment date
next preceding the date of its authentication, unless authenticated on an
interest payment date in which case it shall be dated as of the date of
authentication; provided that if at the time of authentication of any Series
1993-5 Bond interest is in default thereon, such Series 1993-5 Bond shall be
dated as of the date to which interest has been paid; and provided, further,
that Series 1993-5 Bonds authenticated prior to September 1, 1993 shall be dated
the first date that the Series 1993-5 Bonds are delivered to the original
purchasers thereof against payment therefor, Interest shall be paid based upon a
year of twelve 30 day months.
The Series 1993-5 Bonds shall bear interest from their respective
dates, payable quarterly on March 1, June 1, September 1 and December 1 of each
year, beginning September 1, 1993, at the rate of 7.54% per annum and shall
mature on June 1, 2013.
The Series 1993-5 Bonds are subject to redemption at the option of the
State, but if the Company is not in default under the Financing Agreement, only
at the direction of the Company, prior to maturity on any Interest Payment Date
after September 1, 1993, in whole at a redemption price equal to the sum of the
principal amount of Series 1993-5 Bonds redeemed plus the Yield-Maintenance
Premium plus accrued interest to the redemption date.
The Series 1993-5 Bonds are subject to mandatory redemption by the
State at a redemption price equal to 100% of the principal amount redeemed plus
accrued interest to the date of redemption on the dates and in the principal
amounts set forth below:
Date Amount
---- ------
September 1, 1994 $45,000.00
December 1, 1994 $45,000.00
March 1, 1995 $50,000.00
June 1, 1995 $50,000.00
September 1, 1995 $50,000.00
December 1, 1995 $50,000.00
March 1, 1996 $50,000.00
June 1, 1996 $55,000.00
September 1, 1996 $55,000.00
December 1, 1996 $55,000.00
March 1, 1997 $55,000.00
June 1, 1997 $60,000.00
September 1, 1997 $60,000.00
December 1, 1997 $60,000.00
March 1, 1998 $60,000.00
June 1, 1998 $60,000.00
September 1, 1998 $65,000.00
December 1, 1998 $65,000.00
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March 1, 1999 $65,000.00
June 1, 1999 $65,000.00
September 1, 1999 $70,000.00
December 1, 1999 $70,000.00
March 1, 2000 $70,000.00
June 1, 2000 $75,000.00
September 1, 2000 $75,000.00
December 1, 2000 $75,000.00
March 1, 2001 $80,000.00
June 1, 2001 $80,000.00
September 1, 2001 $80,000.00
December 1, 2001 $80,000.00
March 1, 2002 $85,000.00
June 1, 2002 $85,000.00
September 1, 2002 $85,000.00
December 1, 2002 $90,000.00
March 1, 2003 $90,000.00
June 1, 2003 $95,000.00
September 1, 2003 $95,000.00
December 1, 2003 $95,000.00
March 1, 2004 $100,000.00
June 1, 2004 $100,000.00
September 1, 2004 $100,000.00
December 1, 2004 $105,000.00
March 1, 2005 $105,000.00
June 1, 2005 $110,000.00
September 1, 2005 $110,000.00
December 1, 2005 $115,000.00
March 1, 2006 $115,000.00
June 1, 2006 $115,000.00
September 1, 2006 $120,000.00
December 1, 2006 $120,000.00
March 1, 2007 $125,000.00
June 1, 2007 $125,000.00
September 1, 2007 $130,000.00
December 1, 2007 $130,000.00
March 1, 2008 $135,000.00
June 1, 2008 $135,000.00
September 1, 2008 $140,000.00
December 1, 2008 $145,000.00
March 1, 2009 $145,000.00
June 1, 2009 $150,000.00
September 1, 2009 $150,000.00
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December 1, 2009 $155,000.00
March 1, 2010 $160,000.00
June 1, 2010 $160,000.00
September 1, 2010 $165,000.00
December 1, 2010 $170,000.00
March 1, 2011 $170,000.00
June 1, 2011 $175,000.00
September 1, 2011 $180,000.00
December 1, 2011 $180,000.00
March 1, 2012 $185,000.00
June 1, 2012 $190,000.00
September 1, 2012 $190,000.00
December 1, 2012 $195,000.00
March 1, 2013 $200,000.00
Unless otherwise retired prior to maturity, the remaining principal amount of
Series 1993-5 Bonds ($205,000.00), will be payable at their maturity on June 1,
2013.
The State shall have the option to deliver to the Trustee for
cancellation Series 1993-5 Bonds in any aggregate principal amount and receive a
credit against the then current applicable mandatory redemption requirement as
set forth above for the Series 1993-5 Bonds. A credit shall also be received for
any Series 1993-5 Bonds which prior thereto have been redeemed (other than
through the operation of the mandatory redemption requirements) or purchased for
cancellation and canceled pursuant to Section 2.06 of the Trust Agreement and
not theretofore applied as a credit against any mandatory redemption requirement
for the Series 1993-5 Bonds. Each Series 1993-5 Bond so delivered, or previously
redeemed or canceled, shall be credited by the Trustee at 100% of its principal
amount against the applicable mandatory redemption requirement on that mandatory
redemption date, the principal amount of the Series 1993-5 Bonds to be redeemed
by operation of the mandatory redemption requirements on that date shall be
accordingly reduced, and any excess of that amount may be credited against
future applicable mandatory redemption requirements. The Treasurer will on or
before the 45th day preceding each mandatory redemption date furnish the Trustee
with a certificate, signed by the Treasurer or an Authorized Officer, stating
the extent of the credit to be applied with respect to the applicable mandatory
redemption requirement of that payment date. If that certificate is not timely
furnished to the Trustee, the applicable mandatory redemption requirement shall
not be reduced.
If fewer than all of the outstanding Series 1993-5 Bonds are called for
optional or mandatory redemption at one time, the selection of the Series 1993-5
Bonds (including portions thereof) to be called for redemption shall be made in
the manner provided in Section 3.03 of the Trust Agreement, provided that any
such redemption shall be made pro rata among the holders of the outstanding
Series 1993-5 Bonds, based on the principal amount of outstanding Series 1993-5
Bonds held by each holder; provided, that the principal amount to be redeemed
from each such holder shall be rounded, in a manner that the Trustee considers
fair and appropriate, to the
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nearest whole multiple of $5,000. Notice of call for redemption of Series 1993-5
Bonds shall be given in the manner provided in Section 5(d) of the General Bond
Order.
Principal of and redemption premium on the Series 1993-5 Bonds when due
shall be payable to the registered owners, as provided in Section 5(e) of the
General Bond Order, upon presentation and surrender thereof, at the office of
the Trustee. Interest on the Series 1993-5 Bonds when due shall be payable,
except as otherwise provided in Section 5(e) of the General Bond Order, to the
registered owners by check or draft mailed by the Trustee as provided in Section
5(e) of the General Bond Order.
The Trustee may enter into an agreement with the registered owner of a
Series 1993-5 Bond providing for making all payments to that owner of principal
and interest on that Series 1993-5 Bond or any portion thereof (other than any
payment of the entire unpaid principal amount thereof) at a place and in a
manner (including wire transfer of federal funds) other than as provided above
in this Section 5, without prior presentation or surrender of the Series 19935
Bond, upon any conditions which shall be satisfactory to the Trustee and the
Treasurer. That payment in any event shall be made to the person who is the
registered owner of that Series 1993-5 Bond on the date that principal is due,
or, with respect to the payment of interest, as of the applicable date agreed
upon as the case may be. The Trustee will furnish a copy of each of those
agreements, certified to be correct by the Trustee, to other Paying Agents for
the Series 1993-5 Bonds and to the Treasurer. Any payment of principal or
interest pursuant to such an agreement shall constitute payment thereof pursuant
to, and for all purposes of, this Order.
The Series 1993-5 Bonds shall be executed and authenticated by the
persons and in the manner provided in the Trust Agreement.
The Series 1993-5 Bonds shall express on their face that they have not
been registered under the Securities Act of 1933, as amended, or the securities
laws of any state, and that the Series 1993-5 Bonds may not be sold,
transferred, pledged or hypothecated unless and until the Treasurer has received
an opinion of legal counsel satisfactory to the Treasurer that such sale,
transfer, pledge or hypothecation is in compliance with all applicable federal
and state securities laws. Any such opinions shall be furnished to the
Treasurer, with a copy to the Trustee, at the expense of the transferor
Bondholder.
Section 6. Sale of Series 1993-5 Bonds. The Series 1993-5 Bonds shall
be sold pursuant to the terms of the Private Placement Agreement, which is
hereby approved in all respects. The Private Placement Agreement shall be
substantially in the form now on file with the Treasurer, together with such
changes and insertions therein as may be approved by the Treasurer in executing
the Private Placement Agreement with that execution being conclusive evidence of
that approval. The State hereby ratifies the use of the Preliminary Private
Placement Memorandum and consents to the use of the Private Placement
Memorandum, each as identified in the Private Placement Agreement, in connection
with the initial sale of the Series 1993-5
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Bonds. The forms of the Preliminary Private Placement Memorandum and the Private
Placement Memorandum are hereby approved.
Section 7. Allocation of Proceeds of Series 1993-5 Bonds; Creation of
Accounts. The proceeds from the sale of the Series 1993-5 Bonds, including any
premium and accrued interest, shall be received and receipted by the Treasurer,
and shall be allocated, deposited and credited as follows:
(i) To the Debt Service Account, accrued interest and any
premium received on the sale of the Series 1993-5 Bonds;
(ii) To the Issuance Expense Account, the sum of $195,000;
(iii) To the Primary Reserve Account, the sum of $810,000 (the
"Original Deposit"); and
(iv) To the Program Transfer Account, the balance of the
proceeds.
There is hereby created as a separate deposit account in the custody of
the Trustee the Series 1993-5 Issuance Expense Account. Moneys in the Issuance
Expense Account shall be disbursed by the Trustee, upon the written direction of
the Director of Development, for payment of issuance expenses incurred in
connection with the issuance of the Series 1993-5 Bonds, including, but not
limited to, the fees of the Original Purchasers,-the acceptance fee of the
Trustee, the fees and disbursements of bond counsel, Placement Agent's counsel,
printing fees and rating agency fees. On October 1, 1993, the Trustee shall
transfer any balance remaining in the Issuance Expense Account to the Project
Fund. Moneys in the Issuance Expense Account may be invested and reinvested by
the Trustee, at the direction of the Treasurer, in Eligible Investments, and the
earnings from any such investments shall be credited to the Project Fund.
In accordance with Section 7 of the General Bond Order, there are
hereby created as separate deposit accounts in the custody of the Trustee the
Series 1993-5 Primary Reserve Account (the "Primary Reserve Account") and the
Series 1993-5 Collateral Proceeds Account (the "Collateral Proceeds Account").
Moneys in the Primary Reserve Account shall be invested and disbursed in
accordance with the provisions of the General Bond Order. Moneys in the
Collateral Proceeds Account shall be invested and disbursed in accordance with
the provisions of the Financing Agreement and the General Bond Order.
Section 8. Project Fund. In accordance with Section 16 of the General
Bond Order, there is hereby created as a separate deposit account in the custody
of the Trustee the Series 1993-5 Project Fund (the "Project Fund"). Promptly
after the deposit of Series 1993-5 Bonds proceeds in the Program Transfer
Account in accordance with Section 7 of this Order, an amount of money equal to
the amount so deposited shall be transferred from the Program Transfer Account
to the Project Fund. Moneys in the Project Fund shall be invested and disbursed
by the Trustee
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in accordance with the provisions of the Financing, Agreement. Funds loaned to
the Company pursuant to that certain Loan Agreement dated September 21, 1993 by
and between the Director and the Company may be deposited in the Project Fund.
Section 9. Payments to Debt Service Account. The Treasurer hereby
acknowledges and confirms its agreement, pursuant to Section 14 of the General
Bond Order, to pay to the Trustee for deposit in the Debt Service Account at the
times set forth in said section, but only from the sources described in said
Section and only to the extent that such moneys are available from such sources,
moneys, which together with other moneys held by the Trustee and available for
such purpose, will be sufficient to permit the Trustee to pay the Debt Service
Charges on the Series 1993-5 Bonds.
Section 10. Supplement Number 38. The Treasurer shall in connection
with the issuance of the Series 1993-5 Bonds execute and deliver to the Trustee,
in the name of and on behalf of the State, Supplement Number 38 pursuant to the
Trust Agreement and containing provisions as permitted by the Act and the Trust
Agreement and approved by the Treasurer. Approval by the Treasurer shall be
conclusively evidenced by the execution of Supplement Number 38 by the
Treasurer.
Section 11. Taxes. The State does not represent or intend that interest
on the Series 1993-5 Bonds will be excluded from gross income for purposes of
federal income taxation. However, as provided in Section 166.08(T) of the Act,
the Series 1993-5 Bonds, the transfer thereof, and the income therefrom,
including any profit made on the sale thereof, shall at all times be free from
taxation within the State.
Section 12. General. The appropriate officers of the State will do all
things necessary and proper to implement and carry out the orders and agreements
set forth in or approved in the General Bond Order and this Order, for the
proper fulfillment of the purposes thereof. The Treasurer shall furnish to the
Original Purchasers a true certified transcript of all proceedings had with
reference to the authorization and issuance of the Series 1993-5 Bonds along
with other information as is necessary or proper with respect to the Series
1993-5 Bonds.
Order dated: September 1, 1993 /s/ Marry Ellen Withrow
-------------------------------
Mary Ellen Withrow
Treasurer of State
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and
WHEREAS, the text of the Series 1993-5 Bonds, the form of assignment to
be printed thereon, the certificate of authentication to be endorsed thereon and
other provisions to be included therein are to be substantially in the following
forms with appropriate omissions, additions, insertions and variations as in the
Trust Agreement provided or permitted or as requested by the Trustee or
Authenticating Agent:
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BOND FORM
[Form of Series 1993-5 Bond]
REGISTERED NO. REGISTERED
$
THIS SERIES 1993-5 BOND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE. THIS BOND SERIES 1993-5 MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL THE
TREASURER OF STATE OF THE STATE OF OHIO HAS RECEIVED AN
OPINION OF LEGAL COUNSEL SATISFACTORY TO THE TREASURER OF
STATE THAT SUCH SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES
LAWS.
United States of America
State of Ohio
State Economic Development Revenue Bond (Ohio Enterprise Bond Fund)
Series 1993-5
(Foremost Mgmt., Inc. Project)
(Taxable Bond)
Interest Rate Per Annum Maturity Date Dated Date
7.54% June 1, 2013 September 21, 1993
Registered Owner:
Principal Amount: DOLLARS
THE STATE OF OHIO (the "State"), for value received, promises to pay to
the Registered Owner named above, or registered assigns, but, solely from the
sources and in the manner hereinafter referred to, the principal amount stated
above on the Maturity Date stated above (subject to applicable provisions for
prior redemption in whole or in part described herein) and interest thereon from
the Dated Date stated above until the principal amount is paid or provided for
at the Interest Rate stated above on March 1, June 1, September I and December I
of each year, commencing December 1, 1993 (the "Interest Payment Dates").
Interest will be based upon a year of twelve 30-day months.
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Principal, interest and any redemption premium ("Debt Service Charges")
are payable in lawful money of the United States of America, without deduction
for the services of any paying agent, to the person in whose name this Series
1993-5 Bond (or, if applicable, one or more predecessor Series 1993-5 Bonds) is
registered on the applicable record date (the "owner") on the Register
maintained by the Trustee as Bond Registrar. Principal and any redemption
premium are payable upon presentation and surrender of this Bond at the
principal corporate trust office of the Trustee, at present The Provident Bank,
Cincinnati, Ohio (the "Trustee"). Interest payable on each Interest Payment Date
is payable by check or draft mailed by the Trustee to the owner of this Series
1993-5 Bond (or one or more predecessor Series 1993-5 Bonds) as shown on the
Register at the close of business on the 15th day of the calendar month next
preceding that Interest Payment Date (the "Regular Record Date"), at the address
appearing thereon. The Trust Agreement contains provisions for a Special Record
Date in any case of interest not timely paid or provided for by the State.
DEBT SERVICE CHARGES ARE PAYABLE SOLELY FROM AND THAT PAYMENT IS
SECURED BY A PRIOR PLEDGE OF THE DEBT SERVICE ACCOUNT AND THE PLEDGED RECEIPTS
AS DEFINED IN AND TO THE EXTENT AND IN THE MANNER PROVIDED IN THE TRUST
AGREEMENT. THE RIGHT OF OWNERS OF THE SERIES 1993-5 BONDS TO PAYMENT OF DEBT
SERVICE CHARGES SHALL BE LIMITED TO THOSE PLEDGED RECEIPTS, AND THOSE OWNERS
SHALL HAVE NO RIGHT TO HAVE MONEYS RAISED BY TAXATION OBLIGATED OR PLEDGED FOR
THE PAYMENT OF DEBT SERVICE CHARGES.
This Series 1993-5 Bond is one of the State Economic Development
Revenue Bonds (Ohio Enterprise Bond Fund) (collectively, the "Bonds") authorized
and from time to time to be authorized in various series under and pursuant to
Section 13 of Article VIII of the Ohio Constitution, Chapter 166 of the Ohio
Revised Code (the "Act"), the General Bond Order issued by the Treasurer of
State of the State of Ohio (the "Treasurer") on April 11, 1988, and the Trust
Agreement dated as of April 1, 1988 between the State and the Trustee as the
same has been and may be supplemented or amended in accordance with its terms
(collectively, the "Trust Agreement"), to provide moneys for the purposes of the
State's Facilities Establishment Fund, including transfers from those Funds
authorized by the General Bond Order, to fund reserves and for other Authorized
Purposes as provided for in the Act, all relating to providing capital
facilities and improvements for industry, commerce, research and distribution
under the State's economic development financing program provided for in the
Act. As provided in and subject to the Trust Agreement, the Bonds may be issued
from time to time in one or more series, in various principal amounts, with
different maturities and interest rates, and may otherwise vary. The aggregate
principal amount of Bonds that may be issued under the Trust Agreement is not
limited except as provided in the Trust Agreement and as is or may hereafter be
provided by law or a Series Bond Order, and all Bonds will be equally and
ratably secured by the pledges and covenants made therein except as it otherwise
expressly provides or permits.
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<PAGE>
Reference is made to the Trust Agreement for a more complete
description of the provisions, among others, with respect to the nature and
extent of the security, the rights, duties and obligations of the State, the
Trustee, the Bond Registrar, the Authenticating Agent and the owners, and the
terms and conditions upon which the Bonds are issued and secured. Each owner, by
the acceptance hereof, assents to all of the provisions of the Trust Agreement.
This Series 1993-5 Bond is one of a series of the Bonds (the "Series
1993-5 Bonds"), in the aggregate principal amount of $8,100,000, specifically
authorized by and issued pursuant to Series Bond Order No. R5-93 issued by the
Treasurer on September I , 1993, and the Trust Agreement, including the
Thirty-Eighth Supplemental Trust Agreement dated as of September 1, 1993, for
the purpose of providing funds for the acquisition of real property located in
Jackson, Ohio and the construction thereon of certain improvements and paying
the costs of issuance of the Series 1993-5 Bonds. The Project will be leased to
Foremost Mgmt., Inc., an Ohio corporation, (the "Company"), pursuant to a Lease,
dated as of September 21, 1993 (the "Financing Agreement"), between the Director
of Development of the State of Ohio and the Company.
The Series 1993-5 Bonds are issuable only as fully registered bonds in
the denominations of $100,000 and any integral multiple of $5,000 in excess
thereof. This Bond is transferable, and is exchangeable for Series 1993-5 Bonds
of authorized denominations in equal aggregate principal amounts, at the
principal corporate trust office of the Trustee, by the owner in person or by
attorney authorized in writing, upon presentation and surrender hereof to such
office, all subject to the terms, limitations and conditions provided in the
Trust Agreement. The Trustee and Authenticating Agent are not required to
transfer or exchange (i) any Bond during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Bonds and ending at the close of business on the day of that mailing, or (ii)
any Bonds so selected for redemption (in whole or in part) within the next
succeeding 90 days. The Trustee shall not record any transfer of this Series
1993-5 Bond nor authenticate or deliver any Series 1993-5 Bond to a transferee
unless and until the Treasurer has directed the Trustee, in writing, to record
such transfer and deliver such Series 1993-5 Bond. Any such written direction
from the Treasurer to the Trustee shall be accompanied by an opinion of legal
counsel satisfactory to the Treasurer, as indicated in such written direction,
addressed to the Treasurer and the Trustee, to the effect that such transfer is
in compliance with all applicable federal and state securities laws. Such legal
opinion shall be furnished at the expense of the transferor of the Series 1993-5
Bond.
The Series 1993-5 Bonds are subject to redemption at the option of the
State, but if the Company is not in default under the Financing Agreement, only
at the direction of the Company, prior to maturity on any Interest Payment Date
after September 1, 1993, in whole at a redemption price equal to the sum of the
principal amount of Series 1993-5 Bonds redeemed plus the Yield-Maintenance
Premium plus accrued interest to the redemption date.
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"Called Principal" means, with respect to any Series 1993-5 Bond, the
principal of such Series 1993-5 Bond that is to be redeemed at the option of the
State.
"Yield-Maintenance Premium" shall mean, with respect to any Series
1993-5 Bond, a premium equal to the excess, if any, of the Discounted Value of
the Called Principal of such Series 1993-5 Bond over the sum of (i) such Called
Principal plus (ii) interest accrued thereon as of (including interest due on)
the Settlement Date with respect to such Called Principal. If the State and the
owner of any Series 1993-5 Bond shall, prior to the Settlement Date, designate
in writing a lesser premium from that calculated as set forth in the preceding
sentence, the premium so designated shall be payable on the Settlement Date in
lieu of the Yield-Maintenance Premium as described in the preceding sentence
with respect to such Series 1993-5 Bond.
"Discounted Value" means, with respect to the Called Principal of any
Series 1993-5 Bond, the amount obtained by discounting all Remaining Scheduled
Payments with respect to the Called Principal from their respective scheduled
due dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor (applied on
a quarterly basis) equal to the Reinvestment Yield with respect to such Called
Principal.
"Remaining Scheduled Payments" shall mean, with respect to the Called
Principal of any Series 1993-5 Bond, all payments of such principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"Settlement Date" means with respect to the Called Principal of any
Series 1993-5 Bond, the date on which such Called Principal is to be redeemed at
the option of the State.
"Reinvestment Yield" shall mean, with respect to the Called Principal
of any Series 1993- 5 Bond, the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace Page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest date for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between reported yields.
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<PAGE>
"Remaining Average Life" shall mean, with respect to the Called
Principal of any Series 1993-5 Bond, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such Called Principal into
(ii) the sum of the products obtained by multiplying (a) each Remaining
Scheduled Payment of such Called Principal (but not of interest thereon) by (b)
the number of years (calculated to the nearest one-twelfth year) which will
elapse between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
The Series 1993-5 Bonds are subject to mandatory redemption by the
State at a redemption price equal to 100% of the principal amount redeemed plus
accrued interest to the date of redemption on the dates and in the principal
amounts set forth below:
Date Amount
---- ------
September 1, 1994 $45,000.00
December 1, 1994 $45,000.00
March 1, 1995 $50,000.00
June 1, 1995 $50,000.00
September 1, 1995 $50,000.00
December 1, 1995 $50,000.00
March 1, 1996 $50,000.00
June 1, 1996 $55,000.00
September 1, 1996 $55,000.00
December 1, 1996 $55,000.00
March 1, 1997 $55,000.00
June 1, 1997 $60,000.00
September 1, 1997 $60,000.00
December 1, 1997 $60,000.00
March 1, 1998 $60,000.00
June 1, 1998 $60,000.00
September 1, 1998 $65,000.00
December 1, 1998 $65,000.00
March 1, 1999 $65,000.00
June 1, 1999 $65,000.00
September 1, 1999 $70,000.00
December 1, 1999 $70,000.00
March 1, 2000 $70,000.00
June 1, 2000 $75,000.00
September 1, 2000 $75,000.00
December 1, 2000 $75,000.00
March 1, 2001 $80,000.00
June 1, 2001 $80,000.00
September 1, 2001 $80,000.00
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<PAGE>
December 1, 2001 $80,000.00
March 1, 2002 $85,000.00
June 1, 2002 $85,000.00
September 1, 2002 $85,000.00
December 1, 2002 $90,000.00
March 1, 2003 $90,000.00
June 1, 2003 $95,000.00
September 1, 2003 $95,000.00
December 1, 2003 $95,000.00
March 1, 2004 $100,000.00
June 1, 2004 $100,000.00
September 1, 2004 $100,000.00
December 1, 2004 $105,000.00
March 1, 2005 $105,000.00
June 1, 2005 $110.000.00
September 1, 2005 $110,000.00
December 1, 2005 $115,000.00
March 1, 2006 $115,000.00
June 1, 2006 $115,000.00
September 1, 2006 $120,000.00
December 1, 2006 $120,000.00
March 1, 2007 $125,000.00
June 1, 2007 $125,000.00
September 1, 2007 $130,000.00
December 1, 2007 $130,000.00
March 1, 2008 $135,000.00
June 1, 2008 $1315,000.00
September 1, 2008 $140,000.00
December 1, 2008 $145,000.00
March 1, 2009 $145,000.00
June 1, 2009 $150,000.00
September 1, 2009 $150,000.00
December 1, 2009 $155,000.00
March 1, 2010 $160,000.00
June 1, 2010 $160,000.00
September 1, 2010 $165,000.00
December 1, 2010 $170,000.00
March.1, 2011 $170,000.00
June 1, 2011 $175,000.00
September 1, 2011 $180,000.00
December 1, 2011 $180,000.00
March 1, 2012 $185,000.00
June 1, 2012 $190,000.00
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<PAGE>
September 1, 2012 $190,000.00
December 1, 2012 $195,000.00
March 1, 2013 $200,000.00
Unless otherwise retired prior to maturity, the remaining principal amount of
Series 1993-5 Bonds ($205,000.00), will be payable at their maturity on June 1,
2013.
If fewer than all Series 1993-5 Bonds are to be redeemed at one time,
the selection of the Series 1993-5 Bonds (including portions thereof) to be
called for redemption shall be made in the manner provided in Section 3.03 of
the Trust Agreement, provided that any such redemption shall be made pro rata
among the holders of the outstanding Series 1993-5 Bonds, based on the principal
amount of outstanding Series 1993-5 Bonds held by each holder; provided, that
the principal amount to be redeemed from each such holder shall be rounded, in a
manner that the Trustee considers fair and appropriate, to the nearest whole
multiple of $5,000. Optional and mandatory redemption will be exercised by
notice mailed by the Trustee at least 30 days prior to the redemption date to
the owner, as shown on the Register on the 15th day preceding, the mailing, of
each Series 1993-5 Bond subject to redemption in whole or part at the owner's
address then shown thereon. If Series 1993-5 Bonds or portions of Series 1993-5
Bonds are called for redemption and if on that redemption date moneys for the
redemption thereof are held in an appropriate fund or account so as to be
available therefor, then from and after that redemption date those Series 1993-5
Bonds or portions of Series 19935 Bonds shall cease to bear interest and shall
cease to be secured by and shall not be deemed to be outstanding under the Trust
Agreement.
The owners of the Series 1993-5 Bonds and other Bonds issued under the
Trust Agreement will not be entitled to enforce the provisions of, or to
institute, appear in or defend any suit, action or proceeding to enforce any
rights, remedies or covenants granted or contained in, or to take any action
with respect to any event of default under, the Trust Agreement, except as
provided in the Trust Agreement.
The Trust Agreement permits certain amendments to the Trust Agreement
to be made without the consent of or notice to the owners, and other amendments
to be made with the consent of the owners of a majority in aggregate principal
amount of the Bonds then outstanding to be affected thereby.
This Series 1993-5 Bond shall not constitute the personal obligation of
the Treasurer of State.
The State does not represent or intend that interest on the Series
1993-5 Bonds will be excluded from gross income for purposes of federal income
taxation.
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<PAGE>
This Series 1993-5 Bond shall not be entitled to any security or
benefit under the Trust Agreement or become valid or obligatory for any purpose
until the certificate of authentication hereon shall have been signed.
It is hereby certified and recited that all acts and conditions
necessary to be done or to happen or exist precedent to and in the issuance of
the Series 1993-5 Bonds in order to make them legal, valid and binding special
obligations of the State, in accordance with their terms, and in the execution
and delivery of the Trust Agreement and Thirty-Eighth Supplemental Trust
Agreement described herein, have been done and happened or exist as required by
law; that payment in full for the Series 1993-5 Bonds has been received; and
that the Series 1993-5 Bonds do not exceed or violate any constitutional or
statutory limitation.
IN WITNESS WHEREOF, the State of Ohio, under the authority described in
this Series 1993-5 Bond, has caused this Series 1993-5 Bond to be executed by
the facsimile signature of the Treasurer of State of the State of Ohio, and a
facsimile of the Great Seal of the State of Ohio to be affixed hereon, as of the
Dated Date stated above.
--------------------------------
Treasurer of State
[Great Seal]
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<PAGE>
CERTIFICATE OF AUTHENTICATION
This Series 1993-5 Bond is one of the Series 1993-5 Bonds issued under
the provisions of the within mentioned Trust Agreement and Thirty-Eighth
Supplemental Trust Agreement.
The Provident Bank, as Trustee
By
-----------------------------
Authorized Officer
Date of Registration and
Authentication: ____________________________
[Form of Assignment]
For value received, the undersigned sells, assigns and transfers unto
_________________ the within Series 1993-5 Bond and irrevocably constitutes and
appoints _________________ attorney to transfer this Bond on the Register, with
full power of substitution in the premises.
Dated:
- --------------------------
Signature Guaranteed:
- --------------------------
Notice: The assignor's signature to this assignment must correspond exactly
with the name as it appears on the face of this Bond.
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<PAGE>
WHEREAS, the State has, or will have, in all respects complied with the
provisions of the Trust Agreement so as to be entitled to execute and to have
authenticated and delivered the Series 1993-5 Bonds.
WHEREAS, pursuant to Section 4 of the General Bond Order and the
applicable provisions of Article VIII of the Trust Agreement, the State desires
by this Supplement Number 38 and the Series Bond Order above to provide for the
issuance pursuant to the Trust Agreement of the Series 1993-5 Bonds;
NOW, THEREFORE, THIS THIRTY-EIGHTH SUPPLEMENTAL TRUST AGREEMENT,
WITNESSETH that in order to secure the payment of the principal of and interest
on the Series 1993-5 Bonds according to their true intent and meaning, and to
secure the performance and observance of all covenants and conditions therein,
herein, and in the Trust Agreement contained, and for and in consideration of
the premises and of the purchase and acceptance of the Series 1993-5 Bonds by
the holders thereof from time to time, and the acceptance by the Trustee of the
further trust hereby created, and for other good and valuable consideration, the
receipt of which is acknowledged, the State has executed and delivered this
Supplement Number 38.
IN TRUST, NEVERTHELESS, upon the terms and trusts in the Trust
Agreement and this Supplement Number 38 set forth for the security of all
present and future holders of the Bonds issued or to be issued under and secured
by the Trust Agreement, without priority of any one Bond over any other by
reason of series designation, form, number, date of authorization, issuance,
sale, execution or delivery, or date of the Bond or of maturity, except as may
be otherwise permitted by the Trust Agreement.
Section 1. Incorporation of Order. The terms and provisions of the
Series Bond Order No. R5-93 as set forth above, constitute part of this
Supplement Number 38 as if those terms and provisions were here set forth.
Section 2. Form, Execution, Authentication and Delivery. The Series
1993-5 Bonds shall be executed, authenticated and delivered as provided herein
and in the Trust Agreement, and in the Series 1993-5 Bonds, and the certificate
of authentication to be endorsed thereon shall be substantially in the form
provided herein with any necessary modifications to conform hereto.
Section 3. Transfer, Exchange and Registration. The Series 1993-5 Bonds
are subject to all the terms and conditions of the Trust Agreement relating to
transfer, exchange and registration; provided, however, that the Trustee, in its
capacity as Bond Registrar, shall not record any transfer of a Series 1993-5
Bond on the Register for such Bonds nor authenticate or deliver any Series
1993-5 Bond to a transferee unless and until the Treasurer has directed the
Trustee, in writing, to record such transfer and deliver such Series 1993-5
Bond. Any such written direction from the Treasurer to the Trustee shall be
accompanied by an opinion of legal counsel satisfactory to the Treasurer, as
indicated in such written direction, addressed to the
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<PAGE>
Treasurer and the Trustee, to the effect that such transfer is in compliance
with all applicable federal and state securities laws. Such legal opinion shall
be furnished at the expense of the transferor of the Series 1993-5 Bond.
Section 4. Proceeds of Sale. The proceeds from the sale of the Series
1993-5 Bonds shall be applied as provided in Series Bond Order No. R5-93.
Section 5. Concerning the Trustee. The Trustee accepts the trusts
herein declared and provided and agrees to perform the same upon the terms and
conditions in the Trust Agreement and in this Supplement Number 38.
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Supplement Number 38 or the due
execution thereof by the State, or for or in respect of the recitals herein
contained, all of which recitals are made by the State solely.
IN WITNESS WHEREOF, the State has caused this Thirty-Eighth
Supplemental Trust Agreement to be executed by its duly authorized Treasurer of
State, and The Provident Bank, Cincinnati, Ohio, as Trustee, in token of its
acceptance of the trusts created hereunder, has caused this Thirty-Eighth
Supplemental Trust Agreement to be executed in its name, all as of the date
first written above.
STATE OF OHIO
By: /s/ Mary Ellen Withrow
---------------------------
Mary Ellen Withrow
Treasurer of State
THE PROVIDENT BANK, Trustee
By: /s/Craig M. Mann
---------------------------
Craig M. Mann, Vice President
By: /s/Jacqueline M. Dever
---------------------------
Jacqueline M. Dever, Trust Officer
<PAGE>
EXHIBIT 10.9
LEASE
between
DIRECTOR OF DEVELOPMENT
OF THE STATE OF OHIO
and
FOREMOST MGMT., INC.
Dated
as of
September 21, 1993
(OHIO ENTERPRISE BOND FUND PROGRAM)
<PAGE>
LEASE
THIS LEASE made and entered into as of September 2l , 1993
between the Director of Development of the State of Ohio (the "Director"), and
Foremost Mgmt., Inc., a corporation organized under the laws of the State of
Ohio (the "Company"), under the circumstances summarized in the following
recitals (the capitalized terms used in the recitals being used therein as
defined in Article I hereof):
A. Pursuant to the Act, the Director is authorized, among
other things, to acquire property, and convey property so acquired, by lease,
lease purchase or other disposition, upon such terms and conditions as the
Director determines to be appropriate to satisfy the objectives of the Act.
B. The Company has requested that the Director provide
financial assistance for the Project by acquiring and constructing the Project,
leasing the Project to the Company and conveying the Project to the Company upon
termination of the Lease Term, all subject to and in accordance with the terms
of this Lease.
C. The Director has determined that the Project constitutes an
Eligible Project and that the financial assistance to be provided pursuant to
this Lease is appropriate under the Act and will be in furtherance and in
implementation of the public policy set forth in the Act.
D. The financial assistance to be provided pursuant to this
Lease has been reviewed and approved by the Development Financing Advisory Board
and the Controlling Board, pursuant to the Act.
NOW, THEREFORE, in consideration of the premises and the
representations and agreements hereinafter contained, the Director and the
Company agree as follows (provided, that any obligation of the Director created
by or arising out of this Lease shall not be a general debt on the part of the
Director or the State but shall be payable solely out of the rentals, revenues
and other income, charges and moneys realized from the use, lease, sale or other
disposition of the Project and any insurance and condemnation awards as herein
provided):
ARTICLE I
DEFINITIONS
Section 1.1. Use of Defined Terms. In addition to the words
and terms elsewhere defined in this Lease or by reference to other instruments,
the words and terms set forth in Section 1.2 hereof shall have the meanings
therein set forth unless the context or use expressly indicates different
meaning or intent. Such definitions shall be equally applicable to both the
singular and plural forms of any of the words and terms therein defined.
<PAGE>
Section 1.2. Definitions. As used herein:
"Act" means Chapter 166, Ohio Revised Code, as from time to
time enacted and amended.
"Additional Rent" means the additional rent specified in
Section 4.3 of this Lease.
"Allowable Costs" means "allowable costs" of the Project
within the meaning of the Act.
"Application" means the Application of the Company, dated
August 24, 1992, submitted to the Director requesting assistance under the Act.
"Authorized Company Representative" means the person at the
time designated to act on behalf of the Company by written certificate furnished
to the Director and the Trustee, containing the specimen signature of such
person and signed on behalf of the Company by the President of the Company. Such
certificate may designate an alternate or alternates.
"Bonds" means the State of Ohio State Economic Development
Revenue Bonds (Ohio Enterprise Bond Fund), Series 1993-5 (Foremost Mgmt., Inc.
Project) (Taxable Bonds) authorized by the General Bond Order and the Series
Bond Order.
"Code" means the Internal Revenue Code of 1986, as amended,
and references to the Code and Sections of the Code shall include relevant
regulations and proposed regulations thereunder or under the Internal Revenue
Code of 1954, as amended, and any successor provisions to such Sections,
regulations or proposed regulations.
"Collateral Proceeds Account" means the Series 1993-5
Collateral Proceeds Account, established pursuant to the General Bond Order and
the Series Bond Order, in the Economic Development Bond Service Fund.
"Commitment" means the letter from the Director to the
Company, dated May 6, 1993, pursuant to which the Director, on behalf of the
State, agrees to provide assistance under the Act for the Project.
"Company" means Foremost Mgmt. Inc., a corporation organized
under the laws of the State of Ohio.
"Completion Date" means the date of completion of the Project,
as certified by the Company pursuant to Section 3.4 hereof.
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<PAGE>
"Construction Period" means the period between the beginning
of construction of the Project or the date on which this Lease is delivered to
the Director, whichever is earlier, and the Completion Date.
"Controlling Board" means the Controlling Board of the State.
"Cost Certification" means a certification of the Company, as
of a specified date, setting forth in reasonable detail the costs incurred and,
if appropriate, to be incurred in completing the Provision of the Project,
including a detailed listing, by category, of all Allowable Costs.
"Debt Service Account" means the Debt Service Account,
established pursuant to the General Bond Order, in the Economic Development Bond
Service Fund.
"Development Financing Advisory Board" means the Development
Financing Advisory Board of the State.
"Director' means the officer of the State, appointed pursuant
to Section 121.03 of the Ohio Revised Code, who administers and is the executive
head of the Department of Development of the State, the officer who by law
performs the functions of that office, and any person acting on behalf of the
Director of Development of the State pursuant to any delegation permitted by
law.
"Economic Development Bond Service Fund" means the Economic
Development Bond Service Fund created by Section 166.08(S) of the Ohio Revised
Code.
"Eligible Project" means an "eligible project" within the
meaning of the Act.
"Eligible Investments" means Eligible Investments as defined
in the Trust Agreement.
"Event of Default" means any of the events described as an
event of default in Section 9.1 hereof.
"Facilities Establishment Fund" means the Facilities
Establishment Fund created by Section 166.03 of the Ohio Revised Code.
"General Bond Order" means the General Bond Order of the
Treasurer, dated April 11, 1988, as the same may be amended from time to time in
accordance with its provisions or the provisions of the Trust Agreement.
"Governing Instruments" means the articles of incorporation
and code of regulations of the Company.
-3-
<PAGE>
"Governmental Authority" means, collectively, the State, any
political subdivision thereof, any municipality, and any agency, department,
commission, board or bureau of any of the foregoing having jurisdiction over the
Project.
"Guarantors" means the Company, Alan A. Stockmeister, the
Sublessee and Jeno, F. and Lois Paulucci (husband and wife). Notwithstanding any
other provision of this Lease, the Sublessee shall be a Guarantor only with
respect to obligations of the Company arising during the term of the Sublease
and Jeno F. and Lois Paulucci shall be Guarantors only with respect to
obligations of the Company arising during the term of the Sublease and only to
the extent of the amounts due and payable under the Sublease.
"Guaranty" means the Guaranty Agreement of even date herewith
between the Guarantors and the Trustee.
"Independent Engineer" means an engineer or engineering firm
or an architect or architectural firm, qualified to practice the profession of
engineering or architecture under the laws of the State and who or which is not
an officer or a full time employee of the Company or any sublessee of the
Project.
"Interest Rate For Advances" means (a) the interest rate borne
by the Bonds, or (b) a rate which is one percent in excess of the prime or base
interest rate then charged by the Trustee in its lending capacity as a bank,
whichever is greater and lawfully chargeable.
"Issuance Expense Account" means the Series 1993-5 Issuance
Expense Account created in the Series Bond Order.
"Lease" means this Lease, as from time to time amended or
supplemented.
"Lease Approval Documents" means, with respect to the Lease,
the Recommendation of the Director to the Development Financing Advisory Board
dated March 25, 1993, the Resolution of the Development Financing Advisory Board
dated March 25, 1993, the Approval of the Controlling Board dated May 3, 1993
and the Commitment.
"Lease Term" or "Term" means the duration of the leasehold
estate created in this Lease as specified in Section 4.2 hereof.
"Net Proceeds," when used with respect to any insurance or
condemnation award, means the gross proceeds from the insurance or condemnation
award with respect to which that term is used remaining after payment of all
expenses incurred in the collection of such gross proceeds.
-4-
<PAGE>
"Notice Address" means:
(a) As to the Director: Department of Development
P. O. Box 1001
Columbus, Ohio 43166-0101
Attn: Director
and
Squire, Sanders & Dempsey
41 South High Street
Columbus, Ohio 43215
Attn: John P. Witten, Esq.
Tel: (614)365-2700
Fax: (614)365-2499
(b) As to the Company: Foremost Mgmt., Inc.
P.O. Box 667
227 Main Street
Jackson, Ohio 45640
Attn.: Alan A. Stockmeister,
President
Tel: (614)286-8850
Fax: (614)286-6013
and Luigino's, Inc.
525 Lake Avenue South
Duluth, Minnesota 55811
Attn: Jeno F. Paulucci,
President
Tel: (218)723-5555
Fax: (218)723-5580
(c) As to the Trustee: The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45269
Attn: Corporate Trust Dept.
Tel: (513)579-2068
Fax: (513)579-2233
or such additional or different address, notice of which is given under Section
11.3 hereof.
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<PAGE>
"Original Deposit" means Eight Hundred Ten Thousand Dollars
($810,000), which amount is to be deposited in the Primary Reserve Account upon
delivery of this Lease, in accordance with Section 4.5 hereof.
"Permitted Encumbrances" means this Lease and those liens,
charges, easements, conditions, restrictions and encumbrances described on
Exhibit C attached hereto.
"Plans and Specifications" means the plans and specifications
or other appropriate documents describing the Project prepared by or at the
direction of the Company.
"Primary Reserve Account" means the Series 1993-5 Primary
Reserve Account, established pursuant to the General Bond Order and the Series
Bond Order, in the Economic Development Bond Service Fund.
"Project" means the Project Site and the Project Facilities,
together constituting an Eligible Project.
"Project Facilities" means the buildings, structures,
additions and improvements described in Exhibit B attached hereto and more
particularly described in the Plans and Specifications.
"Project Fund" means the Series 1993-5 Project Fund,
established pursuant to the Series Bond Order.
"Project Purposes" means the acquisition of land and the
construction thereon of a facility measuring 149,920 square feet in that
facility to be used for a food processing center, raw material storage and
finished product storage for frozen food processing.
"Project Site" means the real estate described in Exhibit A
attached hereto.
"Provision" means, as applicable, the acquiring, installing,
constructing, reconstructing, rehabilitating, renovating, enlarging, improving,
equipping or furnishing of the Project.
"Series Bond Order" means Series Bond Order R5-93 of the
Treasurer, dated September 20, 1993, as the same may be amended from time to
time in accordance with its provisions or the provisions of the Trust Agreement.
"State" means the State of Ohio.
"Sublease" means the Sublease, dated as of September 21, 1993,
between the Company, as sublessor, and the Sublessee, as sublessee.
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<PAGE>
"Sublessee" means Luigino's, Inc., a corporation organized
under the laws of the State of Minnesota.
"Supplement" means the Thirty-Eighth Supplemental Trust
Agreement, dated as of September 1, 1993, between the Treasurer and the Trustee,
of which the Series Bond Order is a part.
"Terms and Conditions to Disbursement" means the terms and
conditions which must be satisfied by the Company with respect to each request
for disbursement of moneys from the Project Fund in order to obtain the
Director's approval of such request for disbursement, which terms and conditions
are set forth on Exhibit D attached hereto.
"Treasurer" means the Treasurer of State of the State, or the
officer who by law performs the functions of that office.
"Trustee" means the trustee at the time serving as such under
the Trust Agreement, initially The Provident Bank, Cincinnati, Ohio.
"Trust Agreement" means the Trust Agreement, dated as of April
1, 1988, between the Treasurer and the Trustee, of which the General Bond Order
is a part, as the same may be amended, modified or supplemented by any
amendments or modifications thereof and any supplements thereto (including, but
not limited to, the Supplement) entered into in accordance with the provisions
thereof.
Section 1.3. Certain Words and References. Any reference
herein to the Director shall include those succeeding to his functions, duties
or responsibilities pursuant to or by operation of law or lawfully performing
such functions. Any reference to a section or provision of the Constitution of
the State or to the Act or to a section, provision or chapter of the Ohio
Revised Code shall include such section, provision or chapter as from time to
time amended, modified, revised, supplemented or superseded, provided that no
such amendment, modification, supplementation, revision or supersession shall
alter the obligation of the Company to pay the rent, Additional Rent and all
other amounts payable hereunder at the times provided herein. All references to
"generally accepted accounting principles" shall have the meaning set forth in
Statement on Auditing Standard No. 69 or any predecessor or successor
pronouncement of the American Institute of Certified Public Accountants in
effect for any applicable fiscal period.
The terms "hereof," "hereby," "herein," "hereto," "hereunder"
and similar terms refer to this Lease; and the term "heretofore" means before,
and the term "hereafter" means after, the date of delivery of this Lease.
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<PAGE>
ARTICLE II
DETERMNATION AND REPRESENTATIONS
Section 2.1. Determinations of the Director. Pursuant to the
Act and on the basis of the representations and other information vide by the
Company, the Director has heretofore made certain determinations, as set forth
in the Lease Approval Documents, which are hereby confirmed, and the Director
hereby determines that the financial assistance to be provided by the State
pursuant to this Lease will conform to the requirements of the Act, including
Section 166.02 thereof, and will further implement the purposes of the Act by
creating new jobs or preserving existing jobs and employment opportunities and
improving the economic welfare of the people of the State.
Section 2.2. Representations of the Company. The Company
hereby represents and warrants that:
(a) It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio.
(b) It has full power and authority to execute, deliver and
perform this Lease and the Sublease and to enter into and carry out the
transactions contemplated hereby and thereby. Such execution, delivery and
performance do not, and will not, violate any provision of law applicable to the
Company or the Governing Instruments of the Company and do not, and will not,
conflict with or result in a default under any agreement or instrument cc) which
the Company is a parry or by which it or any of its property or assets is or may
be bound. This Lease and the Sublease have, by proper action, been duly
authorized, executed and delivered and all necessary actions have been taken to
constitute this Lease and the Sublease legal, valid and binding obligations of
the Company.
(c) The provision of financial assistance pursuant to the
Lease Approval Documents and this Lease induced the Company to provide the
Project, thereby creating new jobs or preserving existing jobs and employment
opportunities and improving the economic welfare of the people of the State.
(d) It presently intends that the Project will be used and
operated in a manner consistent with the Project Purposes until the end of the
Lease Term, and the Company knows of no reason why the Project will not be so
operated.
(e) There are no actions, suits or proceedings pending or
threatened against or affecting the Company or the Project which, if adversely
determined, would individually or in the aggregate materially impair the ability
of the Company to perform any of its obligations under this Lease or the
Sublease or adversely affect the financial condition of the Company.
(f) No defaults exist under the Sublease and the Company is
not in default under this Lease or in the payment of any indebtedness for
borrowed money or under any agreement or
-8-
<PAGE>
instrument evidencing any such indebtedness, and no event has occurred which by
notice, the passage of time or otherwise would constitute any such event of
default.
(g) Zoning regulations applicable to the Project Site permit
the Provision of the Project thereon in accordance with the Plans and
Specifications and the operation of the Company's business thereon; and all
utilities, including water, storm and sanitary sewer, gas, electric and
telephone, and rights of access to public ways are available or win be provided
to the Project Site in sufficient locations and capacities to meet the
requirements of operating the Project and of any applicable Governmental
Authority.
(h) The Company has made no contract or arrangement of any
kind, other than this Lease, which has given rise to or the performance of which
by the other party thereto would give rise to a lien or claim of lien on the
Project or other collateral covered by this Lease other than the Sublease, and,
except as disclosed in writing to the Director, no materials or labor have
heretofore been supplied to or performed in connection with the Project.
(i) No representation or warranty of the Company contained in
any of the Lease Approval Documents or this Lease, and no statement contained in
any certificate, schedule, list, financial statement or other instrument
furnished to the Director by or on behalf of the Company (including, without
limitation, the Application) contains any untrue statement of a material fact,
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading.
(j) The financial statements of the Company heretofore
delivered to the Director are true and correct, in all respects, have been
prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the financial condition and the results
of operation of the Company as of the dates thereof. No materially adverse
change has occurred in the financial condition of the Company since the
respective dates thereof.
(k) The Company has conveyed, or caused to be conveyed, to the
Director good and marketable title to a fee simple interest in the Project Site
and Project Facilities, subject in all cases to no lien, charge, easement,
condition, restriction or encumbrance except as created by this Lease and except
for Permitted Encumbrances.
(l) Except as disclosed in Exhibit C to this Lease, there are
no other easements or agreements, including, without limitation, parking
agreements, encroachment agreements, access easements, service agreements, real
estate tax abatement agreements and other similar agreements affecting the
Project.
(m) The Project Site has never, and does not currently
contain, nor is it contaminated by, any hazardous or toxic waste materials in
violation of any applicable environmental laws or regulations, including, but
not limited to, Section 103 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 USC 9601 et seq. and Chapter 3734
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of the Ohio Revised Code; and no "clean-up" of the Project Site has occurred
pursuant to any applicable federal or state environmental laws, or regulations
which would give rise to (i) liability on the part of any person, entity or
association to reimburse any governmental authority for the costs of any such
"clean-up, " or (ii) a lien or encumbrance on the Project Site.
(n) The Company has prior to or concurrently with the
execution of this Lease entered into the Sublease, a copy of which is attached
hereto as Annex I and which is incorporated herein by this reference, with the
Sublessee.
ARTICLE III
COMMENCEMENT AND COMPLETION OF THE PROJECT
Section 3.1. Provision of the Project. The Director agrees
that he win cause the P_ Provision of the Project activities on the Project Site
in accordance with the Plans and Specifications.
The Director further agrees that he will enter into, or accept
the assignment of, such contracts as the Company may request in order to
effectuate the purposes of this Section.
The Director hereby makes, constitutes and appoints the
Company as his true and lawful agent, with full power of substitution in the
premises and the Company hereby accepts such agency, (a) to acquire and
construct install the Project Facilities or the Project Site in accordance with
the Plans and Specifications, (b) to make, execute, acknowledge and deliver any
contracts, orders, receipts, writings and instructions, either in the name of
the Company solely or as the stated agent for the Director, with any other
persons, firms or corporations, and in general to do all things which may be
requisite or proper, all for acquiring and constructing the Project Facilities
with the same powers and with the same validity as the Director could do if
acting in his own behalf, (c) pursuant to the provisions of this Lease, to pay
all Allowable Costs incurred in the acquisition and construction of the Project
Facilities from funds made available therefor in accordance with this Lease and
(d) to ask, demand, sue for, levy, recover and receive all such sum of money,
debts, dues and other demands whatsoever which may be due, owing and payable to
the Director under the terms of any contract, order, receipt, writing and
instrument in connection with the acquisition and construction of the Project
Facilities, and to enforce the provisions of any contract, agreement,
obligation, bond or other performance security. So long as the Company is not in
default under any of the provisions of this Lease or the Sublease, this
appointment of the Company to act as agent and all authority hereby conferred is
granted and conferred irrevocably to the Completion Date and thereafter until
all activities in connection with the acquisition and construction of the
Project Facilities shall have been completed, and shall not be terminated prior
thereto by act of the Director or the Company or by operation of law.
The Director and the Company each agree that in connection
with the construction of the Project Facilities the acquisition and construction
of the Project Facilities shall proceed with all reasonable dispatch.
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The Company agrees that all wages paid to laborers and
mechanics employed in connection with the construction of the Project Facilities
by the Company or its contractors or subcontractors shall be paid at the
prevailing rates of wages of laborers and mechanics for the class of work called
for by the Project, which wages shall be determined in accordance with the
requirements of Chapter 4115 of the Ohio Revised Code for determination of
prevailing wage rates.
Section 3.2. Deposits to the Project Fund and the Issuance
Expense Account. In order to provide funds for payment of the Allowable Costs of
the Project, the Director, upon delivery of this Lease, shall cause to be
transferred from the Facilities Establishment Fund to the Project Fund the sum
of Seven Million Ninety-Five Thousand Dollars ($7,095,000). Funds loaned to the
Company pursuant to that certain Loan Agreement dated September 21, 1993 by and
between the Director and the Company may be deposited in the Project Fund. In
order to provide funds for payment of costs of issuance of the Bonds, the amount
of Bond proceeds deposited in the Issuance Expense Account shall be One Hundred
Ninety Five Thousand Dollars ($195,000).
This Lease is conditioned upon the satisfaction of one of the
following conditions:
(a) The Company shall provide cash in the amount of One
Million One Hundred Thousand Dollars ($1,100,000) to the Trustee, which the
Trustee shall deposit in the Project Fund;
(b) The Company shall provide to the Trustee an unconditional
and irrevocable letter of credit, acceptable to the Director in the Director's
sole discretion, for the amount of One Million One Hundred Thousand Dollars
($1,100,000), payable to the Trustee and for a term of not less than one year;
(c) The Company shall provide to the Trustee a letter of
commitment, acceptable to the Director in the Director's sole discretion, from
the Sublessee's bank, reserving for not less than one year One Million One
Hundred Thousand Dollars ($1,100,000) of the Sublessee's lines of credit for
payment of Allowable Costs of the Project and authorizing the Trustee to draw
upon such reserved amount of the lines of credit.
Section 3.3. Disbursements from the Project Fund. The
Treasurer has, in the Supplement, authorized and directed the Trustee to
disburse the moneys in the Project Fund for Allowable Costs of the Project.
Except as otherwise provided in this Lease, each payment from the Project Fund
shall be made only upon (A) the written direction of the Authorized Company
Representative, who shall certify with respect to each such payment: (i) that
each item for which payment is requested is an Allowable Cost properly payable
out of the Project Fund in accordance with the terms and conditions of this
Lease and none of the items for which the payment is proposed to be made has
formed the basis for any payment theretofore made from the Project Fund, (ii)
that each item for which payment is proposed to be made is or was necessary in
connection with the Project and (iii) that the Company has received from each
payee appropriate waivers of any mechanics' or other liens (or has provided
indemnification in lieu thereof satisfactory to the Director) and (B) the
written approval of the Director. The Director shall not be required to approve
any
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request for disbursement of moneys from the Project Fund unless the Company has
complied with all of the Terms and Conditions to Disbursement. The Trustee shall
be allowed a reasonable time, not to exceed fifteen (15) days, in view of the
character of any investment Or investments required to be liquidated for the
purpose, for the making of any disbursement from the Project Fund authorized by
this Section.
Section 3.4. Establishment of Completion Date. The Company
covenants that the Completion Date shall occur not later than December 31, 1994.
The Completion Date shall be evidenced to the Director and to the Trustee by a
certificate signed by the Authorized Company Representative stating that, except
for amounts retained by the Trustee in the Project Fund for Allowable Costs of
the Project not then due and payable, (i) Provision of the Project has been
completed in accordance with the Plans and Specifications and all labor,
services, materials and supplies used in such acquisition and installation have
been paid for, (ii) all other facilities necessary in connection with the
Project have been constructed, acquired and installed in accordance with the
plans and specifications therefor and all costs and expenses incurred in
connection therewith have been paid, (iii) all materially significant disputes,
controversies or claims arising out of or in connection with the acquisition and
installation of the Project have been resolved, satisfied or paid in M1, as the
case may be. Notwithstanding the foregoing, such certificate shall state that it
is given without prejudice to any rights against third parties which exist at
the date of such certificate or which may subsequently come into being. The
Company shall also deliver to the Director and to the Trustee a Cost
Certification. Any amount remaining in the Project Fund on the Completion Date,
except for amounts which the Authorized Company Representative certifies to the
Trustee as being required to pay Allowable Costs of the Project not then due and
payable, shall be transferred by the Trustee to the Collateral Proceeds Account.
Section 3.5. Company Required to Pay Acquisition and
Installation Costs in Event Project Fund Insufficient. In tile event the moneys
in the Project Fund available payment of costs of the Project should not be
sufficient to pay the cost thereof in full, the Company agrees, for the benefit
of the Director, to complete the Project and to pay all the portion of the costs
of the Project as may be in excess of the moneys available therefor in the
Project Fund. The Director does not make any warranty, either express or
implied, that the moneys which will be paid into the Project Fund and which
under the provisions of this Lease will be available for payment of the
Allowable Costs of the Project will be sufficient to pay all the costs which
will be incurred in that connection. The Company agrees that if after exhaustion
of the moneys in the Project Fund the Company should pay any portion of the said
costs of the Project pursuant to the provisions of this Section, it shall not be
entitled to any reimbursement therefor from the Director or the Trustee, nor
shall it be entitled to any diminution in or postponement of the rents payable
under Section 4.3 hereof.
Section 3.6. Remedies to Be Pursued Against Contractors and
Subcontractors and their Sureties. In the event of default of any contractor or
subcontractor under any contract made by it in connection with the Project or in
the event of a breach of warranty with respect to any materials, workmanship, or
performance guaranty, the Company will promptly proceed, either separately or in
conjunction with others, to exhaust the remedies of the Company or the Director
against the
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contractor or subcontractor so in default and against each such surety for the
performance of such contract. The Company agrees to advise the Director of the
steps it intends to take in connection with any such default. If the Company
shall so notify the Director, the Company may, in its own name or in the name of
the Director, prosecute or defend any action or proceeding or take any other
action involving any such contractor, subcontractor or surety which the Company
deems reasonably necessary, and in such event the Director hereby agrees to
cooperate fully with the Company and to take all action necessary to effect the
substitution of the Company for the Director in any such action or proceeding.
Any amounts recovered by way of damages, refunds, adjustments or otherwise in
connection with the foregoing, after deduction of expenses incurred in such
recovery, prior to the Completion Date shall be paid into the Project Fund or,
if recovered after the Completion Date and full disposition of the Project Fund
in accordance with Section 3.4 hereof, shall be paid to the Trustee for deposit
in the Collateral Proceeds Account.
Section 3.7. Investment of Project Fund, Primary Reserve
Account or Collateral Proceeds Account. Any moneys held as part of the Project
Fund, the Primary Reserve Account or the Collateral Proceeds Account shall be
invested by the Trustee, upon the written or oral direction (but if oral,
confirmed promptly in writing) of the Authorized Company Representative, in
Eligible Investments.
Section 3.8. Lease as Security Agreement. This Lease is
intended to create and does create in the Director a security interest in the
Project, and in each part thereof, under the Ohio Uniform Commercial Code
(Chapters 1301 to 1309, inclusive of the Ohio Revised Code) as security for the
payment of rent required by Section 4.3 hereof.
Section 3.9. Plans and Specifications; Inspections. At his
option, the Director may retain, at the Company's expense, an architect,
engineer, appraiser or other consultant for the purpose of approving the Plans
and Specifications, verifying costs and performing inspections as Provision of
the Project progresses. Such inspections or approvals of Plans and
Specifications or the Project shall impose no responsibility or liability of any
nature upon the Director, the State, their agents, representatives or designees
nor, without limitation, carry any warranty or representation as to the adequacy
or safety of the Project or any other physical condition or feature pertaining
to the Project. The Company shall, at the request of the Director, make periodic
reports (including, if required, submission of updated Cost Certifications) to
the Director concerning the status of completion and the expenditure of costs in
respect thereof.
The Company may revise the Plans and Specifications from time
to time; provided that no revision shall be made (a) which would change the
Project Purposes to purposes other than those permitted by the Act; (b) without
obtaining, to the extent required by law, the approval of any applicable
Governmental Authority; and (c) without the prior written approval of the
Director if such revision would change the amounts set forth in the most
recently furnished Cost Certification. In any event, all revisions to the Plans
and Specifications shall be promptly filed with the Director.
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Section 3.10. Environmental Assessment. The Director may
retain, at the Company's expense, an independent consultant to perform an
overall environmental assessment and to prepare a report certifying that the
Project Site is not being used for, or threatened by, nor has ever been used
for, or threatened by, the use, generation, treatment, storage or disposal of
any asbestos or asbestos-containing material, petroleum or any hazardous or
toxic chemical, material, substance or waste to which exposure is prohibited,
limited or regulated by any federal, state or local law, regulation, ordinance,
order or directive pertaining to the protection of the environment (collectively
"Environmental Laws") or which, even if not so regulated, is known to pose a
hazard to the health or safety of the occupants of the Project Site or of
property adjacent to the Project Site and that the Company's environmental
management practices are in compliance with all Environmental Laws. The overall
environmental assessment may be done in three phases. The Company represents and
warrants that it has the authority to and hereby does grant to the Director, its
agents, representatives, employees, consultants and contractors the right to
enter the Project Site and to perform such acts as are necessary to conduct such
assessment.
ARTICLE IV
LEASE OF PROJECT, LEASE TERM AND RENTAL
Section 4.1. Lease of Project. The Director, as lessor
hereunder, in consideration of the rents, covenants and agreements herein
stated, agrees to, and does hereby lease to the Company, as lessee hereunder,
and the Company agrees to, and does hereby lease from the Director, subject to
the provisions of this Lease, the Project for the Lease Term.
Section 4.2. Lease Term and Possession. The Lease Term shall
commence on the date of delivery of this Lease and, subject to ea termination as
provided herein, shall end on June 2, 2013. The Director agrees to deliver to
the Company full possession of the Project (subject to Section 7.2 hereof) at
the commencement of the Lease Term and the Company agrees to accept possession
of the Project upon such delivery. The Director covenants ana agrees that it
will not take any action, other than pursuant to Article IX of this Lease, to
prevent the Company from having quiet and peaceable possession and enjoyment of
the Project during the Lease Term and will, at the request of the Company, and
at the Company's cost, cooperate with the Company in order that the Company may
have quiet and peaceable possession and enjoyment of the Project. This provision
shall not be construed to require cooperation by the Director with the Company
in any labor dispute.
Section 4.3. Rents and Other Amounts Payable. Not later than
the fifteenth (15th) day of the months of October 1993 and November 1993, the
Company shall pay as rent an amount equal to one-half (1/2) of the amount of
interest on the Bonds which will be payable on December 1, 1993. Not later than
the fifteenth (15) day of the months of December 1993, January 1994 and February
1994, the Company shall pay as rent an amount equal to one-third (1/3) of the
amount of interest on the Bonds which will be payable on March 1, 1994. Not
later than the fifteenth (15th) day of the months of March 1994, April 1994 and
May 1994, the Company shall pay as rent an amount equal to one-third (1/3) of
the amount of interest on the Bonds which will be payable on June
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1, 1993. Not later than the fifteenth (15th) day of each month commencing June
15, 1994 and continuing thereafter until the principal of and interest on the
Bonds shall have been fully paid or provision for the payment thereof shall have
been made in accordance with the Trust Agreement, the Company shall pay as rent
an amount equal to the sum of (i) one-third (1/3) of the amount of interest on
the Bonds which will be payable on the next succeeding date on which such
interest is due to be paid, and (ii) one-third (1/3) of the amount of principal
of the Bonds which will be payable (whether at stated maturity or by redemption)
on the next succeeding date on which such principal is due to be paid. The
Company shall receive a credit against the rent payment due in the month of
February of each year to the extent and in the manner provided in the General
Bond Order and the Series Bond Order. If the Company fails to make any payment
required by this paragraph on the due date thereof, the Trustee shall, to the
extent that funds are available therefor, transfer to the Debt Service Account
an amount equal to such payment from the Collateral Proceeds Account and, if the
balance in the Collateral Proceeds Account is insufficient, from the Primary
Reserve Account.
If moneys are transferred from the Primary Reserve Account or
the Collateral Proceeds Account to the Debt Service Account pursuant to the
provisions of Section 14 of the General Bond Order, and if no Event of Default
is then existing, the Company shall receive a credit against rental payments
payable hereunder, in inverse order of their maturity, in an amount equal to the
amount so transferred.
If no Event of Default is then existing and if the balance in
the Primary Reserve Account is greater than or equal to the aggregate amount of
rental payments to become due and payable during the remaining term of this
Lease, the Company may direct the Trustee to apply monies in the Primary Reserve
Account to monthly rental payments as they become due and, in such case and
notwithstanding the provisions of Section 4.5 hereof, the Company shall not be
required to deliver moneys to the Trustee to restore the balance in the Primary
Reserve Account to an amount equal to the Original Deposit.
Not later than the fifteenth (15th) day of each month,
Commencing October 15, 1993, the Company shall pay to the Trustee (i) an amount
equal to one twelfth (1/12) of the Trustee's annual administrative fee (which
annual administrative fee shall be calculated at a rate equal to the sum of (A)
$1,200 per million dollars for each million dollars or any part thereof of the
first five million dollars of outstanding principal amount of Bonds, and (B)
$700 per million dollars for each million dollars or any part thereof of the
next five million dollars of outstanding principal amount of Bonds, and (C) $600
per million dollars for each million dollars or any part thereof of outstanding
principal amount of Bonds in excess of ten million dollars), constituting the
fee of the Trustee in connection with its administration of the Project Fund,
the Primary Reserve Account and the Collateral Proceeds Account, and (ii) an
amount equal to .0104167% of the outstanding principal amount of the Bonds
("Additional Rent"). The Company and the Director acknowledge and agree that the
Additional Rent is intended to reimburse the Department of Development of the
State for a portion of the cost of administering the Ohio Enterprise Bond Fund
program.
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The Company also agrees to pay to the Director reasonable
expenses of the Director related to the Project and requested by the Company or
required by this Lease or the Trust Agreement, or incurred in enforcing the
provisions of this Lease or the Trust Agreement and which are not otherwise
required to be paid by the Company under the terms of this Lease, including,
without limitation, the costs of the overall environmental assessment and report
described in Section 3.10 of this Lease.
In the event Company should fail to make any of the payments
required in this Section 4.3, the item or installment so in default shall
continue as an obligation of the Company until the amount in default shall have
been fully paid, and the Company agrees to pay the same with interest thereon at
the rate of the Interest Rate for Advances. If any payment required by the first
paragraph of this Section 4.3 is not made by the first day of the month
following the month in which such payment is due, the Company shall pay, in
addition to such payment, a late payment charge of five percent (5 %) of the
amount of such payment.
Section 4.4. Place of Payments. The rent provided for in the
first paragraph of Section 4.3 hereof and the late payment charge provided for
in the last paragraph of Section 4.3 hereof shall be paid directly to the
Trustee at its principal corporate trust office for the account of the Director,
and the Trustee shall deposit such payments in the Debt Service Account.
Additional Rent shall be paid to the Trustee, who shall pay such amounts to the
Director, not less frequently than monthly, for deposit in the First Half
Account (if received by the Director between January 1 and June 30) or the
Second Half Account (if received by the Director between July I and December 31)
created in the Trust Agreement. The additional payments to be made to the
Director under Section 4.3 hereof shall be paid directly to the Director for use
as provided in such Section.
Section 4.5. Primary Reserve Account. Upon delivery of this
Lease and in accordance with the General Bond Order and the series Bond Order,
the Company shall deliver or cause to be delivered to the Trustee for deposit or
credit to the Primary Reserve Account a sum of money equal to the Original
Deposit (which sum may, to the extent provided for in the Series Bond Order, be
derived from proceeds of the sale of the Bonds). In accordance with the
provisions of the General Bond Order and the Series Bond Order, the Trustee
shall transfer moneys from the Primary Reserve Account to the Debt Service
Account if (a) the Company shall have failed to make a rent payment required by
the first paragraph of Section 4.3 hereof, and (b) the balance in the Collateral
Proceeds Account is insufficient to provide funds for such transfer.
If, as a result of a transfer described in the immediately
preceding paragraph, the balance in the Primary Reserve Account is less than the
Original Deposit, the Trustee shall promptly notify the Company, by telephone
and confirmed in writing, of the amount of such deficiency, and the Company
shall, not later than ten (10) days after receipt of such notice, deliver to the
Trustee for deposit or credit to the Primary Reserve Account moneys in the
amount of such deficiency.
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Pursuant to Section 14 of the General Bond Order, the Trustee
shall, under the circumstances described in said Section 14, transfer moneys
from the Primary Reserve Account to the Debt Service Account.
Section 4.6. Obligation of the Company Hereunder
Unconditional. The obligations of the Company to make the payments required in
Section 4.3 and Section 4.5 hereof and to perform and observe the other
agreements on its part contained herein shall be absolute and unconditional and
until such time as the principal of and interest and premium, if any, on the
Bonds shall have been fully paid or provision for the payment thereof shall have
been made in accordance with the Trust Agreement, the Company (i) will not,
subject to the provisions of Section 8.6 hereof, suspend or discontinue any
payments provided for in Section 4.3 or Section 4.5 hereof, (ii) will perform
and observe all of its other agreements contained in this Lease, and (iii)
except as provided in Article X hereof, will not terminate the Lease for any
cause including, without limiting the generality of the foregoing, failure to
complete the Project, any acts or circumstances that may constitute failure of
consideration, destruction of or damage to the Project, commercial frustration
of purpose, any change in the tax or other laws or administrative rulings of or
administrative actions by the United States of America or the State or any
political subdivision of either, or any failure of the Director to perform and
observe any agreement, whether expressed or implied, or any duty, liability or
obligation arising out of or connected with this Lease or the Trust Agreement.
Nothing contained in this Section shall be construed to release the Director
from the performance of any of the agreements on his part contained in this
Lease; and in the event Director should fail to perform any such agreement on
his part, the Company may institute such action against the Director as the
Company may deem necessary to compel performance or recover its damages for
nonperformance so long as such action shall not impair the agreements on the
part of the Company contained in the next preceding sentence. The Company may,
however, at its own cost and expense and in its own name or in the name of the
Director, prosecute or defend any action or proceeding or take any other action
involving third persons which the Company deems reasonably necessary in order to
secure or protect its right of possession, occupancy and use hereunder, and in
such event the Director hereby agrees to cooperate fully with the Company and to
take all action necessary to effect the substitution of the Company for the
Director in any such action or proceeding if the Company shall so request. This
provision shall not be construed to require cooperation by the Director with the
Company in any labor dispute.
Section 4.7. Letter of Credit Required. The Company shall
provide to the Director an irrevocable and unconditional letter of credit,
acceptable to the Director in the Director's sole discretion, for the amount of
$3,000,000, payable to the Trustee and for a term of not less than three (3)
years. If any Event of Default occurs, the Trustee shall, at the direction of
the Director, draw on said letter of credit. At any time after thirty (30) days
prior to the expiration of said letter of credit, the Trustee shall at the
direction of the Director draw on said letter of credit unless thirty (30) days
prior to the expiration of said letter of credit or any renewal or replacement
thereof:
(a) said letter of credit is renewed for a term of not less
than one year;
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(b) the Company provides to the Director another unconditional
and irrevocable letter of credit, acceptable to the Director in the Director's
sole discretion, payable to the Trustee, in the amount of $1,500,000, for a term
of not less than one year and upon which the Trustee may draw subject to the
same conditions as the original letter of credit;
(c) the Company provides to the Trustee cash in the amount of
$1,500,000;
(d) the Bonds are prepaid in accordance with this Lease and
the Trust Agreement; or,
(e) the Sublessee (1) assumes this Lease or extends the
Sublease to the term of this Lease and (2) has had positive net income,
excluding any extraordinary earnings or losses, for the fiscal years ending in
1993, 1994 and 1995, as reflected in each case on the income statement of the
Sublessee furnished in accordance with Section 7.5 of the Sublease and as
determined in accordance with generally accepted accounting principles applied
on a basis consistent with that of prior years.
Any amount drawn on a letter of credit by the Trustee or any cash provided to
the Trustee pursuant to this Section 4.7 shall be deposited in the Collateral
Proceeds Account. Provided that one or more of the foregoing conditions (b), (c)
or (e) of this Section 4.7 have been satisfied, and provided that no Event of
Default or event which would with notice or the lapse of time or both constitute
an Event of Default hereunder or under the Bonds has occurred and is continuing,
the remaining balance of any amount deposited to the Collateral Proceeds Account
pursuant to this Section 4.7 shall be paid to the Company by the Trustee from
the Collateral Proceeds Account in accordance with written instruction from the
Director, which instruction may be issued in the Director's sole discretion.
Section 4.8. Assignment of Sublease. The Company shall assign
all its rights and interest in the Sublease to the Director as security for the
payment of rent required by Section 4.3 hereof by the execution of an Assignment
in conformance with the Form of Assignment attached hereto as Annex II and
incorporated herein by this reference. This Lease is conditioned upon the
Sublessee's consent to such assignment by the execution of a Consent in
conformance with the Form of Consent attached hereto as Annex H and incorporated
herein by this reference.
ARTICLE V
MAINTENANCE, TAXES AND INSURANCE
Section 5.1. Maintenance and Modifications of Project by the
Company. The Company agrees that during the Lease Term it will keep the Project
including all appurtenances thereto in good repair and good operating condition
at its own cost.
The Company shall have the privilege of making additions,
modifications or improvements to the Project from time to time as it, in its
discretion, may deem to be desirable for
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its uses and purposes, the cost of which additions, modifications and
improvements shall, be paid by the Company, and the same (except any machinery
or equipment installed pursuant to Section 8.7 hereof) shall be the property of
the Director and be included under the terms of this Lease as part of the
Project.
Section 5.2. Indemnification by the Company. The Company shall
indemnify and hold the Director, the Treasurer and the Trustee (including any
member, officer, director or employee thereof) (collectively, the "Indemnified
Parties") harmless against any and all claims, asserted by or on behalf of any
person, firm or corporation, private or public, arising or resulting from, or in
any way connected with (i) financing, installation, operation, use or
maintenance of the Project (including, but not limited to, claims relating to
compliance with Chapter 4115, Ohio Revised Code), (ii) any act, failure to act
or misrepresentation by any person, firm, corporation or governmental authority
in connection with the issuance, sale or delivery of the Bonds and (iii) any
act, failure to act or misrepresentation by any other Indemnified Party in
connection with, or in the performance of any obligation related to the
issuance, sale and delivery of the Bonds or under this Lease or the Trust
Agreement, including all liabilities, costs and expenses, including reasonable
counsel fees, incurred in any action or proceeding brought by reason of any such
claim. In the event any action or proceeding is brought against any Indemnified
Party by reason of any such claim, such Indemnified Party will promptly give
written notice thereof to the Company. In case such notice shall be so given,
the Company shall be entitled to participate at its own expense in the defense
or, if it so elects, to assume at its own expense the defense of such claim,
suit, action or proceeding, in which event such defense shall be conducted by
counsel chosen by the Company and reasonably satisfactory to such Indemnified
Party against whom such action or proceeding is pending; but if the Company
shall elect not to assume such defense, it shall reimburse such Indemnified
Party for the reasonable fees and expenses of any counsel retained by such
Indemnified Party. If at any time the Indemnified Party becomes dissatisfied
with the selection of counsel by the Company, a new mutually agreeable counsel
shall be retained at the expense of the Company. Each Indemnified Party agrees
that the Company shall have the sole right to compromise, settle or conclude any
claim, suit, action or proceeding against any of the Indemnified Parties.
Notwithstanding the foregoing, each Indemnified Party shall have the right to
employ counsel in any such action at its own expense; and provided further that
such Indemnified Party shall have the right to employ counsel in any such action
and the fees and expenses of such counsel shall be at the expense of the Company
if: (i) the employment of counsel by such Indemnified Party has been authorized
by the Company, (ii) there reasonably appears that there is a conflict of
interest between the Company and the Indemnified Party in the conduct of the
defense of such action (in which case the Company shall not have the right to
direct the defense of such action on behalf of the Indemnified Party) or (iii)
the Company shall not in fact have employed counsel to assume the defense of
such action. The Company shall also indemnify the Indemnified Parties from and
against all costs and expenses, including reasonable counsel fees, lawfully
incurred in enforcing any obligations of the Company under this Lease. Anything
herein to the contrary notwithstanding, the foregoing agreements by the Company
to indemnify any Indemnified Party shall not apply to grossly negligent acts or
omissions or acts or omissions of willful misconduct on the part of such
Indemnified Party. The Company shall not be liable for any settlement of any
action or claim effected without its consent. The obligations of the
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Company under this Section shall survive the termination of this Lease and shall
be in addition to any other rights, including without limitation, rights to
indemnity which any Indemnified Party may have at law, in equity, by contract or
otherwise.
Section 5.3. Taxes, Other Governmental Charges and Utility
Charges. The Company will pay, as the same respectively become due, all taxes,
assessments, whether general or special, and governmental charges of any kind
whatsoever that may at any time be lawfully assessed or levied against or with
respect to the Project or any machinery, equipment or other property installed
or brought by the Company thereon (including, without limiting the generality of
the foregoing, any taxes levied upon or with respect to the receipts, income or
profits of the Director from the Project which, if not paid, may become or be
made a lien on the Project or a charge on the revenues and receipts therefrom),
and all utility and other charges incurred in the operation, maintenance, use,
occupancy and upkeep of the Project, provided, that with respect to special
assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Company shall be obligated to pay only
such installments as are required to be paid during the Lease Term.
Section 5.4. Insurance Required. The Company or Sublessee
shall insure the Project in an aggregate amount equal to the replacement cost of
the Project, but in any event not less than the principal amount of Bonds
outstanding from time to time, against loss or damage by fire, boiler explosion,
as well as such other risks as are covered by the endorsement commonly known as
"extended coverage", plus vandalism and malicious mischief, in insurance
companies authorized to issue such policies in the State. Any insurance policy
maintained by the Company pursuant to this Section 5.4 may provide that the
policy does not cover the first $25,000 or less of loss, or such greater amount
as may (with due regard to insurance practices from time to time current with
respect to buildings similar to the Project Facilities) be approved in writing
by the Director, with the result that the Company is its own insurer to that
extent. Any return of insurance premium or dividends based upon such premium
shall be due and payable solely to the Company unless such premium shall have
been paid by the Director or Trustee.
As an alternative to the above, the Company may insure the
Project under a blanket insurance policy or policies which cover not only the
Project but other properties.
Section 5.5. Additional Provisions Respecting Insurance. Any
insurance policy issued pursuant to Section 5.5 hereof shall be so written or
endorsed as to make losses, if any, adjustable by the Company and payable to the
Company and the Trustee, for the account of the Director; provided, any such
insurance policy may be so written or endorsed as to make losses not in excess
of $25,000 for each occurrence payable directly to the Company as hereinafter
provided in Section 6.1. Each insurance policy provided for in Section 5.5 and
Section 5.8 hereof shall contain a provision to the effect that the insurance
company shall not cancel the same without first giving written notice thereof to
the Director and the Trustee at least thirty days in advance of such
cancellation, and the Company shall deliver to the Director and the Trustee
duplicate copies or
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certificates of insurance pertaining to each such policy of insurance procured
by the Company and shall keep such duplicate copies or certificates up to date.
Section 5.6. Application of Net Proceeds of Insurance. The Net
Proceeds of the insurance carried pursuant to the provisions of this Lease shall
be applied as follows: (i) the Net Proceeds of the insurance required in Section
5.5 hereof shall be applied as provided in Section 6.1 hereof, and (H) the Net
Proceeds of the insurance required in Section 5.8 hereof shall be applied toward
extinguishment or satisfaction of the liability with respect to which such
insurance proceeds 'may be paid.
Section 5.7. Public Liability Insurance. The Company agrees
that it will carry public liability insurance with refer ace to its operations
at the Project with one or more reputable insurance companies duly qualified to
do business in the State, in minimum amounts of $1,000,000 for the death of or
personal injury to one person and $3,000,000 for personal injury or death for
each occurrence in connection with the Project and $500,000 for property damage
of any occurrence in connection with the Project, with a deductible not to
exceed $10,000. The Director and the Trustee shall be made additional insureds
under such policies. The insurance provided by this Section 5.8 may be by
blanket insurance policy or policies.
Section 5.8. Advances. In the event the Company shall fad to
maintain the full insurance coverage required by this Lease or shall fad to keep
the Project in good repair and operating condition, the Director or the Trustee
may (but shall be under no obligation to) take out the required policies of
insurance and pay the premiums on the same or may make such repairs or
replacements as are necessary and provide for payment thereof, and all amounts
so advanced therefor by the Director shall become an additional obligation of
the Company to the Director, which amounts, together with interest thereon at
the Interest Rate for Advances from the date thereof, the Company agrees to pay
on demand.
ARTICLE VI
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 6.1. Damage and Destruction. If prior to full payment
of the Bonds (or provision for payment thereof having been made in accordance
with the provisions of the Trust Agreement), the Project Facilities shall be
damaged or partially or totally destroyed by fire, flood, windstorm, or other
casualty at any time during the Lease Term, there shall be no abatement or
reduction in the rent payable by the Company under this Lease, and, to the
extent that the claim for loss resulting from such damage or destruction is not
greater than $50,000 the Company (i) will promptly repair, rebuild, replace or
restore the property damaged or destroyed with such changes, alterations and
modifications (including the substitution and addition of other property) as may
be desired by the Company and as will not make the Project unsuitable for the
Project Purposes, and (ii) will apply for such purpose so much as may be
necessary of any Net Proceeds of insurance policies resulting from claims for
such losses not in excess of $50,000 as well as any additional
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moneys of the Company necessary therefor. All Net Proceeds of insurance
resulting from claims for any such loss not in excess of $50,000 shall be paid
to the Company.
If prior to fall payment of the Bonds (or provision for
payment thereof having been made in accordance with the provisions of the Trust
Agreement), the Project Facilities shall be destroyed (in whole or in part) or
damaged by fire, flood, windstorm or other casualty to such extent that the
claim for loss resulting from such destruction or damage is in excess of $50,000
the Company shall promptly give written notice thereof to the Director and the
Trustee. All Net Proceeds of insurance policies resulting from claims for such
losses in excess of $50,000 shall be paid to and held by the Trustee in the
Collateral Proceeds Account, whereupon, unless the Company shall have elected to
exercise its option to purchase the Project pursuant to the provisions of
Section 10.2(a) of this Lease, (i) the Company will proceed to repair, rebuild,
replace or restore the property damaged or destroyed with such changes,
alterations and modifications (including the substitution and addition of other
property) as may be desired by the Company and as will not make the Project
unsuitable for tile Project Purposes, and (h) the Trustee will disburse moneys
in the Collateral Proceeds Account to or upon the direction of the Company for
payment of the costs of such repair, rebuilding, replacement or restoration,
either on completion thereof or, if the Company shall so request, as the work
progresses. Any such disbursements shall be made pursuant to the procedures set
forth in Section 3.3 of this Lease for disbursement of moneys in the Project
Fund, including, but not limited to, the requirement that the Company obtain the
written approval of the Director with respect to each disbursement. In the event
the moneys in the Collateral Proceeds Account are not sufficient to pay in MI
the costs of such repair, rebuilding, replacement or restoration, the Company
nonetheless will complete the work and pay the costs thereof from its own
resources. The Company shall not, by reason of the payment of such excess costs,
be entitled to any reimbursement from the Director or any diminution in or
postponement of the rents payable under Section 4.3 of this Lease.
Section 6.2. Eminent Domain. In the event that title to or the
temporary use of the Project, or any part thereof, shall be taken under the
exercise of the power of eminent domain by any governmental body or by any
person, firm or corporation acting under governmental authority, there shall be
no abatement or reduction in the rent payable by the Company under this Lease
during the balance of the Lease Term, and any Net Proceeds received from any
award made in such eminent domain proceedings shall be paid to and deposited by
the Trustee in the Collateral Proceeds Account and shall be applied by the
Director or the Company in one or more of the following ways as shall be
directed in writing by the Authorized Company Representative:
(a) to the replacement or restoration of the Project to
substantially the same condition as existed prior to the exercise of said power
of eminent domain; or
(b) to the redemption of all of the Bonds pursuant to the
Trust Agreement, together with accrued interest thereon to the date of
redemption upon exercise of the option to purchase authorized by Section 10.2(b)
of this Lease.
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Within ninety days from the date of entry of a final order in an eminent domain
proceeding granting condemnation, the Authorized Company Representative shall
direct the Director and the Trustee in writing as to which of the ways specified
in this Section the Company elects to have the Net Proceeds of the condemnation
award applied. Any balance of the Net Proceeds remaining after such application
shall be retained in the Collateral Proceeds Account.
The Director shall cooperate fully with the Company in the
handling and conduct of any prospective or pending condemnation proceedings with
respect to the Project or any part thereof and, to the extent it may lawfully do
so, will permit the Company to litigate in any such proceedings in its own name
or in the name and on behalf of the Director (except as such proceedings are
instigated by the Director, in which event the Company shall have the right to
proceed as if it were the owner of the Project). In no event will the Director
voluntarily settle or consent to the settlement of any prospective or pending
condemnation proceedings with respect to the Project or any part thereof without
the written consent of the Company.
Section 6.3. Condemnation of Company Owned Property. The
Company shall be entitled to the Net Proceeds of any condemnation award or
portion thereof made for damages to or takings of its own property.
ARTICLE VII
SPECIAL COVENANTS
Section 7.1. No Warranty of Condition or Suitability. The
Director does not make any warranty, either express or implied, as to the
condition, workmanship, merchantability or capacity of the Project or any part
thereof or as to its or any part's suitability or operation for the Project
Purposes.
At any time, upon request of the Company, so long as it is not
in default hereunder, the Director will assign to the Company all warranties and
guarantees of all contractors, subcontractors, manufacturers, suppliers and
engineers for the furnishing of labor, materials, supervision or design in
connection with the Project and any rights or causes of action against any of
the foregoing.
Section 7.2. Right of Access to the Project. The Company
agrees that the Director and any of the Director's duly authorized agents shall
have the right at all reasonable times to ewer upon the Project and to examine
and inspect the Project. The Company further agrees that the Director and the
Director's duly authorized agents shall have such rights of access to the
Project as may be reasonably necessary to cause to be completed the construction
provided for in Section 3.1 hereof, and thereafter for the proper maintenance,
of the Project in the event of failure by the Company to perform its obligations
under Sections 3.1 or 5.1 hereof.
Section 7.3. Granting Easements. If the Company is not in
default under this Lease, the Director at the request of the Company shall grant
easements, licenses, rights-of-way
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(including the dedication of public highways) and other rights or privileges in
the nature of easements with respect to Project Site, or may release existing
easements, licenses, rights-of-way and other rights of privileges with or
without consideration, and the Director agrees that it shall execute and deliver
any instrument necessary or appropriate to grant or release" any such easement,
license, right-of-way or other right or privilege upon receipt of: (a) a copy of
the instrument of grant or release; (b) a written application signed by the
Authorized Company Representative requesting such instrument; and (c) a
certificate executed by an Independent Engineer that in his opinion such grant
or release will not make the Project unsuitable for the Project Purposes.
Section 7.4. No Abatement or Diminution of Rent. No release or
grant effected under the provisions of Section 7.3 of this Lease shall entitle
Company to any abatement or diminution of the of the rents payable under Section
4.3 hereof.
Section 7.5. Deposit of Moneys. Any moneys received by
Director pursuant to Section 7.3 of this Lease shall immediately be paid to the
Trustee for deposit in the Collateral Proceeds Account.
Section 7.6. Information Concerning Operations. At the request
of the Director and, in any event, within ninety (90) days after the last day of
each fiscal year of the Company beginning with the fiscal year in which the
Completion Date occurs, the Company shall furnish to the Director a report on
Project operations setting forth the total number of employees then employed by
the Company at the Company Facilities and such other employment, economic and
statistical data concerning the Project as may reasonably be requested by the
Director.
Section 7.7. Affirmative Covenants of the Company. Throughout
the Term of this Lease, the Company shall:
(a) Taxes and Assessments. Pay and discharge promptly, or
cause to be paid and discharged promptly, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon it, its income or
any of its property, or upon any part thereof, as well as all claims of any kind
(including claims for labor, materials and supplies) which, if unpaid, might by
law become a lien or charge upon its property. Nothing in this Section shall
require the Company to pay or discharge any such tax, assessment, governmental
charge or levy so long as the validity thereof shall be contested in good faith
and by appropriate legal proceedings, provided that the Company shall have
delivered to the Director an opinion of counsel, selected by the Company and
reasonably acceptable to the Director, to the effect that nonpayment of any such
items during the pendency of such contest will not adversely affect the
Director's right, title or interest in the Project.
(b) Maintain Existence. Do or cause to be done all things
necessary to preserve and keep ii full force and effect its existence and its
material rights and franchises.
(c) Maintain Property. Maintain and keep its property in good
repair, working order and condition, and from time to time make all repairs,
renewals and replacements which, in
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the opinion of the Company, are necessary and proper so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this subsection (c) shall
prevent the Company from selling or otherwise disposing of any property
whenever, in the good faith judgment of the Company, such property is obsolete,
worn out, without economic value or unnecessary for the conduct of the business
of the Company.
(d) Maintain Insurance. Keep all of its insurable property
insured against loss or damage by fire and other risks, maintain public
liability insurance against claims r personal injury, death, or property damage
suffered by others upon, in or about any premises occupied by the Company; and
maintain all such worker's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which it may be engaged in
business. All insurance for which provision has been made in this subsection (d)
shall be maintained against such risks and in at least such amounts (but subject
to such deductibles) as such insurance is usually carried by persons engaged in
the same or similar businesses, and all insurance herein provided for shall be
effected and maintained in force under a policy or policies issued by insurers
of recognized responsibility, except that it may effect worker's compensation or
similar insurance in respect of operations in any state or other jurisdiction
either through an insurance fund operated by such state or other jurisdiction or
by causing to be maintained a system or systems of self-insurance which is in
accordance with applicable law.
(e) Furnish Information. Furnish to the Director:
(i) Quarterly Reports. Within forty-five (45) days after the
end of each quarterly period of each fiscal year of the Company, the balance
sheet of the Company as at the end of such quarterly period, together with
related statements of income and retained earnings (or accumulated deficit) and
changes in financial position for such quarterly period, setting forth in
comparative form the corresponding figures as at the end of or for the
corresponding quarter of the previous fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, subject to usual year-end audit adjustments.
(ii) Annual Reports. Within ninety (90) days after the last
day of each fiscal year of the Company, a copy of its audit report containing a
balance sheet of the Company as at the end of such fiscal year, together with
related statements of income and retained earnings (or accumulated deficit) and
changes in financial position for such fiscal year, setting forth in comparative
form the corresponding figures as at the end of or for the previous fiscal year,
all in reasonable detail and all examined by and accompanied by a review letter
or opinion of its independent certified public accountants to the effect that
such financial statements were prepared in accordance with generally accepted
accounting principles consistently applied, and present fairly the Company's
financial position at the close of such period and the results of its operations
for such period. In addition, the Company shall provide to the Director, along
with such audit report, a certificate from its auditors which states that the
Company has complied with all financial covenants which are set forth in Section
7.8(d) hereof, or, as the case may be, disclose any defaults thereunder.
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(iii) Certificate; No Default. With the financial reports
required to be furnished under this Section, a certificate of the Company's
chief executive officer or chief financial officer stating that (a) no Event of
Default has occurred and is continuing and no event or circumstance which would
constitute an Event of Default, but for the requirement that notice be given or
time elapse or both, has occurred and is continuing, or, if such an Event of
Default or such event or circumstance has occurred and is continuing, a
statement as to the nature thereof and the action which the Company proposes to
take with respect thereto, and that (b) no action, suit or proceeding by it or
against it at law or in equity, or before any governmental instrumentality or
agency, is pending or threatened, which, if adversely determined, would
materially impair the right or ability of the Company to carry on the business
which is contemplated in connection with the Project or would materially impair
the right or ability of the Company to perform the transactions contemplated by
this Lease or would materially and adversely affect its business, operations,
assets or condition, all as of the date of such certificate, except as disclosed
in such certificate.
(iv) Other Information. Such other information respecting the
business, properties or the condition or operations, financial or otherwise, Of
the Company as the Director may reasonably request, provided that reasonable
provision is made for protecting proprietary information of the Company.
(f) Deliver Notice. Forthwith upon learning of any of the
following, deliver written notice thereof to the Director, describing the same
and the steps being taken by the Company with respect thereto:
(i) the occurrence of an Event of Default or an event or
circumstance which would constitute an Event of Default, but for the requirement
that notice be given or time elapse or both, or
(ii) any action, suit or proceeding by it or against it at law
or in equity, or before any governmental instrumentality or agency, instituted
or threatened which, if adversely determined, would materially impair the right
or ability of the Company to carry on the business which is contemplated in
connection with the Project or would materially impair the right or ability of
the Company to perform the transactions contemplated by this Lease, or would
materially and adversely affect its business, operations, assets or condition,
or
(iii) the occurrence of a Reportable Event, as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), under, or
the institution of steps by the Company to withdraw from, or the institution of
any steps to terminate, any employee benefit plan as to which the Company may
have liability.
(g) Inspection Rights. At any reasonable time and from time to
time, permit the Director, or any agents or representatives thereof, to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Company and discuss the general business affairs of
the Company with any of its officers; provided, however, that the Company
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reserves the right to restrict access to any of its facilities in accordance
with reasonably adopted procedures relating to safety and security.
(h) Zoning, Planning and Environmental Regulations. The
Provision of the Project will be completed and the Project and the Company
Facilities will be operated and maintained in the manner as to conform with all
applicable zoning, planning, building, environmental and other applicable
governmental regulations (or variances therefrom) imposed by any Governmental
Authority and as to be consistent with the purposes of the Act.
(i) Use of Project Fund Moneys. All moneys disbursed from the
Project Fund (except for any amounts transferred to the Collateral Proceeds
Account pursuant to the terms of this Lease) shall be used for the payment of
Allowable Costs relating to Provision of the Project. No part of any such moneys
shall be knowingly paid to or retained by the Company or any, officer,
shareholder, director or employee of the Company as a fee, kick-back or
consideration of any type, except as previously disclosed to the Director in
writing. The Company has no identity of interest with, or interest in, the
general contractor or any architect, subcontractor, laborer or materialman
performing work or services or supplying materials in connection with the
Provision of the Project, except as previously disclosed to the Director in
writing.
(j) Sublessee. Cause the Sublessee, pursuant to the Sublease,
to:
(i) Taxes and Assessments. Pay and discharge promptly, or
cause to be paid and discharged promptly, when and payable, all taxes,
assessments and governmental charges or levies imposed upon it, its income or
any of its property, or upon any part thereof, as well as all claims of any kind
(including claims for labor, materials and supplies) which, if unpaid, might by
law become a lien or charge upon its property. Nothing in this Section shall
require the Sublessee to pay or discharge any such tax, assessment, governmental
charge or levy so long as the validity thereof shall be contested in good faith
and by appropriate legal proceedings, provided that the Sublessee shall have
delivered to the Director an opinion of counsel, selected by the Sublessee and
reasonably acceptable to the Director, to the effect that nonpayment of any such
items during the pendency of such contest will not adversely affect the
Director's right, title or interest in the Project.
(ii) Maintain Existence. Do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and its
material rights and franchises.
(iii) Maintain Property. Maintain and keep its property in
good repair, working order and condition, and rom time to time make all repairs,
renewals and replacements which, in the opinion of the Sublessee, are necessary
and proper so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this subsection (iii) shall prevent the Sublessee from selling or
otherwise disposing of any property whenever, in the good faith judgment of the
Sublessee, such property is obsolete, worn out, without economic value or
unnecessary for the conduct of the business of the Sublessee.
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(iv) Maintain Insurance. Keep all of its insurable property
insured against loss or damage by fire and other risks, maintain public
liability insurance against claims for personal injury, death, or property
damage suffered by others upon, in or about any premises occupied by the
Sublessee; and maintain all such worker's compensation or similar insurance as
may be required under the laws of any state or jurisdiction in which it may be
engaged in business. All insurance for which provision has been made in this
subsection (iv) shall be maintained against such risks and in at least such
amounts (but subject to such deductibles) as such insurance is usually carried
by persons engaged in the same or similar businesses, and all insurance herein
provided for shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that it may
effect worker's compensation or similar insurance in respect of operations in
any state or other jurisdiction either through an insurance fund operated by
such state or other jurisdiction or by causing to be maintained a system or
systems of self-insurance which is in accordance with applicable law.
(v) Furnish Information. Furnish to the Director:
(A) Quarterly Reports. Within forty-five (45) days after the
end of each quarterly period of each year of the Sublessee, the balance sheet of
the Sublessee as at the end of such quarterly period, together with related
statements of income and retained earnings (or accumulated deficit) and changes
in financial position for such quarterly period, setting forth in comparative
form the corresponding figures as at the end of or for the corresponding quarter
of the previous fiscal year, all in reasonable detail, prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
subject to usual year-end audit adjustments.
(B) Annual Reports. Within ninety (90) days after the last day
of each fiscal year of the Sublessee, a copy of its audit report containing a
balance sheet of the Sublessee as at the end of such fiscal year, together with
related statements of income and retained earnings (or accumulated deficit) and
changes in financial position for such fiscal year, setting forth in comparative
form the corresponding figures as at the end of or for the previous fiscal year,
all in reasonable detail and all examined by and accompanied by a review letter
or opinion of its independent certified public accountants to the effect that
such financial statements were prepared in accordance with generally accepted
accounting principles consistently applied, and present fairly the Sublessee
financial position at the close of such period and the results of its operations
for such period. In addition, the Sublessee shall provide to the Director, along
with such audit report, a certificate from its auditors which states that the
Sublessee has complied with all financial covenants which are set forth in
Section 7.8(d) hereof, or, as the case may be, disclose any defaults thereunder.
(C) Certificate, No Default. With the financial reports
required to be furnished under this Section, a certificate of the Sublessee's
chief executive officer or chief financial officer stating that (a) no Event of
Default under the Sublease has occurred and is continuing and no event or
circumstance which would constitute an Event of Default under the Sublease, but
for the requirement that notice be given or time elapse or both, has occurred
and is continuing, or, if such an Event of Default under the Sublease or such
event or circumstance has occurred and is continuing,
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a statement as to the nature thereof and the action which the Sublessee proposes
to take with respect thereto, and that (b) no action, suit or proceeding by it
or against it at law or in equity, or before any governmental instrumentality or
agency, is pending or threatened, which, if adversely determined, would
materially impair the right or ability of the Sublessee to carry on the business
which is contemplated in connection with the Project or would materially impair
the right or ability of the Sublessee to perform the transactions contemplated
by this Lease or would materially and adversely affect its business, operations,
assets or condition, all as of the date of such certificate, except as disclosed
in such certificate.
(D) Other Information. Such other information respecting the
business, properties or the condition or operations, financial or otherwise, of
the Sublessee as the Director may reasonably request, provided that reasonable
provision is made for protecting proprietary information of the Sublessee.
(vi) Deliver Notice. Forthwith upon learning of any of the
following, deliver written notice thereof Director, describing the same and the
steps being taken by the Sublessee with respect thereto:
(A) the occurrence of an Event of Default under the Sublease
or an event or circumstance which would constitute an Event of Default under the
Sublease, but for the requirement that notice be given or time elapse or both,
or
(B) any action, suit or proceeding by it or against it at law
or in equity, or before any governmental instrumentality or agency, instituted
or threatened which, if adversely determined, would materially impair the right
or ability of the Sublessee to carry on the business which is contemplated in
connection with the Project or would materially impair the right or ability of
the Sublessee to perform the transactions contemplated by the Sublease, or would
materially and adversely affect its business, operations, assets or condition,
or
(C) the occurrence of a Reportable Event, as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), under, or
the institution of steps by the Sublessee to withdraw from, or the institution
of any steps to terminate, any employee benefit plan as to which the Sublessee
may have liability.
(vii) Inspection Rights. At any reasonable time and from time
to time, permit the Director, or any agents or representatives thereof, to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Sublessee and discuss the general business
affairs of the Sublessee with any of its officers; provided, however, that the
Sublessee reserves the right to restrict access to any of its facilities in
accordance with reasonably adopted procedures relating to safety and security.
(viii) Zoning, Planning and Environmental Regulations. The
Provision of the Project will be completed and the Project will be operated and
maintained in such manner as to
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conform with all applicable zoning, planning, building, environmental and other
applicable governmental regulations (or variances therefrom) imposed by any
Governmental Authority and as to be consistent with the purposes of the Act.
(ix) Use of Project Fund Moneys. All moneys disbursed from the
Project Fund (except for any amounts transferred to the Collateral Proceeds
Account pursuant to the terms of this Lease) shall be used for the payment of
Allowable Costs relating to Provision of the Project. No part of any such moneys
shall be knowingly paid to or retained by the Sublessee or any, officer,
shareholder, director or employee of the Sublessee as a fee, kick-back or
consideration of any type. The Sublessee has no identity of interest with, or
interest in, the general contractor or any architect, subcontractor, laborer or
materialman performing work or services or supplying materials in connection
with the Provision of the Project.
Section 7.8. Negative Covenants of the Company. Throughout the
Lease Term, the Company shall not without the prior written consent of the
Director:
(a) Maintain Existence. Sell, transfer or otherwise dispose of
all, or substantially all, of its assets, consolidate with or merge into any
other entity, or permit one or more entities to consolidate with or merge into
it; provided, however, that the Company may, without violating the agreement
contained in this subsection (i), consolidate with or merge into another entity,
or permit one or more other entities to consolidate with or merge into it, or
sell, transfer or otherwise dispose of all, or substantially all, of its assets
as an entirety and thereafter dissolve if: (i) the prior written consent of the
Director is obtained; or (ii)(A) the surviving, resulting or transferee entity,
as the case may be, assumes in writing all of the obligations of the Company
hereunder (if such surviving, resulting or transferee entity is other than the
Company); and (B) the surviving, resulting or transferee entity, as the case may
be, is an entity duly organized and validly existing under the laws of the State
or duly qualified to do business therein, and has a net worth of not less than
that of the Company immediately prior to such disposition, consolidation or
merger, transfer or change of form.
(b) ERISA. Voluntarily terminate any employee benefit plan or
other plan (a "Plan") maintained for employees of the Company and covered by
Title IV of ERISA, so as to result in any material liability of the Company to
the Pension Benefit Guaranty Corporation ("PBGC"), enter into any Prohibited
Transaction (as defined in Section 4975 of the Internal Revenue Code of 1986, as
amended, and in ERISA) involving any Plan which results in any material
liability of the Company to the PBGC, cause any occurrence of any Reportable
Event (as defined in Title IV of EMSA) which results in any material liability
of it to the PBGC, or allow or suffer to exist any other event or condition
which results in any material liability of the Company to the PBGC.
(c) Agreements. Enter into any agreement containing any
provision which would be violated or breached by the performance of its
obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
(d) Financial Covenants.
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(i) Suspension of Operation. Suspend or discontinue operation
of the Project.
(e) Modify Sublease. Amend, modify or terminate any provision
of the Sublease or consent to or waive any Event of Default under the Sublease.
Upon the occurrence and continuation of any Event of Default under the Sublease,
the Sublessee Shall at the direction of the Director exercise its rights and
remedies thereunder in accordance with such direction.
(f) Sublease. Permit the Sublessee, pursuant to the Sublease,
to:
(i) Maintain Existence. Sell, transfer or otherwise dispose of
all, or substantially all, of its assets, consolidate with or merge into any
other entity, or permit one or more entities to consolidate with or merge into
it; provided, however, that the Sublessee may, without violating the agreement
contained in this subsection (i), consolidate with or merge into another entity,
or permit one or more other entities to consolidate with or merge into it, or
sell, transfer or otherwise dispose of all, or substantially all, of its assets
as an entirety and thereafter dissolve if: (i) the prior written consent of the
Director is obtained; or (ii)(A) the surviving, resulting or transferee entity,
as the case may be, assumes in writing all of the obligations of the Sublessee
hereunder (if such surviving, resulting or transferee entity is other than the
Sublessee); and (B) the surviving, resulting or transferee entity, as the case
may be, is an entity duly organized and validly existing under the laws of the
State or duly qualified to do business therein, and has a net worth of not less
than that of the Sublessee immediately prior to such disposition, consolidation
or merger, transfer or change of form.
(ii) ERISA. Voluntarily terminate any employee benefit plan or
other plan (a "Plan") maintained or employees of the Sublessee and covered by
Title IV of ERI as to result in any material liability of the Sublessee to the
Pension Benefit Guaranty Corporation ("PBGC"), enter into any Prohibited
Transaction (as defined in Section 4975 of the Internal Revenue Code of 1986, as
amended, and in ERISA) involving any Plan which results in any material
liability of the Sublessee to the PBGC, cause any occurrence of any Reportable
Event (as defined in Title IV of ERISA) which results in any material liability
of it to the PBGC, or allow or suffer to exist any other event or condition
which results in any material liability of the Sublessee to the PBGC.
(iii) Agreements. Enter into any agreement containing any
provision which would be violated or breached by the performance of its
obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
Section 7.9. Sublease. It shall be an express covenant of the
Sublease that the Sublessee shall not without the prior written consent of the
Director:
(a) Suspension of Operation. Suspend or discontinue operation
of the Project.
(b) Net Worth. Permit total assets less total liabilities
("Net Worth"), determined in each case in accordance with generally accepted
accounting principles applied on a basis
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consistent with that of prior years, to be less than $15,000,000 as of December
31, 1993, $25,000,000 as of December 31, 1994, and $35,000,000 as of December
31, 1995 and thereafter.
(c) Debt Restrictions. Permit total Sublessee liabilities
including capitalized lease obligations but exclusive loans from officers,
directors or holders of 5 % or more of the Company's equity securities to exceed
an amount which is three (3) times Net Worth (determined as provided for in
Section 7.9(b) above) at December 31, 1993, two (2) times Net Worth (determined
as provided for in Section 7.9(b) above) at December 31, 1994, and equal to
tangible net worth (determined as provided for in Section 7.9(b) above) at each
December 31 thereafter as reflected in each case on the balance sheet of the
Company furnished in accordance with Section 7.5 of the Sublease and as
determined in each case in accordance with generally accepted accounting
principles applied on a basis consistent with that of prior years.
(d) Shareholder Loans. Pay, or otherwise make a distribution
as satisfaction for, interest on any loan made to Guarantor by an officer,
director or holder of 5 % or more of Guarantor's equity securities (present or
future) unless all amounts due as payments of principal and interest on the Note
have been paid. Guarantor shall not make loans to any officer, director of
holder of 5% or more of Guarantor's equity securities (present or future),
except for loans of which the aggregate balance does not exceed $14,.000,000.
(e) Encumber Assets. Pledge, assign, sell-leaseback,
hypothecate or in any manner encumber any of its assets, except as otherwise
expressly permitted by the Sublease.
(f) Removal of Assets. Remove, transfer or transport any of
the Project Facilities from the Project Site, except as permitted pursuant to
Section 4.4 of the Sublease.
(g) Sell Stock. Sell any equity interest, including without
limitation common or preferred stock, in the Sublessee unless the now-existing
loan from the Sublessee to Jeno F, Paulucci is repaid in full.
Section 7.10. Mechanics' and Other Liens. The Company shall
not suffer or permit any mechanics' or other liens to be filed or exist against
the Project nor any part thereof, nor against the Company's leasehold interest
in the Project, nor against the Project Fund or the Collateral Proceeds Account,
by reason of work, labor, services, or materials supplied or claimed to have
been supplied to, for or in connection with the Project or any part thereof or
to the Director or the Company or anyone holding the Project or any part thereof
through or under the Company. Nothing in this Section shall require the Company
to pay or discharge any such lien so long as the validity thereof shall be
contested in good faith and by appropriate legal proceedings, provided that the
Company shall have delivered to the Director an opinion of counsel, selected by
the Company and reasonably acceptable to the Director, to the effect that
nonpayment of any such lien during the pendency of such contest will not
adversely affect the Director's right, title or interest in the Project. If any
such liens shall at any time be filed, the Company shall, within one hundred
twenty days after notice of the filing thereof but subject to the right to
contest hereinafter set forth, cause the same to
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be discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction or otherwise. If the Company shall fail to cause such lien to be
discharged, or to contest the validity or amount thereof, within the period
aforesaid, then, in addition to any other right or remedy of the Director, the
Director may, but shall not be obligated to, discharge the same either by paying
the amount claimed to be due or by procuring the discharge of such lien by
deposit or by bonding. Any amount paid by the Director shall be reimbursed by
the Company to the Director on demand, and if not so reimbursed on demand shall
be paid by the Company with interest thereof at the Interest Rate for Advances
from the date of payment by the Director, which amounts the Company agrees to
pay.
ARTICLE VIII
ASSIGNMENT, SUBLEASING AND SELLING;
REDEMPTION; RENT PREPAYMENT AND ABATEMENT
Section 8.1. Assignment and Subleasing by the Lessee. This
Lease may not be assigned in whole or in part, nor may the Project be subleased
as a whole or in part, by the Company without the consent of the Director. The
Director hereby consents to the sublease of the Project to the Sublessee
pursuant to the Sublease.
Section 8.2. Pledge by the Director. The Director has pledged
any moneys receivable under or pursuant to this Lease (except for reimbursement
of expenses and indemnification by the Company) to the Trustee pursuant to the
Trust Agreement. The Company hereby consents to such assignment and pledge.
Section 8.3. Restrictions on Transfer and Encumbrance of
Project by the Director. The Director agrees that, except as otherwise provided
in this Lease, it will not sell, assign, transfer, convey or otherwise dispose
of the Project or any portion thereof during the Lease Term and that it will
not, to the extent permitted by law, take any action which may reasonably be
construed as tending to cause or induce the levy of special assessments by
others against the Project without the written consent of the Company, nor will
it create or suffer to be created any debt, lien or charge thereon or make any
pledge or assignment of or create any lien or encumbrance upon the rents,
revenues and receipts derived from the sale, lease or other disposition of the
Project other than as provided in Section 8.2 hereof.
Section 8.4. Redemption of Bonds. The Director, at the written
request at any time of the Company if the Bonds are then callable, shall
forthwith take all steps that may be necessary under the applicable redemption
provisions of the Trust Agreement to effect redemption of all or part of then
outstanding Bonds, as may be specified by the Company, on the earliest
redemption date on which such redemption may be made under such applicable
provisions, if the Company shall then have deposited with the Trustee moneys
sufficient to pay the principal of and premium, if any, and interest due or to
become due on such redemption date with respect to the Bonds as to which such
request is made.
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Section 8.5. Prepayment of Rents. There is expressly reserved
to the Company the right, and the Company is authorized and permitted, at any
time it may choose, to prepay all or any part of the rents payable under Section
4.3 hereof, and the Director agrees that the Trustee may accept such prepayment
of rents when the same are tendered by the Company. Notwithstanding the
provisions of Section 4.4 of this Lease, prepaid rent shall be deposited to the
Collateral Proceeds Account and transferred to the Debt Service Account as
rental payments in the amounts and on the dates specified for rental payments
pursuant to Section 4.3 of this Lease.
Section 8.6. Lessee Entitled to Certain Rent Abatements if
Bonds Paid Prior to Maturity. If at any tune during the Lease Term there shall
be no Bonds outstanding, within the meaning of the Trust Agreement, and if the
Company is not at the time in default hereunder, the Company shall be entitled
to use and occupy the Project from such time to tile termination of the Lease,
without the payment of the rent (but otherwise on the terms and conditions
hereof).
Section 8.7. Installation of the Company's Own Machinery and
Equipment. In addition to the Project Facilities, the Company may from time to
time, in its sole discretion and at its own expense, install additional movable
personal property, machinery, equipment, furniture or fixtures in the Project
Facilities or on the Project Site. All such property so installed by the Company
shall remain the sole property of the Company in which the Director shall have
no interest, and may be modified or removed at any time while the Company is not
in default hereunder. Nothing contained in the preceding provisions of this
Article shall prevent the Company from purchasing, after delivery of this Lease,
movable personal property, machinery, equipment, furniture or fixtures, not
constituting part of the Project, on conditional sale contract or lease sale
contract, or subject to vendor's lien or security agreement, as security for the
unpaid portion of the purchase price thereof; provided no such lien or security
interest shall attach to any part of the Project.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Event of Default. Each of the following shall be
an "Event of Default":
(a) The Company shall fail to pay any amount payable pursuant
to this Lease on the date on which such payment is due and payable; or
(b) The Sublessee shall fail to pay any amount payable
pursuant to the Sublease on the date on which such payment is due and payable;
or
(c) The Company shall fail to observe and perform any
agreement, term or condition contained in the Lease other than as required
pursuant to subsection (a) above, and such failure continues for a period of
thirty (30) days after notice of such failure is given to the Company by the
Director, or for such longer period as the Director may agree to in writing;
provided, that if
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the failure is of such nature that it can be corrected but not within the
applicable period, such failure shall not constitute an Event of Default so long
as the Lessee institutes curative action within the applicable period and
diligently pursues such action to completion; or
(d) The Sublessee shall fail to observe and perform any
agreement, term or condition contained in the Sublease other than as required
pursuant to subsection (b) above, and such failure continues for a period of
thirty (30) days after notice of such failure is given to the Sublessee by the
Director, or for such longer period as the Director may agree to in writing;
provided, that if the failure is of such nature that it can be corrected but not
within the applicable period, such failure shall not constitute an Event of
Default so long as the Sublessee institutes curative action within the
applicable period and diligently pursues such action to completion; or
(e) Any representation or warranty made by the Company (or any
of its officers) herein or in any, Lease Approval Document or in connection
herewith or therewith shall prove to have been incorrect in any material respect
when made; or
(f) Any representation or warranty made by the Sublessee (or
any of its officers) in any Lease Approval Document or in connection therewith
shall prove to have been incorrect in any material respect when made; or
(g) The Company shall fail to pay any indebtedness of the
Company, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, by acceleration, on demand or otherwise) and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such indebtedness; or any other default
under any agreement or instrument relating to any such indebtedness, or any
other event, shall occur and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such default
or event is to accelerate, or to permit the acceleration of, the maturity of
such indebtedness; or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(h) The Sublessee shall fail to pay any indebtedness of the
Sublessee, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, by acceleration, on demand or otherwise) and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such indebtedness; or any other default
under any agreement or instrument relating to any such indebtedness, or any
other event, shall occur and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such default
or event is to accelerate, or to permit the acceleration of, the maturity of
such indebtedness; or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the Stated maturity thereof; or
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(i) The Company commences a voluntary case concerning it under
titles of the United States Code entitled "Bankruptcy", as now, or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against the Company under the Bankruptcy Code and relief is ordered
against the Company, or the petition is controverted but is not dismissed within
sixty (60) days after the commencement of the case; or the Company is not
generally paying its debts as such debts become due; or a custodian (as defined
in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Company; or the Company commences any
other proceeding under any reorganization, arrangement, readjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect; or there is commenced against
the Company any such proceeding which remains undismissed for a period of sixty
(60) days; or the Company is adjudicated insolvent or bankrupt; or the Company
fails to controvert in a timely manner any such case under the Bankruptcy Code
or any such proceeding or any order of relief or other order approving any such
case or proceeding or the appointment of any custodian or the like of or for it
or any substantial part of its property or suffers any such appointment to
continue undischarged or unstayed for a period of sixty (60) days; or the
Company makes a general assignment for the benefit of creditors; or any action
is taken by the Company for the purpose of effecting any of the foregoing; or a
receiver or trustee or any other officer or representative of the court or of
creditors, or any court, governmental officer or agency, shall under color of
legal authority, take and hold possession of any substantial part of the
property or assets of the Company for a period in excess of sixty (60) days; or
(j) The Sublessee commences a voluntary case concerning it
under titles of the United States Code entitled "Bankruptcy", as now, or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against the Sublessee under the Bankruptcy Code
and relief is ordered against the Sublessee, or the petition is controverted but
is not dismissed within sixty (60) days after the commencement of the case; or
the Sublessee is not generally paying its debts as such debts become due; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of the Sublessee; or the Sublessee
commences any other proceeding under any reorganization, arrangement,
readjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or similar law of any jurisdiction whether now or hereafter in effect; or there
is commenced against the Sublessee any such proceeding which remain undismissed
for a period of sixty (60) days; or the Sublessee is adjudicated insolvent or
bankrupt; or the Sublessee fails to controvert in a timely manner any such case
under the Bankruptcy Code or any such proceeding or any order of relief or other
order approving any such case or proceeding or the appointment of any custodian
or the like of or for it or any substantial part of its property or suffers any
such appointment to continue undischarged or unstayed for a period of sixty (60)
days; or the Sublessee makes a general assignment for the benefit of creditors;
or any action is taken by the Sublessee for the purpose of effecting any of the
foregoing; or a receiver or trustee or any other officer or representative of
the court or of creditors, or any court, governmental officer or agency, shall
under color of legal authority, take and hold possession of any substantial part
of the property or assets of the Sublessee for a period in excess of sixty (60)
days; or
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(k) A judgment or order for the payment of money in excess of
Ten Thousand Dollars ($10,000) shall be rendered against the Company and either
(i) enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of thirty (30) 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; or
(l) A judgment or order for the payment of money in excess of
Ten Thousand Dollars ($10,000) shall be rendered against the Sublessee and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of thirty (30)
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; or
(m) Any default under the Guaranty shall have occurred and be
continuing; or
(n) The Company fails to meet its minimum funding requirements
under Section 301 et seq. of ERISA, with respect to any of its Plans; or
(o) The Sublessee fails to meet its minimum funding
requirements under Section 301 et seq. of ERISA, with respect to any of its
Plans; or
(p) The Company waives, suffers or consents to any "Event of
Default" under the Sublease as such term is defined therein; or
(q) Any "Event of Default" under the Sublease as such term is
defined therein.
Section 9.2. Remedies on Default. Whenever an Event of Default
shall have happened and be subsisting, any one or more of the following remedial
steps may be taken:
(a) The Director may at his option declare all installments of
rent payable under Section 4.3 hereof for the remainder of the Lease Term to be
immediately due and payable, whereupon the same shall become immediately due and
payable.
(b) The Director may reenter and take possession of the
Project without terminating this Lease, and sublease the Project for the account
of the Company, holding the Company liable for the difference between the rent
and other amounts payable by such sublessee in such subleasing and the rents and
other amounts payable by the Company hereunder.
(c) The Director may terminate the Lease Term, exclude the
Company from possession of the Project and use his best efforts to lease or sell
the Project to another, but holding the Company liable for all rent and other
payments due up to the effective date of such leasing.
(d) The Director may direct the Trustee, in writing, to
transfer any amounts remaining in the Project Fund to the Collateral Proceeds
Account.
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(e) The Director may take whatever action at law or in equity
as may appear necessary or desirable to collect the rent then due and thereafter
to become due, or to enforce performance and observance of any obligation,
agreement or covenant of the Company under this Lease.
Any amounts collected pursuant to action taken under this Section shall be paid
into the Collateral Proceeds Account and applied in accordance with the
provisions of the Trust Agreement or, if the Bonds have been fully paid (or
provision for payment thereof has been made in accordance with the provisions of
the Trust Agreement) and all other amounts payable thereunder and hereunder have
been paid, as directed by the Company.
Section 9.3. No Remedy Exclusive. No remedy conferred upon or
reserved to the Director by this Lease is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Lease or now or
hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Director to exercise any remedy reserved to
him in this Article, it shall not be necessary to give any notice, other than
such notice as may be herein expressly required.
Section 9.4. Agreement to Pay Attorneys' Fees and Expenses. In
the event the Company should default under any of the provisions of this Lease
and the Director should employ attorneys or incur other expenses for the
collection of rent or the enforcement of performance or observance of any
obligation or agreement on the part of the Company contained in this Lease, the
Company agrees that it will on demand therefor reimburse the reasonable fee of
such attorneys and such other expenses so incurred. If any such fees and
expenses are not so reimbursed, the amount thereof, together with interest
thereon from the date of demand for payment at the Interest Rate for Advances,
shall, to the extent permitted by law, constitute indebtedness secured hereby
and by the Trust Agreement, and in any action brought to collect such
indebtedness, the Director shall be entitled to seek the recovery of such fees
and expenses in such action except as limited by law or by judicial order or
decision entered in such proceedings.
Section 9.5. No Additional Waiver Implied by One Waiver. In
the event any agreement contained in this Lease should be breached by either
party and thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
Section 9.6. Waiver of Appraisement, Valuation, Etc. In the
event the Company should default under any of the provisions of this Lease, the
Company agrees to waive, to the extent it may lawfully do so, the benefit of all
appraisement, valuation, stay, extension or redemption laws now or hereafter in
force, and all right of appraisement and redemption to which it may be entitled.
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Section 9.7. Reinstatement. Notwithstanding any termination of
this Lease in accordance with the provisions of Section 9.2 hereof, unless and
until the Director shall have entered into a valid and binding agreement
providing for the reletting of the Project, the Company may at any time after
such termination pay all accrued unpaid rent plus any costs to the Director and
the Trustee (including, but not limited to, fees and expenses) occasioned by the
default and fully cure all other defaults then capable of being cured. Upon such
payment and cure, this Lease shall be fully reinstated, as if it had never been
terminated, and the Company shall be restored to the use, occupancy and
possession of the Project.
ARTICLE X
OPTIONS AND OBLIGATIONS TO PURCHASE PROJECT
Section 10.1. Option to Terminate. The Company shall have the
option to cancel or terminate the term of this Lease at any time when all the
Bonds shall be deemed to have been paid and discharged under the provisions of
the Trust Agreement and all amounts payable by the Company hereunder shall have
been paid. Such option shall be exercised by giving the Director notice in
writing of such cancellation or termination and such cancellation and
termination shall forthwith become effective.
Section 10.2. Option to Purchase Project Prior to Payment of
the Bonds. The Company shall have, and is hereby granted, the option to purchase
the Project prior to the expiration of the Lease and prior to the full payment
of the Bonds (or provision for payment thereof having been made in accordance
with the provisions of the Trust Agreement), if any of the following shall have
occurred:
(a) The Project Facilities shall have been damaged or
destroyed as set forth in Section 6.1 hereof (i) to such extent that they cannot
be reasonably restored within a period of six months to the condition thereof
immediately preceding such damage or destruction, or (ii) to such extent that
the Company is thereby prevented from carrying on its normal operations for a
period of six consecutive months.
(b) Title to, or the temporary use of, all or substantially
all of the Project shall have been taken under the exercise of the power of
eminent domain by any governmental authority, or person, firm or corporation
acting under governmental authority (including such a taking or takings as
results in the Company being thereby prevented from carrying on its normal
operations therein for a period of six consecutive months).
(c) As a result of any changes in the Constitution of the
State of Ohio or the Constitution of the United States of America or of
legislative or administrative action (whether state or federal) or by final
decree, judgment or order or any court or administrative body (whether state or
federal) entered after the contest thereof by the Director in good faith, this
Lease shall have become void or unenforceable or impossible of performance in
accordance with the intent and
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purpose of the parties as expressed in this Lease, or if unreasonable burdens or
excessive liabilities shall have been imposed upon the Director or the Company,
with respect to the Project or operation thereof, including without limitation
federal, state or other ad valorem, property, income or other taxes not being
imposed on the date of this Lease other than ad valorem taxes presently levied
upon privately owned property used for the same general purpose as the Project;
provided, that the provisions of this subsection shall in no way effect the
Company's obligation for the continued maintenance of the Project during the
Lease Term.
To exercise such option, the Company shall, within ninety (90) days following
the event authorizing the exercise of such option, give written notice to the
Director, and to the Trustee if any of the Bonds shall then be unpaid, and shall
specify therein the date of closing such purchase, which date shall be not less
than forty-five (45) nor more than ninety (90) days from the date such notice is
mailed, and in case of a redemption of the Bonds in accordance with the
provisions of the Trust Agreement shall make arrangements satisfactory to the
Trustee for the giving of the required notice of redemption, m which
arrangements Director shall cooperate. The purchase price payable by the
Company, in the event of its exercise of the option granted in this Section,
shall be the sum of the following:
(1) An amount of money which, when added to (i) the moneys and
investments held to the credit of the Collateral Proceeds Account and the
Primary Reserve Account and (ii) the aggregate rental payments made by the
Company and not theretofore applied to the payment of principal of or interest
on the Bonds, will be sufficient pursuant to the provisions of the Trust
Agreement, to pay and discharge all then outstanding Bonds on the first possible
date for redemption, plus
(2) An amount of money equal to the Trustee's fees and
expenses, to the extent payable by the Company pursuant to this Lease, accrued
and to accrue until such final payment and redemption of the Bonds, plus
(3) The sum of One Dollar ($1.00) to the Director.
In the event of the exercise of the option granted in this Section any Net
Proceeds of insurance or condemnation shall be paid to the Company,
notwithstanding any provision of Section 6.1 and 6.2 hereof, and the Director
will deliver to the Company the documents referred to in Section 10.4 hereof.
The mutual agreements contained in this Section 10.2, are
independent of, and constitute an agreement separate and distinct from any and
all provisions of this Lease and shall be unaffected by any fact or circumstance
which might impair or be alleged to impair the validity of any other provisions.
Section 10.3. Agreement to Purchase Project. The Company
agrees that it will purchase and the Director agrees that it will sell the
Project for One Dollar ($1.00) upon full payment of the Bonds or provision for
payment thereof having been made in accordance with the provisions
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<PAGE>
of the Trust Agreement. Upon sale of the Project to the Company as provided in
this Section 10.3, the Director will deliver to the Company the documents
referred to in Section 10.4 hereof.
Section 10.4. Conveyance upon Exercise of Option to Purchase.
Upon exercise of any option to purchase granted herein, the Director will upon
payment purchase price deliver or cause to be delivered to the Company documents
conveying to the Company good and marketable title to the property being
purchased, as such property then exists, subject to the following: (i) those
liens and encumbrances, if any, 'to which title to said property was subject
when conveyed to the Director, (ii) those liens and encumbrances created by the
Company or to the creation or suffering of which the Company consented; (iii)
those liens and encumbrances resulting from the failure of the Company to
perform or observe any of the agreements on its part contained in this Lease;
(iv) Permitted Encumbrances, other than this Lease; and (v) if the option is
exercised pursuant to the provisions of Section 10.2(b) hereof, the rights and
title of the condemning authority.
Section 10.5. Option to Purchase, Redeem or Defease Bonds.
Provided no Event of Default has occurred and is existing, the Company may
instruct the Trustee to apply any moneys on deposit in the Collateral Proceeds
Account, together with any moneys furnished to the Trustee by the Company but
not constituting payments due under Article IV of this Lease, to any of the
following purposes:
(a) Purchase of Bonds in the open market at prices not greater
than their fair market value;
(b) Redemption of Bonds pursuant to the optional redemption
provisions thereof; or
(c) Defeasance of Bonds pursuant to Article IX of the Trust
Agreement.
If the sum of the amounts in the Collateral Proceeds Account and the Primary
Reserve Account, when added to the amount delivered by the Company to the
Trustee for application in accordance with this Section 10.5, is sufficient to
purchase for cancellation, optionally redeem or defease all of the Outstanding
Bonds, the Trustee shall, at the direction of the Company, apply moneys in the
Primary Reserve Account for any of such purposes.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Surrender of Project. In the event the Company
should default under this Lease and the Lease Term is terminated, the Company
agrees to surrender possession of the Project peaceably and promptly to the
Director in as good condition as prevailed at the time it was put in full
possession thereof, loss by fire or other casualty covered by insurance,
ordinary wear and tear, obsolescence and acts of God excepted.
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<PAGE>
Section 11.2. Amounts Remaining in Collateral Proceeds Account
and Primary Reserve Account. It is agreed by the parties hereto that any amounts
remaining in the Collateral Proceeds Account or the Primary Reserve Account upon
expiration or sooner cancellation or termination of this Lease, after payment in
full of the Bonds (or provision for payment thereof having been made in
accordance with the provisions of the Trust Agreement) and the fees, charges and
expenses of the Trustee and all other amounts required to be paid hereunder,
shall belong to and be paid to the Company by the Trustee as overpayment of
rents.
Section 11.3. Notices. All notices, certificates, requests or
other communications hereunder shall be sufficiently given and shall be deemed
given when mailed by registered or certified mail, postage prepaid, addressed to
the recipient at its Notice Address. A duplicate copy of each notice,
certificate, request or other communication given hereunder to the Director, the
Company, or the Trustee shall also be given to the others. The Company, the
Director and the Trustee may, by notice given hereunder, change a Notice Address
or designate any further addresses to which subsequent notices, certificates,
requests or other communications shall be sent.
Section 11.4. Net Lease. This Lease shall be deemed and
construed to be a "net lease", and the Company shall pay absolutely net during
the Lease Term the rent and all other payments required hereunder, free of any
deductions, without abatement, deduction or set-off other than those herein
expressly provided.
Section 11.5. Binding Effect. This Lease shall inure to the
benefit of and shall be binding upon the Director, the Company and their
respective successors and assigns, subject, however, to the limitations
contained in Sections 8.1 and 8.3 hereof, and subject to the further limitation,
as set forth on page I of this Lease, that any obligation of the Director
created by or arising out of this Lease shall not be a general debt of the
Director or the State but shall be payable solely out of the proceeds derived
from this Lease or the Net Proceeds of any insurance or condemnation awards as
provided herein.
Section 11.6. Extent of Covenants of the Director; No Personal
Liability. All covenants, stipulations, obligations and agreements of the
Director contained in this Lease shall be effective to the extent authorized and
permitted by applicable law. No such covenant, stipulation, obligation or
agreement shall be deemed to be a covenant, stipulation, obligation or agreement
of any present or future Director in other than such Director's official
capacity acting pursuant to the Act.
Section 11.7 Amendments, Changes and Modifications. This Lease
may not be effectively amended, changed or modified except by an instrument in
writing executed by the Director and the Company. No amendment to the Supplement
which has the effect of increasing the Company's obligations under this Lease
shall become effective without the written consent of the Company.
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<PAGE>
Section 11.8. Execution Counterparts. This Lease may be
executed in several counterparts, each of which shall be regarded as an original
and all of which shall constitute but one and the same Lease.
Section 11.9. Severability. If any clause, provision or
section of this Lease be held illegal or invalid by any court, the invalidity of
such clause, provision or section shall not affect any of the remaining clauses,
provisions or sections hereof and this Lease shall be construed and enforced as
if such illegal or invalid clause, provision or section had not been contained
herein. In case any agreement or obligation contained in this Lease be held to
be in violation of law then such agreement or obligation shall be deemed to be
the agreement or obligation of the Director or the Company, as the case may be,
to the full extent permitted by law.
Section 11.10. Captions. The captions or headings in this
Lease are for convenience only and in no way define, limit or describe the scope
or intent of any provisions or sections of this Lease.
Section 11.11. Governing Law. This Lease shall be deemed to be
a contract made under the laws of the State of Ohio and for all purposes shall
be governed by and construed in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the Director and the Company have caused
this Lease to be executed in their respective names by their duly authorized
officers or representatives, all as of the date first above written.
Signed and acknowledged. DIRECTOR OF DEVELOPMENT OF THE STATE
in the presence of: OF OHIO
/s/ Marlo B. Tannous By: /s/ Donald E. Jakeway
- ----------------------------- ----------------------------
Donald E. Jakeway, Director
/s/ Lana Dixon
- -----------------------------
Signed and acknowledged
in the presence of:
FOREMOST MGMT., INC.
/s/ Benjamin M. Alexander By: /s/ Alan A. Stockmeister
- ----------------------------- ----------------------------
Alan A. Stockmeister
President and Chief
/s/ Kathy L. Jones Executive Officer
- -----------------------------
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<PAGE>
STATE OF OHIO :
:ss.
COUNTY OF FRANKLIN :
On this 17th day of September, 1993, before me, a Notary
Public in and for said Count personally appeared, Thomas C. Washbush, Donald E.
Jakeway, Director of the Department of Development and State Development of the
State of Ohio, and acknowledged the execution of the foregoing instrument and
that the same is his voluntary act and deed on behalf of the Director of
Development of the State of Ohio and the voluntary act and deed of said officer
as such.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my official seal on the day and year aforesaid.
/s/ Marlo B. Tannous
--------------------------------
Notary Public
STATE OF OHIO :
:ss.
COUNTY OF FRANKLIN :
On this 20th of September, 1993, before me, a Notary Public in
and for said County and State, personally appeared Alan A. Stockmeister,
President and Chief Executive Officer of Foremost Mgmt., Inc., the corporation
which executed the foregoing instrument, who acknowledged that he did sip said
instrument as such President and Chief Executive Officer for and on behalf of
said Foremost Mgmt., Inc.; that the same is his free act and deed as such
President and Chief Executive Officer, and the free act and deed of said
Foremost Mgmt., Inc.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my seal on the day and year aforesaid.
/s/ Kathy L. Jones
--------------------------------
[notary stamp] Notary Public
This instrument was prepared by Benjamin M. Alexander, Esq., Squire, Sanders &
Dempsey, 41 South High Street, Columbus, Ohio 43215.
* Filed without exhibits. Such exhibits will be filed with the Commission upon
request.
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<PAGE>
Exhibit 10.10
SUBLEASE
between
FOREMOST MGMT., INC.
SUBLESSOR
and
LUIGINO'S, INC.
SUBLESSEE
DATED
as of
September 21, 1993
<PAGE>
INDEX
THIS INDEX IS NOT A PART OF THIS LEASE AND IS ONLY FOR CONVENIENCE OF REFERENCE.
Page
ARTICLE I. -- DEFINITIONS................................................. 2
Section 1.1. USE OF DEFINED TERMS...................................... 2
Section 1.2 DEFINITIONS............................................... 2
Section 1.3. CERTAIN REFERENCES........................................ 5
ARTICLE II. -- LEASE OF PROJECT; CONSTRUCTION AND EQUIPPING............... 5
Section 2.1. SUBLEASE TERM AND POSSESSION.............................. 5
Section 2.2. IMPROVEMENT AND EQUIPPING................................. 5
Section 2.3. PLANS AND SPECIFICATIONS.................................. 5
Section 2.4. COMPLETION DATE........................................... 6
Section 2.5. REMEDIES AGAINST CONTRACTORS, SUBCONTRACTORS AND
SURETIES.................................................. 6
Section 2.6. OWNERSHIP OF PROPERTY..................................... 6
ARTICLE III. -- RENT AND ADDITIONAL PAYMENTS.............................. 7
Section 3.1. RENT...................................................... 7
Section 3.2. ADDITIONAL PAYMENTS....................................... 7
Section 3.3. PLACE OF PAYMENTS......................................... 8
Section 3.4. OBLIGATIONS UNCONDITIONAL................................. 8
Section 3.5. PAST DUE RENT AND ADDITIONAL PAYMENTS..................... 8
ARTICLE IV. -- MAINTENANCE AND USE OF PROJECT............................. 8
Section 4.1. COMPLIANCE WITH LEGAL AND INSURANCE
REQUIREMENTS.............................................. 8
Section 4.2. MAINTENANCE AND USE OF PROJECT SITE AND PROJECT
FACILITIES................................................ 9
Section 4.3. ADDITIONS, MODIFICATIONS AND IMPROVEMENTS................. 9
Section 4.4. SUBSTITUTIONS AND REMOVALS................................ 9
Section 4.5. INDEMNIFICATION........................................... 9
ARTICLE V. -- TAXES, MECHANICS' LIENS AND INSURANCE....................... 10
Section 5.1. PAYMENT OF TAXES, AND OTHER GOVERNMENTAL
CHARGES................................................... 10
Section 5.2. MECHANICS' AND OTHER LIENS................................ 11
Section 5.3. INSURANCE................................................. 11
Section 5.4. WORKERS' COMPENSATION COVERAGE............................ 12
Section 5.5. PAYMENT BY SUBLESSOR OR DIRECTOR.......................... 12
<PAGE>
ARTICLE VI. -- DAMAGE, DESTRUCTION AND CONDEMNATION....................... 12
Section 6.1. DAMAGE TO OR DESTRUCTION OF PROJECT FACILITIES............ 12
Section 6.2. USE OF INSURANCE PROCEEDS................................. 13
Section 6.3. EMINENT DOMAIN............................................ 13
Section 6.4. PROCEEDS RELATING TO PROJECT EQUIPMENT.................... 13
ARTICLE VII. -- FURTHER REPRESENTATIONS AND AGREEMENTS RESPECTING
THE PROJECT AND THE SUBLESSEE............................. 13
Section 7.1. REPRESENTATIONS OF THE SUBLESSEE.......................... 13
Section 7.2. DOCUMENTS TO BE PROVIDED.................................. 14
Section 7.3. RIGHT OF INSPECTION....................................... 14
Section 7.4. ASSIGNMENT AND SUBLEASING................................. 15
Section 7.5. SUBLESSEE TO MAINTAIN ITS EXISTENCE; SALE OF ASSETS OR
MERGERS................................................... 15
Section 7.8. BOOKS AND RECORDS; FINANCIAL STATEMENTS................... 15
Section 7.7. TITLE OF PROJECT SITE..................................... 16
Section 7.8. NO WARRANTY OF CONDITION OR SUITABILITY................... 17
ARTICLE VIII. -- EVENTS OF DEFAULT AND REMEDIES........................... 17
Section 8.1. EVENTS OF DEFAULT......................................... 17
Section 8.2. REMEDIES ON DEFAULT....................................... 18
Section 8.3. NO REMEDY EXCLUSIVE....................................... 19
Section 8.4. AGREEMENT TO PAY FEES AND EXPENSES........................ 20
Section 8.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER................ 20
Section 8.6. NOTICE OF DEFAULT......................................... 20
ARTICLE IX -- MISCELLANEOUS............................................... 20
Section 9.1. OTHER PROVISIONS.......................................... 20
Section 9.2. QUIET ENJOYMENT........................................... 21
Section 9.3. SURRENDER OF PROJECT...................................... 21
Section 9.4. NOTICES................................................... 21
Section 9.9. CAPTIONS.................................................. 21
Section 9.10. GOVERNING LAW............................................. 21
ASSIGNMENT OF SUBLEASE
ACKNOWLEDGMENT AND CONSENT TO ASSIGNMENT
<PAGE>
SUBLEASE
THIS SUBLEASE made and entered into effective as of September 21, 1993,
between FOREMOST MGMT., INC. a Ohio corporation, as SUBLESSOR (the "SUBLESSOR")
and LUIGINO'S, INC., a Minnesota corporation, as SUBLESSEE (the "SUBLESSEE"),
under the circumstances summarized in the following recitals (the capitalized
terms not defined in the recitals being used therein as defined in ARTICLE I.
hereof):
A. Pursuant to the ACT and the AGREEMENT, the DIRECTOR will acquire the
PROJECT SITE and make a LOAN to the SUBLESSOR to assist in acquiring
and installing the PROJECT EQUIPMENT in a structure to be constructed
on the b and leased to the SUBLESSEE by the SUBLESSOR.
B. Upon the terms and conditions hereinafter set forth, the SUBLESSOR is
willing to Lease the PROJECT SITE and the PROJECT FACILITIES to the
SUBLESSEE and the SUBLESSEE is willing to Lease the PROJECT SITE and
the PROJECT FACILITIES from the SUBLESSOR.
C. The SUBLESSOR and the SUBLESSEE each have full right and lawful
authority to enter into this SUBLEASE and to perform and observe the
provisions hereof on their respective parts to be performed and
observed.
NOW, THEREFORE, in consideration of the promises and the mutual
representations and agreements hereinafter contained, the parties hereto agree
as follows:
<PAGE>
ARTICLE I.
DEFINITIONS
Section 1.1. USE OF DEFINED TERMS. In addition to the words and terms
elsewhere defined in this SUBLEASE, the words and terms set
forth in Section 1.2 hereof shall have the meanings therein
set forth unless the context or use expressly indicates
different meaning or intent. Such definitions shall be equally
applicable to both the singular and plural forms of any of the
words and terms therein defined.
Section 1.2 DEFINITIONS. As used herein:
"ACT" means Chapter 166, Ohio Revised Code, as enacted and
amended pursuant to Section 13 of ARTICLE VIII. of the Ohio
Constitution.
"ADDITIONAL PAYMENTS" means the amounts required to be paid by
the SUBLESSEE pursuant to the provisions of Section 3.2
hereof.
"BONDS" means the State of Ohio Economic Development Revenue
Bonds (Ohio Enterprise Bond Fund),"Series 1993-5 (Foremost
Mgmt, Inc. Project) (Taxable Bonds) authorized by the General
Bond Order and the Series Bond Order.
"COMPLETION DATE" means the Date of Completion of the PROJECT
to be furnished by the SUBLESSEE pursuant to Section 2.4
hereof.
"ENGINEER" means an individual or firm qualified to practice
the profession of engineering or architecture under the laws
of the State and acceptable to the SUBLESSOR and who is not a
salaried employee of the SUBLESSEE.
"EVENT OF DEFAULT" means any of the events described as an
Event of Default in Section 8.1 hereof.
"FORCE MAJEURE" means any of the causes, circumstances or
events described as constituting Force Majeure in Section 8.1
hereof.
"INDEPENDENT COUNSEL" means an attorney or a firm of attorneys
duly admitted to practice law before the highest Court of the
State and who is acceptable to the SUBLESSOR.
"INTEREST RATE FOR ADVANCES" means (a) the interest rate borne
by the BONDS, or (b) a rate which is one percent in excess of
the prime or base interest rate then charged by the Trustee
(as defined in the LEASE) in its lending capacity as a bank,
whichever is greater and lawfully chargeable.
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<PAGE>
"LEASE" means that certain LEASE between the DIRECTOR OF
DEVELOPMENT OF THE STATE OF OHIO and FOREMOST MGMT., INC.,
dated as of September 21, 1993 (OHIO ENTERPRISE BOND FUND
PROGRAM) pertaining to this PROJECT.
"SUBLEASE ASSIGNMENT" means the SUBLEASE ASSIGNMENT, of even
date herewith, between the SUBLESSOR, the SUBLESSEE and the
DIRECTOR, as from time to time amended or supplemented.
"SUBLEASE TERM" means the period commencing on September 21,
1993, and, unless earlier terminated as herein provided,
ending at the end of fifteen (15) years after the SUBLEASE
PAYMENT COMMENCEMENT DATE.
"SUBLEASE PAYMENT COMMENCEMENT DATE" means June 1, 1994.
"NET PROCEEDS", when used with respect to any insurance
proceeds or condemnation award, means the gross proceeds
thereof less the payment of all expenses, including attorneys'
fees incurred in connection with the collection of such gross
proceeds.
"NOTICE ADDRESS" means:
(a) As to the SUBLESSEE: 525 Lake Avenue South
Duluth, MN 55802
Attention: President
(b) As to the SUBLESSOR: P.O. Box 667
227 Main Street
Jackson, Ohio 45640
Attention: Nan A. Stockmeister
(c) As to the DIRECTOR: Department of Development
P.O. Box 10001
77 South High Street
Columbus, Ohio 43266-0101
Attention: Bruce Langner
or such different Address Notice which is given under Section
9.4 hereof.
"PLANS AND SPECIFICATIONS" means the plans and specifications
describing the improvements to be made to the PROJECT
FACILITIES and the PROJECT EQUIPMENT, as now prepared and as
such may be changed from time to time as provided in Section
2.3 hereof.
-3-
<PAGE>
"PROJECT" means the PROJECT SITE, the PROJECT FACILITIES and
the PROJECT EQUIPMENT, together constituting a "PROJECT" as
defined in the ACT.
"PROJECT EQUIPMENT" means the trade fixtures, machinery,
apparatus, furniture, equipment and other personal property
located in or upon, or based at, the PROJECT SITE to be
installed or owned by the SUBLESSOR.
"PROJECT FACILITIES" means all buildings, structures,
additions, improvements, facilities, fixtures, fittings,
machinery, apparatus, installations, furniture, equipment and
other property, now or hereafter located in, upon or under, or
based at, the PROJECT SITE and owned by the SUBLESSOR and the
PROJECT SITE, including the facilities described in EXHIBIT A,
together with any and all additions, modifications and
substitutions thereto.
"PROJECT PURPOSES" means the acquisition of land and the
construction thereon of a facility measuring 149,920 square
feet in that facility to be used for a food processing center,
raw material storage and finished product storage for frozen
food processing.
"PROJECT SITE" means the Real Estate described in EXHIBIT B
attached hereto.
"RENT" means the rent payable pursuant to Section 3.1 hereof.
"REQUIRED PROPERTY INSURANCE COVERAGE" means insurance
insuring the PROJECT FACILITIES against loss or damage by
fire, lightning, vandalism and malicious mischief and all
other perils covered by standard "extended coverage" or "all
risks" Policies, and during the construction period only shall
include Builder's Risk insurance, excluding Workers
Compensation Insurance and Contractors Liability Insurance.
"REQUIRED PUBLIC LIABILITY INSURANCE COVERAGE" means
Comprehensive General Accident and Public Liability Insurance.
"STATE" means the State of Ohio.
"SUBLEASE" means this SUBLEASE as from time to time amended or
supplemented.
"SUBLEASE ASSIGNMENT" means the Assignment of Sublease by
Foremost Mgmt., Inc. (Assignor) to the Director of Development
of the State of Ohio (Assignee), dated September 21, 1993.
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<PAGE>
Section 1.3. CERTAIN REFERENCES. The terms "hereof", "hereby", "herein",
"hereto", "hereunder" and similar terms, mean this SUBLEASE.
The term "hereafter" means after, and the term "heretofore"
means before the Date of Delivery of this SUBLEASE. Words of
the masculine gender include the feminine and the neuter, and
when the sense so indicates, words of the neuter gender may
refer to any gender.
ARTICLE II.
LEASE OF PROJECT; CONSTRUCTION AND EQUIPPING
Section 2.1. SUBLEASE TERM AND POSSESSION. Upon and subject to the
provisions herein set forth, the SUBLESSOR does hereby Lease
to the SUBLESSEE, and the SUBLESSEE does hereby Lease from the
SUBLESSOR, the PROJECT SITE and the PROJECT FACILITIES for the
SUBLEASE TERM. Possession of the PROJECT SITE and the PROJECT
FACILITIES shall be delivered by the SUBLESSOR and accepted by
the SUBLESSEE on the commencement of the SUBLEASE TERM.
Section 2.2. IMPROVEMENT AND EQUIPPING. Upon the execution and delivery of
this SUBLEASE, the SUBLESSOR shall, at its own expense,
promptly undertake and complete the improvement of the PROJECT
SITE and the PROJECT FACILITIES, and shall install the PROJECT
EQUIPMENT, in accordance with the PLANS AND SPECIFICATIONS and
in such a manner as to conform with all applicable zoning,
planning, building, environmental and other regulations of
governmental authorities having jurisdiction. In connection
with such work, the SUBLESSOR shall make, execute, acknowledge
and deliver any contracts, orders, receipts, writings and
instructions as may be required and in general to do all
things which may be requested or proper for such construction
and equipping, and shall pay all fees, costs and expenses
incurred in such construction and equipping. The SUBLESSOR
expressly acknowledges and agrees that all wages paid to
laborers and mechanics employed on the PROJECT, in connection
with such work, shall be paid at not less than the prevailing
wages for laborers and mechanics for the class of work called
for by the PROJECT, which wages shall be determined in
accordance with the requirements of Chapter 4115, Ohio Revised
Code, for determination of prevailing wage rates. To the
extent required byss.4115.032, Ohio Revised Code, the
SUBLESSOR shall comply, and shall require compliance by all
contractors or subcontractors working on the PROJECT, with all
applicable requirements of ss.4115.03 through 4115.16, Ohio
Revised Code.
Section 2.3. PLANS AND SPECIFICATIONS. The Plans and Specifications
are at the date hereof on file with the SUBLESSOR and
SUBLESSEE but may be changed from time to time by the
SUBLESSEE provided that the Plans and Specifications shall not
be changed to such an extent that the PROJECT PURPOSES are
such as are not permitted under the ACT.
-5-
<PAGE>
Section 2.4. COMPLETION DATE. Completion of the improvement and equipping
of the PROJECT shall be evidenced to the DIRECTOR and the
SUBLESSOR by a Certificate signed by an authorized Officer of
the SUBLESSEE stating that such work has been:
(i) substantially completed in accordance with the PLANS
AND SPECIFICATIONS and all costs then due and payable
in connection therewith have been paid,
(ii) accomplished in such a manner as to conform with all
applicable zoning, planning, building, environmental
and other regulations of all governmental authorities
having jurisdiction; and,
(iii) accomplished to its satisfaction so as to permit the
use and operation of the PROJECT for the PROJECT
PURPOSES.
The Certificate shall also specify the date by which the
foregoing three (3) events occurred. Notwithstanding the
foregoing, such Certificate shall state that it is given
without prejudice to any rights against third parties which
then exist or may subsequently come into being.
Section 2.5. REMEDIES AGAINST CONTRACTORS, SUBCONTRACTORS AND
SURETIES. In the event of Default of any contractor or
subcontractor under any Contract made by it in connection with
the work described in Section 2.2. hereof, or in the event of
a Breach of Warranty with respect to any materials,
workmanship, or performance guaranty, the SUBLESSOR will
promptly inform SUBLESSEE of the steps it intends to take in
connection with any such Default, either separately or in
conjunction with others, against the contractor or
subcontractor so in Default and against each such surety for
the performance of such Contract. If the SUBLESSEE shall so
inform SUBLESSOR, the SUBLESSEE may, in its own name or, to
the extent lawful, in the name of SUBLESSOR, prosecute or
defend any action or proceeding or take any other action
involving any such contract, subcontractor or surety that the
SUBLESSEE deems reasonably necessary, and in such event
SUBLESSOR hereby agrees to cooperate fully with the SUBLESSEE
and to take all action necessary to effect the substitution of
the SUBLESSEE for SUBLESSOR in any such action or proceeding.
Section 2.6. OWNERSHIP OF PROPERTY. All improvements, modifications
and additions to the PROJECT SITE and the PROJECT FACILITIES
made by the SUBLESSOR shall be and remain the property of the
SUBLESSOR in which SUBLESSEE shall have no interest. All
equipment, and all other personal property and equipment
(including such property which when installed becomes a
fixture) owned or installed by SUBLESSEE in or upon the
PROJECT SITE shall be and remain the property
-6-
<PAGE>
of the SUBLESSEE in which the SUBLESSOR shall have no interest
and which shall not be subject to any Lien of MORTGAGE or the
SUBLEASE ASSIGNMENT. The equipment, and such other personal
property and equipment may be purchased by the SUBLESSEE on
Conditional Sale, Installment Purchase or Lease Sale Contract,
or subject to Vendor's Lien or Security Agreement, as security
for the unpaid portion of the purchase price thereof. However,
no such Lien or Security Interest shall attach to any part of
the PROJECT SITE or the PROJECT FACILITIES. The SUBLESSEE
shall pay as due the Purchase Price of, and all costs and
expenses with respect to, the acquisition and installation of
this equipment and any such other personal property and
equipment installed by it pursuant to this Section. The
SUBLESSEE may, at its expense and in its discretion, remove
from the PROJECT SITE and the PROJECT FACILITIES items of
equipment and other personal property and equipment installed
by ft pursuant to this Section provided that the removal of
this equipment during the term of this SUBLEASE shall not be
such as to impair the character or significance of the PROJECT
as furthering the purposes of the ACT. At the expiration or
earlier termination of this SUBLEASE, the SUBLESSEE may, and
at the request of the SUBLESSOR shall, remove all Items of
equipment and other property of the SUBLESSEE. If the removal
of SUBLESSEE'S property causes any damage to the PROJECT SITE
or the PROJECT FACILITIES, the SUBLESSEE shall promptly repair
such damage at Its expense.
ARTICLE III.
RENT AND ADDITIONAL PAYMENTS
Section 3.1. RENT.
(a) $14,940,000.00 payable in installments of $83,000.00
dollars per month starting on the SUBLEASE PAYMENT
COMMENCEMENT DATE and continuing on the same day as each and
every month thereafter for the SUBLEASE TERM.
Section 3.2. ADDITIONAL PAYMENTS. The SUBLESSEE shall pay to the SUBLESSOR
and the DIRECTOR as Additional Payments hereunder, any and all
reasonable and necessary costs and expenses incurred or paid
by the DIRECTOR or by the SUBLESSOR in connection with or
otherwise related to actions taken by the DIRECTOR or the
SUBLESSOR under the SUBLEASE ASSIGNMENT or this SUBLEASE. All
such Additional Payments shall be payable upon WRITTEN DEMAND
therefor, and if not paid, shall theretofore bear interest at
the INTEREST RATE FOR ADVANCES. Costs and expenses of the
DIRECTOR or the SUBLESSOR, for purposes of this Section 32
shall mean and include actual, out-of- pocket costs and
expenses and shall not include overhead or other
administrative expenses.
-7-
<PAGE>
Section 3.3. PLACE OF PAYMENTS. The SUBLESSEE shall pay all Rent directly
to the SUBLESSOR notwithstanding the SUBLEASE ASSIGNMENT.
Additional Payments shall be made directly to the person or
entity to whom or to which they are due.
Section 3.4. OBLIGATIONS UNCONDITIONAL. The obligations of the SUBLESSEE to
pay Rent and make Additional Payments shall be absolute and
unconditional and the SUBLESSEE shall make such payments
without abatement, diminution or deduction regardless of any
cause or circumstances whatsoever including, without
limitation, any defense, set-off, recoupment or counterclaim
which the SUBLESSEE may have or assert against the SUBLESSOR,
the DIRECTOR, or any other person.
Section 3.5. PAST DUE RENT AND ADDITIONAL PAYMENTS. If the SUBLESSEE fails
to pay any Rent and additional Payments the amount due and
payable shall continue as an obligation of the SUBLESSEE until
such shall have been fully paid and shall bear interest at the
Interest Rate for Advances.
ARTICLE IV.
MAINTENANCE AND USE OF PROJECT
Section 4.1. COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS. The
SUBLESSEE, at its expense, shall promptly comply with all
Legal Requirements and Insurance Requirements, and shall
procure, maintain and comply with all permits, licenses and
other authorizations required for any use being made of the
PROJECT or any part thereof then being made or anticipated to
be made, and for the proper construction, installation,
operation and maintenance of the PROJECT or any part thereof.
As used in this Section, "LEGAL REQUIREMENTS" means all laws,
statutes, codes, acts, ordinances, judgments, decrees,
injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all
governmental entities, departments, commissions, boards,
courts, authorities and agencies which now or at any time
hereafter may be applicable to the PROJECT or any part
thereof, any use, anticipated use or condition of the PROJECT
or any part thereof.
"INSURANCE REQUIREMENT" means all provisions of any Insurance
Policy covering or applicable to the PROJECT or any part
thereof, all requirements of the Issuer of any such Policy,
and all orders, rules, regulations or other requirements of
the National Board of Fire Underwriters (or any other body
exercising similar functions) applicable to or affecting the
PROJECT or any part thereof. The SUBLESSEE may, at its expense
and after PRIOR NOTICE to the SUBLESSOR and DIRECTOR, by any
appropriate proceedings diligently prosecuted, contest in good
faith any Legal Requirement and postpone compliance therewith
pending the Resolution or Settlement of such contest provided
that such postponement does not,
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in the opinion of Independent Counsel, materially affect the
PROJECT SITE or the PROJECT FACILITIES or subject the PROJECT
SITE or the PROJECT FACILITIES, or any part thereof, to
imminent loss or forfeiture. Any such action by SUBLESSEE
shall be at SUBLESSEE'S cost and expense and at no cost and no
expense to the SUBLESSOR and DIRECTOR.
Section 4.2. MAINTENANCE AND USE OF PROJECT SITE AND PROJECT FACILITIES.
The SUBLESSEE, at its expense, will keep the PROJECT SITE and
PROJECT FACILITIES in good order and condition (ordinary wear
and tear excepted) and will make all necessary or appropriate
repairs, replacements and renewals thereof, interior,
exterior, structural and nonstructural, ordinary and
extraordinary, foreseen and unforeseen. The SUBLESSEE will not
do, or permit to be done, any act or thing which might
materially impair the value of the PROJECT SITE and PROJECT
FACILITIES or usefulness, will not commit or permit any waste
of the PROJECT and will not permit any unlawful occupation,
business or trade to be conducted on the PROJECT SITE. The
SUBLESSEE shall also, at its own expense, promptly comply with
all rights of way or use, privileges, franchises, servitudes,
licenses, easements, tenements, hereditaments and appurtenance
forming a part of the PROJECT and all instruments creating or
evidencing the same, in each case, to the extent compliance
therewith is required of the SUBLESSEE under the terms
thereof.
Section 4.3. ADDITIONS, MODIFICATIONS AND IMPROVEMENTS. The SUBLESSEE
may from time to time in its discretion and at its expense,
make any additions, modifications or improvements to the
PROJECT FACILITIES which it may deem desirable for its
business purposes provided that no such additions,
modifications or improvements shall, in the opinion of an
Engineer, adversely affect the structural integrity or
strength of any improvements constituting a part of the
PROJECT FACILITIES or materially interfere with the use and
operation thereof. All additions, modifications and
improvements so made by the SUBLESSEE shall become or be
deemed to constitute a part of the PROJECT FACILITIES.
Section 4.4. SUBSTITUTIONS AND REMOVALS. In any instance where the
SUBLESSEE, in its reasonable discretion, determines that any
item of personal property constituting a part of the PROJECT
FACILITIES shall have become inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary or should be replaced,
the SUBLESSEE may remove such items with the consent of the
SUBLESSOR and the DIRECTOR or if the SUBLESSEE substitutes and
installs other items of property having equal or greater value
(but not necessarily the same function) in the operation of
the PROJECT FACILITIES, which such substituted property shall
be free from all Liens and encumbrances and shall become part
of the PROJECT FACILITIES.
Section 4.5. INDEMNIFICATION. The SUBLESSEE releases the SUBLESSOR and the
DIRECTOR from, agrees that they shall not be liable for and
indemnifies the
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SUBLESSOR and DIRECTOR against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and
expenses (including, without limitation, reasonable attorneys'
fees and expenses except as may be limited by law or judicial
order or decision entered in any action brought to recover
moneys under this Section) imposed upon, incurred by or
asserted against either on account of:
(a) ownership of any interest in the PROJECT or any part
thereof,
(b) any accident, injury to or death of person or loss of
or damage to property occurring on or about the
PROJECT or any part thereof or the adjoining
sidewalks, curbs, vaults and vault space, if any,
streets or ways,
(c) any use, disuse or condition of the PROJECT or any
part thereof, or the adjoining sidewalks, curbs,
vaults and vault space, if any, streets or ways,
(d) any failure on the part of the SUBLESSEE to perform
or comply with any of the terms hereof, or
(e) the performance of any labor or services or the
furnishing of any materials or other property in
respect of the PROJECT or any part thereof.
(f) any violation of a duty owed or violation thereof by
SUBLESSEE set out in Section 3.10 and 5.2 of the
LEASE except that which is beyond the control of
SUBLESSEE.
In case any action, suit or proceeding is brought against the
SUBLESSOR or DIRECTOR for any such reason, the SUBLESSEE, upon
the request of the SUBLESSOR or DIRECTOR, will at the
SUBLESSEE'S expense, cause such action, suit or proceeding to
be resisted and defended. Any amounts payable to the SUBLESSOR
under this Section which are not paid within ten (10) days
after WRITTEN DEMAND therefor shall bear interest at the
Interest Rate for Advances from the Date of such Demand. The
obligations of the SUBLESSEE under this Section shall survive
any termination of the this SUBLEASE.
ARTICLE V.
TAXES, MECHANICS' LIENS AND INSURANCE
Section 5.1. PAYMENT OF TAXES, AND OTHER GOVERNMENTAL CHARGES. The
SUBLESSEE shall pay, promptly when due, and before penalty or
interest accrue thereon all taxes, assessments, whether
general or special, all other governmental charges and all
public or private utility charges of any kind whatsoever
foreseen or unforeseen, ordinary or extraordinary, that now or
may hereafter at any time be assessed, levied or imposed
against or with respect to the PROJECT (including,
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without limitation, any taxes levied upon or with respect to
the revenues, income or profit of the SUBLESSEE from the
PROJECT) which, if not paid, may become or be made a Lien on
the PROJECT SITE or the PROJECT FACILITIES, or any part
thereof or a charge on such revenues, income and profits.
Notwithstanding the preceding Paragraph the SUBLESSEE
may, at its expense and after PRIOR WRITTEN NOTICE to
the SUBLESSOR and DIRECTOR, and by appropriate
proceedings diligently prosecuted, contest in good
faith the validity or amount of any such taxes,
assessments and other charges, and after Notice to
the SUBLESSOR and the DIRECTOR may, during the period
of contest, permit the items so contested to remain
unpaid. However, if at any time the SUBLESSOR or
DIRECTOR shall notify the SUBLESSEE that, in the
opinion of Independent Counsel, by nonpayment of any
such items as to any part of the PROJECT SITE or the
PROJECT FACILITIES will be materially affected or the
PROJECT SITE or the PROJECT FACILITIES or any part
thereof will be subject to imminent loss or
forfeiture, the SUBLESSEE shall promptly pay such
taxes, assessments or charges. During the period when
the taxes, assessments or other charges so contested
remain unpaid, the SUBLESSEE shall set aside on its
Books adequate reserves with respect to such taxes,
assessments or charges.
Section 5.2. MECHANICS' AND OTHER LIENS. The SUBLESSEE shall not permit any
mechanics' or other liens to be filed or exist against the
PROJECT SITE or PROJECT FACILITIES by reason of work, labor,
services or materials supplied or claimed to have been
supplied to, for or in connection with the PROJECT or to the
SUBLESSEE. If any such Lien shall at any time be filed, the
SUBLESSEE shall, within thirty (30) days after Notice of the
filing thereof but subject to the right to contest hereinafter
set forth, cause the same to be discharged of record by
payment, deposit bond, Order of a Court of competent
jurisdiction or otherwise. Notwithstanding the foregoing, the
SUBLESSEE shall have the right, at its own expense, and after
PRIOR NOTICE to the SUBLESSOR and the DIRECTOR and by
appropriate proceedings duly instituted and diligently
prosecuted, contest in good faith the validity or the amount
of any such Lien. However, if the DIRECTOR or the SUBLESSOR
shall notify the SUBLESSEE that, in the opinion of Independent
Counsel, by nonpayment of any such items will be materially
affected or the PROJECT SITE or the PROJECT FACILITIES or any
part thereof will be subject to imminent loss or forfeiture,
the SUBLESSEE shall promptly cause such Lien to be discharged
of record.
Section 5.3. INSURANCE. The SUBLESSEE shall keep the PROJECT FACILITIES
continuously insured with Required Property Insurance Coverage
in an amount at least equal to the replacement value under
this SUBLEASE for the Term hereof.
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The SUBLESSEE shall keep and maintain in force and comply with
all insurance requirements of SUBLESSOR on behalf of SUBLESSOR
as set forth in Sections 5.4, 5.5, 5.6, 5.7 and 5.8 of the
LEASE. The SUBLESSOR shall be covered in the same manner and
respects as the DIRECTOR and TRUSTEE therein.
During the PROJECT construction period it shall be the
obligation, responsibility and liability of the SUBLESSOR to
keep, maintain and pay for Contractors General Liability
Insurance and Workers' Compensation Insurance in statutory and
reasonable amounts pertaining to its activities and others
performing services for and/or at the direction and instance
of SUBLESSOR.
Section 5.4. WORKERS' COMPENSATION COVERAGE. The SUBLESSEE shall maintain,
or cause to be maintained in connection with the PROJECT, any
Workers' Compensation Coverage required by the applicable laws
of the State pertaining to its activities.
Section 5.5. PAYMENT BY SUBLESSOR OR DIRECTOR. If the SUBLESSEE fails to
(i) pay taxes, assessments and other governmental or
utility charges as required by Section 5.1. hereof,
(ii) pay or discharge mechanics' or other Liens as
required by Section 5.2. hereof,
(iii) maintain and keep in force the Insurance required by
Section 5.3. hereof or
(iv) maintain required Workers' Compensation Coverage as
required by Section 5.4. hereof, the SUBLESSOR or the
DIRECTOR may (but shall not be obligated to) Advance
Funds to pay any such required charges of items. Any
Funds so advanced shall be payable an WRITTEN DEMAND
therefor and shall bear interest from the Date of
Advancement at the Interest Rate for Advances.
ARTICLE VI.
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 6.1. DAMAGE TO OR DESTRUCTION OF PROJECT FACILITIES. In case of any
damage to or destruction of the PROJECT FACILITIES or any part
thereof, the SUBLESSEE will promptly give WRITTEN NOTICE
thereof to the SUBLESSOR and the DIRECTOR generally describing
the nature and extent of such damage or destruction. There
shall be no abatement or diminution of Rent and the SUBLESSEE
shall, whether or not the Net Proceeds of Insurance, if any,
received on Account of such damage or destruction shall be
sufficient for such purpose, promptly commence and complete,
or cause to be commenced and
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completed, repair or restoration of the PROJECT FACILITIES as
nearly as practicable to the value, condition and character
thereof existing immediately PRIOR to such damage or
destruction, with such changes or alterations, however, as the
SUBLESSEE may deem necessary for proper operation of the
PROJECT and consistent with the PROJECT PURPOSES.
Section 6.2. USE OF INSURANCE PROCEEDS. In connection with the repair or
restoration of the PROJECT FACILITIES pursuant to Section 6.1.
hereof. Net Proceeds of Required Property Insurance Coverage
of Twenty-Five Thousand and No/100's ($25,000.00) Dollars or
less shall be paid to the SUBLESSEE for application in
accordance with Section 5.3. of this SUBLEASE. Any such Net
Proceeds in excess of Twenty-Five Thousand and No/100's
($25,000.00) Dollars shall be paid to and held by the
SUBLESSOR and applied pursuant to Section 6.1. of this
SUBLEASE.
Section 6.3. EMINENT DOMAIN. If Title to or the temporary use of the
PROJECT SITE or the PROJECT FACILITIES, or any part thereof,
shall be taken under the exercise of the power of Eminent
Domain by any governmental body or by any person, firm or
corporation acting under governmental body or by any person,
firm or corporation acting under any governmental authority,
the SUBLESSEE will promptly give WRITTEN NOTICE thereof to the
SUBLESSOR and the DIRECTOR describing the nature and extent of
such taking. Any Net Proceeds received from any award made in
such Eminent Domain proceedings with respect to the PROJECT
SITE and the PROJECT FACILITIES shall be paid to SUBLESSOR.
Section 6.4. PROCEEDS RELATING TO PROJECT EQUIPMENT. All Insurance proceeds
and all awards made in connection with Eminent Domain
proceedings paid or payable by reason of damage, destruction
or the taking of equipment and other property of the SUBLESSEE
shall be the property of and shall be paid to the SUBLESSEE.
ARTICLE VII.
FURTHER REPRESENTATIONS AND AGREEMENTS
RESPECTING THE PROJECT AND THE SUBLESSEE
Section 7.1. REPRESENTATIONS OF THE SUBLESSEE. The SUBLESSEE warrants and
represents as follows:
(a) It is duty incorporated, and is in good standing
under the Laws of the State of its Incorporation and
duly qualified to do business in the State, and will
remain so qualified.
(b) The financing assistance provided by the DIRECTOR
under the ACT, the BONDS and the Terms of the
SUBLEASE,
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(i) have induced the SUBLESSEE to locate within
the City of Jackson, Ohio that business of
the SUBLESSEE to be conducted by use of the
PROJECT; and
(ii) will carry out and give effect to the public
purposes of the ACT.
(c) The improvement of the PROJECT FACILITIES and the
installation of the PROJECT EQUIPMENT in accordance
with the Plans and Specifications will be
accomplished and the PROJECT will be utilized and
maintained in such manner as to conform with all
applicable zoning, planning, building, environmental
and other regulations of all governmental authorities
having jurisdiction of the PROJECT.
(d) The SUBLESSEE has full power and authority to execute
and deliver this SUBLEASE and the ASSIGNMENT and to
carry out the transactions provided for herein. This
SUBLEASE and the ASSIGNMENT have by proper corporate
action been duty authorized, executed and delivered
by the SUBLESSEE and all steps necessary have been
taken to constitute this SUBLEASE and the ASSIGNMENT,
a valid and binding obligation of the SUBLESSEE.
(e) The execution, delivery and performance by the
SUBLESSEE of this b and the ASSIGNMENT and the
consummation of the transactions contemplated hereby
and thereby will not violate any provision of law or
regulation applicable to the SUBLESSEE or of any Writ
or Decree of any Court or governmental
instrumentality, or of the Articles of Incorporation
or the By- Laws of the SUBLESSEE or of any MORTGAGE,
indenture, contract, agreement or other undertaking
to which the SUBLESSEE is party or which purports to
be binding upon the SUBLESSEE or upon any of its
assets.
Section 7.2. DOCUMENTS TO BE PROVIDED. The SUBLESSEE shall file with the
SUBLESSOR during the first two (2) weeks of the Calendar Month
succeeding each Anniversary of the Completion Date, commencing
with the month succeeding the First Anniversary of the
Completion Date, a Certificate setting forth the description
of each item of personal property or fixtures which has become
a part of the PROJECT FACILITIES and of any additions,
remodeling, modification or improvements to the PROJECT
FACILITIES which have been made during the twelve (12)
Calendar Months preceding the first of the month in which such
Certificate is filed.
Section 7.3. RIGHT OF INSPECTION. Subject to reasonable security and safety
regulation and upon reasonable Notice, the SUBLESSOR and the
DIRECTOR and their respective
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agents, shall have the right at any time during normal
business hours to inspect the PROJECT.
Section 7.4. ASSIGNMENT AND SUBLEASING. This SUBLEASE may not be assigned
in whole or in part by the SUBLESSEE, nor may the PROJECT SITE
or the PROJECT FACILITIES be Subleased in whole or in part by
the SUBLESSEE without the PRIOR WRITTEN APPROVAL of the
SUBLESSOR and the DIRECTOR.
Section 7.5. SUBLESSEE TO MAINTAIN ITS EXISTENCE; SALE OF ASSETS OR
MERGERS. The SUBLESSEE shall do all things necessary to
preserve and keep in full force and effect its existence,
rights and franchises, except as otherwise permitted by this
Section 7.5.. In particular, the SUBLESSEE shall not without
the PRIOR APPROVAL of the SUBLESSOR and DIRECTOR (which
approval shall not be unreasonably withheld):
(a) sell, transfer or otherwise dispose of all, or
substantially all, of its assets;
(b) consolidate with or merge into any other entity;
or
(c) permit one (1) or more other entities to
consolidate with or merge into it. The preceding restrictions
shall not apply, however, to a transaction if both of the
following conditions are met:
(i) the transferee or the surviving or resulting entity
has a net worth, determined in accordance with
generally accepted accounting principles consistently
applied, equal to or greater than the net worth of
the SUBLESSEE immediately PRIOR to such
consolidation, merger, sale, transfer or disposition;
and,
(ii) the transferee or the surviving or resulting entity,
if other than the SUBLESSEE, by proper Written
Instrument satisfactory to the SUBLESSOR and the
DIRECTOR, irrevocably and unconditionally assumes the
obligation to perform and observe the agreements and
obligations of the SUBLESSEE under this SUBLEASE.
Section 7.8. BOOKS AND RECORDS; FINANCIAL STATEMENTS. The SUBLESSEE shall
keep true and proper Books of Records and Accounts in which
full and correct entries are made of all its business
Transactions, and shall reflect in its Financial Statements
adequate accruals and appropriations to reserves, all in
accordance with generally accepted accounting principles. The
SUBLESSEE shall deliver to the SUBLESSOR and the DIRECTOR
copies of the follow:
(a) within forty-five (45) days after the end of each
Quarterly period of each Fiscal Year of the
SUBLESSEE, Balance Sheet of the SUBLESSEE in the
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same form and substance as the SUBLESSOR is required
to furnish to the DIRECTOR pursuant to Section 7.7(e)
of the LEASE.
(b) within ninety (90) days after the and of each Fiscal
Year of the SUBLESSEE, Balance Sheet of the SUBLESSEE
as at the end of such year and Statements of Income
and retained earnings of the LESSEE for such year,
setting forth in comparative form the corresponding
figures as at the end of or for the previous Fiscal
Year, all in reasonable detail and accompanied by an
opinion thereon of the regular Independent Certified
Public Accountants selected by the SUBLESSEE, stating
that such Balance Sheets and Financial Statements
have been prepared in accordance with generally
accepted accounting principles consistently applied
and that the Audit by such Accountants in connection
with such Balance Sheets and Financial Statements has
been made in accordance with generally accepted
auditing standards in accordance with the same
provisions contained in Section 7.7(j) of the LEASE;
(c) all reports and certificates as specified in Section
7.4 of the LEASE respecting SUBLESSEE;
(d) promptly upon receipt thereof, copies of all Reports
submitted to the SUBLESSEE by Independent Certified
Public Accountants in connection with any annual,
interim or Special Audit of the Records of the
SUBLESSEE made by such Accountants; and
(e) as soon as available, copies of all Financial
Statements, Reports, Notices and Proxy Statements
sent by the SUBLESSEE to its Shareholders, generally,
and of all regular and periodic Reports and all
Registration Statements (other than on form S-8)
filed by the SUBLESSEE with any securities exchange
or with the Securities and Exchange Commission or any
successor agency.
The DIRECTOR and the SUBLESSOR shall, to the extent
permitted by law, maintain the confidentiality of all
Financial Statements, Reports and other information
submitted by the SUBLESSEE pursuant to this Section.
Section 7.7. TITLE OF PROJECT SITE. The SUBLESSOR and SUBLESSEE have
obtained Written evidence as to the status of Title to the
PROJECT SITE as of the Date of Acquisition thereof by the
DIRECTOR. The SUBLESSOR and SUBLESSEE agree that Title is
satisfactory and that all defects in and Liens and
encumbrances on such Title, as set forth in such evidence of
exclusions from coverage and exceptions, do not impair the
SUBLESSEE'S use or the value of the PROJECT SITE and the
PROJECT FACILITIES.
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Section 7.8. NO WARRANTY OF CONDITION OR SUITABILITY. SUBLESSOR does not
make any warranty, either express or implied, as to the
suitability or utilization of the PROJECT SITE or the PROJECT
FACILITIES for the PROJECT PURPOSES, or as to the condition of
the PROJECT SITE or the PROJECT FACILITIES or that they are or
will be suitable for the SUBLESSEE'S purposes or needs.
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. EVENTS OF DEFAULT. Any one (1) or more of the following events
shall be an "EVENT OF DEFAULT" under the SUBLEASE:
(a) any EVENT OF DEFAULT of SUBLESSEE as defined in
Section 9.1 of the LEASE;
(b) The SUBLESSEE fails to pay when due any payments of
Rent on or Prior to the Date on which any such
payment is due and payable and continuing for more
than ten (10) days thereafter;
(c) The SUBLESSEE fails to observe or perform any term,
covenant or agreement, on the SUBLESSEE'S part to be
observed or performed under this SUBLEASE, and the
continuation of such failure for thirty (30) days
after WRITTEN NOTICE of such failure is given to the
SUBLESSEE by the SUBLESSOR or the DIRECTOR, or for
such longer period as the SUBLESSOR and the DIRECTOR
may agree to in Writing; provided, that if the
failure is other than the payment of money and is of
such nature that it cannot be corrected within the
applicable period, such failure shall not constitute
an Event of Default so long as the SUBLESSEE
institutes curative action within the applicable
period and diligently pursues such action to
completion;
(d) The SUBLESSEE shall:
(i) admit in Writing its inability to pay its
debts generally as they become due;
(ii) have an Order for Relief entered in any case
commenced by or against it under the Federal
Bankruptcy laws, as now or hereafter are in
effect;
(iii) commence a proceeding under any other
Federal or State Bankruptcy, insolvency,
reorganization or other similar law, or have
such a proceeding commenced against it and
either have an Order of
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Insolvency or Reorganization entered against
it or have the proceeding remain undismissed
and unstayed for ninety (90) days;
(iv) made an Assignment for the benefit of
creditors; or
(v) have a Receiver or Trustee appointed for ft
or for the whole or any substantial part of
its property; or
(e) The SUBLESSEE, or its permitted Assign or Subleasee,
shall suspend or discontinue operation of the PROJECT
for a period longer than one hundred eighty (180)
days other than by reason of Force Majeure.
Notwithstanding the foregoing, 1, by reason of Force
Majeure the SUBLESSEE is unable to perform or observe
any agreement, term or condition hereof, other than
any obligation to pay Rent or make Additional
Payments or other payments required hereunder, the
SUBLESSEE shall not be deemed in Default during the
continuance of such inability. However, the SUBLESSEE
shall promptly give Notice to the SUBLESSOR and the
DIRECTOR of the existence of an Event of Force
Majeure and shall use best efforts to remove the
effects thereof; provided that the Settlement of
Strikes or other industrial disturbances shall be
entirely at the sole discretion of the SUBLESSEE.
The term "FORCE MAJEURE" shall mean, without limitation, the
following:
(i) acts of God; strikes, lockouts or other
industrial disturbances; acts of public
enemies; orders or restraints of any kind of
the government of the United States or of
the State or any part of their departments;
agencies, political subdivisions or
officials, or any civil or military
authority; insurrections; civil
disturbances; riots; epidemics; landslides;
lightening; earthquakes; fires; hurricanes;
tornados; storms; droughts: floods; arrests,
restraint of government and people;
explosions, breakage; malfunction or
accident to facilities, machinery,
transmission pipes or canals; partial or
entire failure of utilities; shortages of
labor, materials, supplies or
transportation; or
(ii) any other cause, circumstance or event not
reasonably within the control of the
SUBLESSEE.
Section 8.2. REMEDIES ON DEFAULT. Whenever an Event of Default shall have
happened and be subsisting, any one (1) or more of the
following remedial steps may be taken:
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(a) The SUBLESSOR may, with the consent of the DIRECTOR,
and shall at the request of the DIRECTOR, declare all
installments of Rent, together with any Additional
Payments and other amounts payable hereunder to be
immediately due and payable, whereupon the same shall
become immediately due and payable;
(b) The SUBLESSOR may re-enter and take possession of the
PROJECT SITE and the PROJECT FACILITIES without
terminating this SUBLEASE and SUBLEASE the PROJECT
SITE and the PROJECT FACILITIES for the Account of
the SUBLESSEE holding the SUBLESSEE liable for the
difference between the Rent and other amounts payable
by such Subleasee in such Subleasing and the Rent,
Additional Payments and other amounts payable by the
SUBLESSEE hereunder;
(c) The SUBLESSOR may terminate this SUBLEASE, exclude
the SUBLESSEE from possession of the PROJECT SITE and
the PROJECT FACILITIES and lease the PROJECT SITE and
the PROJECT FACILITIES to another, but holding the
SUBLESSEE liable for all Rent, Additional Payments
and other amounts payable hereunder up to the
effective date of such Subleasing;
(d) The SUBLESSOR and the DIRECTOR may have access to,
inspect, examine and make copies of the Books and
Record, Accounts, and Financial Data of the SUBLESSEE
pertaining to the PROJECT;
(e) The SUBLESSOR or the DIRECTOR may pursue all remedies
now or hereafter existing at law or in equity to
collect all the amounts then due and thereafter to
become due under this SUBLEASE, or to enforce the
performance and observance of any other obligation or
agreement of the SUBLESSEE, under this SUBLEASE.
Any amounts collected as or applicable to Rent and any other
amounts which would be applicable to payment of principal of
or interest on the NOTE collected pursuant to action taken
under this Section shall be paid to the DIRECTOR.
Section 8.3. NO REMEDY EXCLUSIVE. No remedy conferred or reserved by this
SUBLEASE is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy
given under this SUBLEASE or now or hereafter existing at law,
in equity or by statute. No delay or omission to exercise any
right or power accruing upon any Default shall impair any such
right or power or shall be construed to be a waiver thereof,
but any such rights and power may be exercised from time to
time and as often as may be deemed expedient. In order to
entitle the SUBLESSOR or the
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DIRECTOR to exercise any remedy reserved to it in this
ARTICLE, it shall not be necessary to give any Notice, other
than such Notice as may be expressly provided for herein or
required by law.
Section 8.4. AGREEMENT TO PAY FEES AND EXPENSES. If an Event of Default
should occur and the SUBLESSOR or the DIRECTOR should incur
expenses, including attorneys' fees, in connection with the
enforcement of this SUBLEASE or the collection of sums due,
the SUBLESSEE shall reimburse the SUBLESSOR and the DIRECTOR,
as applicable, for the expenses so incurred upon Demand. If
any such expenses are not so reimbursed, the amount thereof,
together with interest thereon from the Date of Demand for
payment at the Interest Rate for Advances, shall, to the
extent permitted by law, be reimbursed and in any action
brought to collect such sums, the SUBLESSOR or the DIRECTOR,
as applicable, shall be entitled to seek recovery of such
expenses in such action except as limited by law or by
Judicial Order or decision entered in such proceedings.
Section 8.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. No failure by
the SUBLESSOR or the DIRECTOR to insist upon strict
performance by the SUBLESSEE of any provision hereof shall
constitute a waiver of such failure to strictly perform and no
express waiver shall be deemed to apply to any other existing
or subsequent failure by the SUBLESSEE to observe or comply
with any provision hereof.
Section 8.6. NOTICE OF DEFAULT. The SUBLESSEE shall notify the
SUBLESSOR and the DIRECTOR immediately if it becomes aware of
the occurrence of any Event of Default hereunder or of any
fact, condition or event which, with the giving of Notice or
passage of time or both, would become an Event of Default.
ARTICLE IX
MISCELLANEOUS
Section 9.1. OTHER PROVISIONS. The SUBLESSEE agrees to be bound by and
adhere to all terms and conditions required to be performed by
it pursuant to the terms and conditions contained in that
certain LEASE between DIRECTOR OF DEVELOPMENT OF THE STATE OF
OHIO and FOREMOST MGMT., INC., dated as of September 21, 1993
(OHIO ENTERPRISE BOND FUND PROGRAM) pertaining to this
PROJECT, including but not limited to fulfilling the
obligation to furnish a Letter of Credit in Section 3.2 (c) or
parts (a) or (b) thereof and Section 7.9 of the LEASE.
SUBLESSEE shall provide for any construction cost overruns,
furnish a Jeno F. Paulucci Personal Guaranty of this Sublease
and in return all tax abatements received by SUBLESSOR in
connection with this PROJECT shall all be passed through and
returned to SUBLESSEE.
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<PAGE>
Section 9.2. QUIET ENJOYMENT. The SUBLESSOR covenants with the
SUBLESSEE that, upon the payment of Rent and Additional
Payments and the performance and observance of the other
covenants and agreements on its part to be performed and
observed hereunder, the SUBLESSEE shall and may peaceably and
quietly have, hold and enjoy the PROJECT SITE and the PROJECT
FACILITIES without hindrance from any person whomsoever.
Section 9.3. SURRENDER OF PROJECT. Upon the termination or expiration
of this SUBLEASE, the SUBLESSEE shall surrender peaceably and
promptly possession of the PROJECT SITE and the PROJECT
FACILITIES, leaving same in good condition and repair
(ordinary wear and tear excepted).
Section 9.4. NOTICES. All Notices, Certificates, requests or other
communications hereunder shall be in Writing and be deemed to
be sufficiently given when
A PAGE OF TEXT IS MISSING
invalid or unenforceable, such determination shall not affect
any other provision, covenant, obligation or agreement, each
of which shall be construed and enforced as if such invalid or
unenforceable portion were not contained herein. Nor shall
such invalidity or un enforceability affect any valid and
enforceable application thereof, and each such provision,
covenant, obligation or agreement shall be deemed to be
effective, operative, made, entered into or taken in the
manner and to the full extent permitted by law.
Section 9.9. CAPTIONS. The captions and headings in this SUBLEASE shall be
solely for convenience of reference and in no way define,
limit or describe the scope or intent of any provisions or
Sections of this SUBLEASE.
Section 9.10. GOVERNING LAW. This SUBLEASE shall be deemed to be a CONTRACT
made under the laws of the State and for all purposes shall be
governed by and construed in accordance with the law of the
State.
IN WITNESS WHEREOF, the SUBLESSOR and the SUBLESSEE have caused this
SUBLEASE to be duly executed in their respective names, all as of the Date
hereinbefore written.
Signed and acknowledged FOREMOST MGMT., INC.
in the presence of SUBLESSOR
/s/ Witness BY: /s/ Alan A. Stockmeister
- --------------------- -----------------------------
Alan A. Stockmeister
ITS: President
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<PAGE>
/s/ Witness
- ---------------------
Witnesses as to Foremost Mgmt., Inc.
Signed and acknowledged LUIGINO'S, INC.
in the presence of SUBLESSEE
/s/ Witness BY: /s/ Ronald O. Bubar
- --------------------- -----------------------------
Ronald O. Bubar
ITS: Executive Vice President of
/s/ Witness Operations
- ---------------------
Witnesses as to Luigino's, Inc.
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<PAGE>
STATE OF OHIO )
) ss.
County of Franklin )
On this 20th day of September, 1993, before me, a Notary Public, in and
for said County and State, personally appeared Alan A. Stockmeister, the
President of FOREMOST MGMT., INC., who acknowledged that he did sign said
SUBLEASE on behalf of said Corporation with due authorization thereof and that
the same is his free act and deed in signing as an Officer of said Corporation
and on behalf of said Corporation, and the free act and deed of said
Corporation.
/s/ Notary Public
----------------------------
(SEAL) Notary Public
[Notary Stamp]
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<PAGE>
STATE OF OHIO )
) ss.
County of Franklin )
On this 20th day of September, 1993, before me a Notary Public, in and
for said County and State, personally appeared Ronald O. Bubar, the Executive
Vice President of LUIGINO'S, INC., who acknowledged that he did sign said
SUBLEASE on behalf of said Corporation with due authorization thereof and that
the same is his free act and deed in signing as an Officer of said Corporation
and on behalf of said Corporation, and the free act and deed of said
Corporation.
/s/ Notary Public
----------------------------
(SEAL) Notary Public
[Notary Stamp]
This Instrument Prepared By: Bruce E. Coleman
Attorney at Law
Attorney Registration No. 17826
525 Lake Avenue South
Duluth, MN 55802-2300
(218) 723-5465
o Filed without exhibits. Such exhibits will be filed with the Commission
upon request.
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<PAGE>
ASSIGNMENT OF SUBLEASE
THIS ASSIGNMENT OF SUBLEASE (the "ASSIGNMENT") is made and entered into
this 21st day of September, 1993, and from FOREMOST MGMT., INC. ("ASSIGNOR"), an
Ohio corporation, 227 Main Street, Jackson, Ohio, 45640, to the DIRECTOR OF
DEVELOPMENT OF THE STATE OF OHIO ("ASSIGNEE"), 77 South High Street, Columbus,
Ohio, 43266-0101, under the following circumstances:
A. Pursuant to Section 13, Article VIII of the Ohio Constitution and
Chapter 166 of the Ohio Revised Code, and a LOAN AGREEMENT (the
"AGREEMENT") of even date herewith, between ASSIGNEE as Lender and
ASSIGNOR as Borrower, in which the ASSIGNEE has made a LOAN (the
"LOAN") to ASSIGNOR in the principal amount of Two Million and No/100's
($2,000,000.00) Dollars; and a LEASE of even date herewith, between
ASSIGNEE as LESSOR and ASSIGNOR as LESSEE, in connection with the sale
of $8,100,000 of Bonds used, for the purpose of acquiring certain
property in connection with the PROJECT as defined in the AGREEMENT,
including the real estate described in EXHIBIT A attached hereto (the
"SUBLEASED PREMISES").
B. By the AGREEMENT and as further evidenced by the NOTE of ASSIGNOR (the
"NOTE") delivered thereunder, and the LEASE and documents related
thereto ASSIGNOR has agreed to repay the LOAN by making payments (the
"LOAN PAYMENTS") at the times and in the amounts set forth in the NOTE
and to make the payments required by the LEASE.
C. ASSIGNOR has entered into a SUBLEASE as SUBLESSOR effective as of
September 21, 1993, (the "SUBLEASE") with LUIGINO'S, INC., (the
"SUBLESSEE") covering the SUBLEASED PREMISES, a SUBLEASE having been
filed for record in the Jackson County, Ohio Recorder's Office on
September 20, 1993, as Instrument No. 174317 in Lease Volume 39, Page
319.
D. By this ASSIGNMENT, ASSIGNOR intends to assign the SUBLEASE and the
Rentals and other payments payable thereunder to ASSIGNEE as security
for it obligations under the AGREEMENT, the NOTE and the LEASE.
NOW, THEREFORE, in consideration of the LOAN and the LEASE and for
other valuable considerations received, and to secure the payment of LOAN
PAYMENTS and LEASE PAYMENTS and the performance and observance by ASSIGNOR of
its other obligations set forth in the AGREEMENT, the NOTE, the LEASE and this
ASSIGNMENT, ASSIGNOR does hereby grant, sell, transfer, set over, deliver and
assign unto ASSIGNEE, the SUBLEASE, together with the absolute, present and
continuing right to all Rents and Payments due or to become due thereunder.
-1-
<PAGE>
Section: 1. REPRESENTATIONS AND WARRANTIES. ASSIGNOR represents and
warrants to ASSIGNEE that:
(a) it has delivered to ASSIGNEE a true, executed
Counterpart of the SUBLEASE;
(b) it has full authority and right to ASSIGN the
SUBLEASE as herein provided;
(c) it has made no other ASSIGNMENT OF THE SUBLEASE or of
any Rents or Payments Payable thereunder; and,
(d) no payments under the SUBLEASE have been assigned,
encumbered, waived, released, discharged or
compromised.
Section 2. PERFORMANCE BY ASSIGNOR. ASSIGNOR covenants and agrees that it
will perform and observe, duly and punctually, any and all of
its obligation and duties as SUBLESSOR under the SUBLEASE in
accordance with the terms thereof.
Section 3. PROHIBITED ACTS. ASSIGNOR covenants and agrees that it will
not, without the PRIOR WRITTEN CONSENT of ASSIGNEE:
(a) receive, collect, waive, discount, set-off,
compromise or agree to any reduction of or deduction
from any rents or payments under the SUBLEASE.
(b) pledge, assign, encumber or MORTGAGE the SUBLEASE;
(c) agree to any cancellation, termination, amendment or
modification of the SUBLEASE, or
(d) agree to any ASSIGNMENT or further SUBLEASE of the
SUBLEASE by the SUBLESSEE except as expressly
authorized by the SUBLEASE.
Section 4. COLLECTION AND RECEIPT OF RENTS. ASSIGNEE shall have, by
virtue of this ASSIGNMENT, the absolute, present and
continuing right to receive and collect any and all payments
of "RENT", as defined in the SUBLEASE, and all other amounts
payable thereunder directly from the SUBLESSEE; however, the
failure of ASSIGNEE to receive such payments shall not relieve
ASSIGNOR from any of its obligations under the AGREEMENT, or
the NOTE, or the LEASE; and provided further that ASSIGNEE
shall not exercise its right hereunder to require all amounts
payable under the Sublease to be paid directly to ASSIGNEE
until an Event of Default has occurred under the Lease or
Sublease; and provided further that ASSIGNEE shall not
exercise its right hereunder to require all amounts payable
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<PAGE>
under the Sublease to be paid directly to ASSIGNEE until an
Event of Default has occurred under the LEASE or SUBLEASE.
Section 5. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT. The
SUBLEASE is and shall remain subject and subordinate to the
LEASE between ASSIGNOR and ASSIGNEE, however, ASSIGNEE agrees,
by its acceptance of this ASSIGNMENT, that
(a) as long as the SUBLEASE is in full force and effect
and shall not have been terminated pursuant to any
conditions or limitations contained therein or
pursuant to law;
(b) the SUBLESSEE shall not be in Default in the Payment
of Rent under the SUBLEASE or in the performance and
observance of its obligations thereunder; and,
(c) the SUBLESSEE agrees to attorn to ASSIGNEE when
ASSIGNEE is in possession of the SUBLEASED PREMISES,
then ASSIGNEE will not take action to terminate the
SUBLEASE or interfere with or interrupt the
SUBLESSEE'S possession and use at the SUBLEASED
PREMISES in connection with any action taken under
this ASSIGNMENT including Foreclosure.
Section 6. ENFORCEMENT OF SUBLEASE AND SUBLEASE GUARANTY. ASSIGNEE
shall have the right, but not the obligation, to enforce, by
all available remedies, the SUBLEASE without any PRIOR NOTICE
to or the consent of ASSIGNOR.
Section 7. LIMITATION OF LIABILITY OF ASSIGNEE. The acceptance by
ASSIGNEE of this ASSIGNMENT, with all of the rights, powers,
privileges and authority so created, shall not, prior to
actual entry upon and taking of possession of the SUBLEASED
PREMISES by ASSIGNEE, be deemed or construed to constitute
ASSIGNEE a "MORTGAGEE IN POSSESSION"; nor to place
responsibility for the control, care, management or report of
the SUBLEASED PREMISES upon ASSIGNEE; nor to cause ASSIGNEE to
be liable for any waste committed thereon or for any dangerous
or defective condition of the SUBLEASED PREMISES or any part
thereof; nor thereafter or at any time or in any event
obligate ASSIGNEE to appear in or defend any action or
proceeding relating to the SUBLEASE or to the SUBLEASED
PREMISES; nor to perform or discharge any obligation, duty or
liability of SUBLESSOR under the SUBLEASE; nor shall ASSIGNEE
be liable in any way for any injury or damage to person or
property sustained by any person, firm or corporation in or
about the SUBLEASED PREMISES.
-3-
<PAGE>
Section 8. INDEMNIFICATION. ASSIGNOR hereby agrees to indemnify and hold
ASSIGNEE harmless of and from any and all liability, loss,
damage or expense which it may or might incur under or by
reason of this ASSIGNMENT, or for any action taken by ASSIGNEE
hereunder or by reason or in defense of any and all claims and
demands whatsoever which may be asserted against ASSIGNEE
arising out of or in connection with the SUBLEASE, including,
but without limitation thereto, any claim by the SUBLESSEE of
credit for rental paid to and received by ASSIGNOR, but not
delivered to ASSIGNEE; and should ASSIGNEE incur any such
liability, loss, damage or expense, the amount thereof
(including reasonable attorneys' fees) without interest
thereon at the Interest Rate for Advances, as defined in the
SUBLEASE, shall be payable by ASSIGNOR immediately upon
demand.
Section 9. NO WAIVER. ASSIGNEE may take or release other security, may
release any party primarily or secondarily liable for any
indebtedness secured hereby, may grant extensions, renewals or
indulgences with respect to such indebtedness, and may. apply
any other security therefor held by it to the satisfaction of
such indebtedness without prejudice to any of its rights
hereunder. It is further agreed that nothing herein contained
and no act done or omitted by ASSIGNEE pursuant to the powers
and rights granted it herein shall be deemed to be a waiver by
ASSIGNEE of its rights and remedies under the AGREEMENT or the
NOTE or the LEASE, but this ASSIGNMENT is made and accepted
without prejudice to any of the rights and remedies possessed
by ASSIGNEE under the terms thereof. The right of ASSIGNEE to
enforce any other security therefor owned by it may be
exercised by ASSIGNEE either prior to, simultaneously with, or
subsequent to any action taken by it hereunder.
Section 10. CAPTIONS. Any Paragraph Titles or Captions contained in this
ASSIGNMENT are for convenience only and shall not be deemed to
define, limit or otherwise modify the scope or intent of this
ASSIGNMENT.
Section 11. TERMINATION OF ASSIGNMENT. Upon Payment in Full of the NOTE,
all LEASE payments and all other indebtedness payable
hereunder, this ASSIGNMENT shall become and be void and of no
effect, but the Affidavit, Certificate, and Letter of
Statement of ASSIGNEE showing any part of said indebtedness to
remain unpaid shall be and constitute conclusive evidence of
the validity, effectiveness and continuing force of this
ASSIGNMENT, and any person, firm or corporation, may and is
hereby authorized to rely thereon.
Section 12. NOTICES. All Notices, Demands, or Documents of any kind which
ASSIGNEE may be required or may desire to serve upon ASSIGNOR
hereunder shall be sufficiently served by delivering same to
ASSIGNOR personally or by leaving a copy of same addressed to
ASSIGNOR at the address above-specified or by
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<PAGE>
depositing a copy of same in the United States mail, postage
prepaid and addressed to ASSIGNOR at said address.
Section 13. SUCCESSORS AND ASSIGNS. The terms, covenants, conditions
and warranties contained herein and the powers granted hereby
shall inure to the benefit of and bind ASSIGNOR and ASSIGNEE
and their respective successors and assigns.
IN WITNESS WHEREOF, the ASSIGNOR has executed and delivered this
ASSIGNMENT as of the Date first above written.
Signed and acknowledged FOREMOST MGMT., INC.
in the presence of SUBLESSOR
/s/ Witness BY: /s/ Alan A. Stockmeister
- --------------------- -----------------------------
Alan A. Stockmeister
ITS: President
/s/ Witness
- ---------------------
Witnesses as to Foremost Mgmt., Inc.
Signed and acknowledged DIRECTOR OF DEVELOPMENT OF
in the presence of THE STATE OF OHIO, ACTING ON
BEHALF OF THE STATE
ASSIGNEE
BY:
- --------------------- -----------------------------
Donald E. Jakeway
ITS: Director
- ---------------------
Witnesses as to DIRECT OR OF
DEVELOPMENT OF THE STATE OF OHIO
-5-
<PAGE>
STATE OF OHIO )
) ss.
County of Franklin )
On this 20th day of September, 1993, before me, a Notary Public, in and
for said County and State, personally appeared Alan A. Stockmeister, the
President of Foremost Mgmt., Inc., who executed the foregoing instrument as
President on behalf of Foremost Mgmt., Inc. and who acknowledged that the same
to be his free act and deed individually and as President and the free act and
deed of Foremost Mgmt., Inc.
/s/ Notary Public
-------------------------
(SEAL) Notary Public
[Notary Stamp]
STATE OF OHIO )
) ss.
County of Franklin )
On this ___ day of September, 1993, before me a Notary Public, in and
for said County and State, personally appeared Donald E. Jakeway, of the State
of Ohio, who executed the foregoing instrument as Director of Development of the
State of Ohio, acting on behalf of the State, and who acknowledged that the same
to be his free act and deed individually and as Director and the free act and
deed of the State of Ohio.
-------------------------
(SEAL) Notary Public
[Notary Stamp]
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<PAGE>
ACKNOWLEDGMENT
AND
CONSENT TO ASSIGNMENT
LUIGINO'S, INC. as SUBLESSEE (the "SUBLESSEE") under the SUBLEASE (the
"SUBLEASE") referred to in the foregoing ASSIGNMENT OF SUBLEASE (the
"ASSIGNMENT") hereby expressly acknowledges and consents to the ASSIGNMENT and
agrees that all payments of Rent under the SUBLEASE shall be made directly to
ASSIGNEE while the ASSIGNMENT is in effect and that ASSIGNEE shall have the
right directly to enforce the SUBLEASE. The SUBLESSEE further agrees to the
provisions governing subordination, non-disturbance and attornment set forth in
Section 5. of the ASSIGNMENT.
LUIGINO'S, INC.
By: /s/ Ronald O. Bubar
--------------------------
Ronald O. Bubar
ITS: Executive Vice President of
Operations
STATE OF OHIO )
) ss.
County of Franklin )
On this 20th day of September, 1993, before me, a Notary Public, in and
for said County and State, personally appeared Ronald O. Bubar, of Luigino's,
Inc., who executed the foregoing instrument as Executive Vice President of
Operations on behalf of Luigino's, Inc. and who acknowledged that the same to be
his free act and deed individually and as Executive Vice President of Operations
and the free act and deed of Luigino's, Inc.
/s/ Notary Public
-------------------------
(SEAL) Notary Public
[Notary Stamp]
o Filed without exhibits. Such exhibits will be filed with the Commission
upon request.
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<PAGE>
EXHIBIT 10.11
[Letterhead of Ohio Department of Development]
December 22, 1998
Mr. Joel Kozlak
Chief Financial Officer
Luigino's, Inc.
P.O. Box 16630
Duluth, MN 55816
Dear Mr. Kozlak:
I received you letter of December 22, 1998, in which you requested a waiver of
your net worth covenant in your various loan agreements with the State of Ohio.
The Department of Development hereby grants a waiver of the net worth covenant
for the current fiscal year.
In your letter you also asked us to consider modifying the net worth definition
and minimum requirement, based upon your intention to issue senior subordinated
debt in the amount of $100 million early next year. The Department hereby agrees
to change the definition of net worth to include all subordinated debt and
agrees to require a minimum net worth of $85 million for the remaining term of
all outstanding State of Ohio bonds and loans.
If we can be of further assistance at any time, please contact your loan
officer, Bruce Langner, at (614) 644-6546.
Sincerely,
/s/ Peter D. Patitsas for
Joseph C. Robertson
Director
jcr/bal
<PAGE>
EXHIBIT 10.12
SHAREHOLDER CONTROL AGREEMENT
This Shareholder Control Agreement (this "Agreement"), is
entered into as of February 4, 1999 among all of the Shareholders (as defined in
Article I of this Agreement) and Luigino's, Inc., a Minnesota corporation (the
"Company").
RECITALS
A. The Shareholders are the holders of all of the issued and
outstanding equity securities of the Company (the "Shares").
B. The Shareholders desire to enter into this Agreement, pursuant to
Section 302A.457 of the Minnesota Business Corporations Act, to provide certain
rights to the holders of the voting equity securities of the Company (the
"Voting Shareholders"), and to remove from the Board of Directors of the Company
(the"Board") the power to make certain decisions concerning the management and
affairs of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants and provisions contained herein, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
The following terms shall have the definitions set forth below:
"Affiliate" has the meaning given such term in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
"Fair Value," with respect to any security, assets or property, means
that value determined in good faith by the Board, in its reasonable discretion,
to be the fair value of such security, assets or property.
"New Credit Facility" means the Amended and Restated Credit Agreement
dated February 4, 1999 between the Company and The First National Bank of
Chicago, as Agent.
<PAGE>
"Note Indenture" means the Indenture dated as of February 4, 1999
between the Company and U.S. Bank Trust National Association, as Trustee,
relating to the Series A and Series B 10% Senior Subordinated Notes Due 2006 of
the Company.
"Permitted Encumbrances" means (a) liens for taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable (provided that any such non-consensual lien secures
only obligations not in default and the holder thereof has not taken any steps
to enforce it) and (c) other liens, claims, charges, security interests,
mortgages, pledges, easements, conditional sale or title retention agreements or
other defects which (i) are not material in amount, or (ii) do not materially
detract from the value of or materially impair the existing use of the property
affected.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union
or association.
"Shareholders" means the Persons listed on Exhibit A hereto, who are
all of the holders of the voting and non-voting equity securities of the Company
issued and outstanding on the date hereof, and their respective transferees, who
are required by this Agreement to agree to be bound by the terms and conditions
of this Agreement. The term "Shareholder" means any one of the Shareholders and,
in the case of a Shareholder who is a natural person, the term "Shareholder"
shall also include such Shareholder's legal representatives, executors or
administrators when the context so requires.
ARTICLE II
SIGNIFICANT BUSINESS DECISIONS
2.1. Significant Business Decisions. Except as otherwise specifically
provided in this Agreement, notwithstanding that no vote may be required, or
that a lesser percentage vote may be specified by law, by the Articles of
Incorporation or bylaws of the Company, or otherwise, the Company and the
Shareholders agree that (i) the Company shall not take, and shall not cause or
permit any subsidiary of the Company to take, any of the following actions, in a
single transaction or a series of related transactions, without the unanimous
approval of the Voting Shareholders, and (ii) the Board shall have no right to
make or participate in any decisions regarding such actions:
(a) amend its Certificate or Articles of Incorporation, bylaws or any
other charter document;
(b) authorize or issue, or obligate itself to issue, any equity
security (including any security convertible into or exercisable or exchangeable
for any equity security);
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<PAGE>
(c) redeem, retire, purchase or otherwise acquire, directly or
indirectly, through any of its subsidiaries or otherwise, shares of its capital
stock or warrants or options with respect to such capital stock;
(d) declare or pay any cash or other dividend or make any other
distribution of any kind on, its capital stock other than dividends and
distributions from a wholly-owned subsidiary of the Company to the Company or to
any other wholly-owned subsidiary of the Company;
(e) sell, lease, exchange, transfer or otherwise dispose of, any assets
(including the capital stock of subsidiaries), other than sales, leases,
exchanges, transfers or other dispositions of (i) inventory in the ordinary
course of business and (ii) assets so sold, leased, exchanged, transferred or
disposed of the Fair Value of which shall not exceed $100,000 in any fiscal year
of the Company;
(f) enter into or permit to exist any agreement or undertaking which
prohibits, restricts or limits the ability of any of its subsidiaries to pay
dividends or distributions to the Company or otherwise to transfer assets or
engage in transactions with the Company;
(g) recapitalize or otherwise change its capital structure in such a
manner as will result in a change in control from one person to another person,
either directly or indirectly, of the power to vote any of the securities or
other interests having voting power for the election of directors of the Company
or otherwise having voting power to direct or cause the direction of management
policies of the Company;
(h) voluntarily dissolve or liquidate;
(i) have a subsidiary which is not wholly-owned by the Company either
directly or indirectly through one or more other wholly-owned subsidiaries;
(j) change its business in any material respect;
(k) voluntarily subject any of its assets (including the capital stock
of subsidiaries) to any lien or encumbrance, other than Permitted Encumbrances
and other than in connection with indebtedness permitted under Section 2.1(o);
(1) purchase, lease, exchange or otherwise acquire any securities or
assets of any other Person, except for acquisitions of supplies and equipment in
the ordinary course of business consistent with past practice, provided,
however, that this Section 2.1(l) shall not apply to purchases, leases,
exchanges or acquisitions between the Company and any of its wholly-owned
subsidiaries or between any of its wholly-owned subsidiaries;
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<PAGE>
(m) make capital expenditures or commitments for additions to property,
plant or equipment constituting capital assets which individually are in an
amount greater than $50,000 or in the aggregate are in an amount greater than
$100,000 in any twelve (12) month period;
(n) enter into any joint ventures or partnerships with any other
Person;
(o) incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any indebtedness (including, without limitation,
capitalized leases) or for the deferred purchase price for the acquisition of
property, other than (i) accounts payable and accrued expenses incurred in the
ordinary course of business, (ii) pursuant to the Note Indenture or (iii)
pursuant to the terms of the New Credit Facility;
(p) adopt, enter into or become bound by any employee benefit or
incentive plan, program or arrangement, including without limitation any plan,
program or arrangement pursuant to which any shares of the Company's capital
stock could be issued, or amend, modify or terminate (partially or completely)
any such employee benefit, incentive plan, program or arrangement;
(q) commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other federal or state bankruptcy, insolvency or receivership or similar
law, consent to the institution of or fail to contest in a timely and
appropriate manner any such proceeding or filing, apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Company or any of its subsidiaries, file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, make a general assignment for the benefit of creditors; admit in
writing its inability to pay its debts as they become due, or take any action
for the purpose of effecting any of the foregoing;
(r) remove, appoint and elect members of the Board, including the
filling of vacancies thereon;
provided, however, that nothing in this Agreement shall remove from the Board
the power to approve, disapprove, enter into, amend or modify the terms of any
transaction or arrangement between the Company or any of its subsidiaries and
any director, officer or shareholder of the Company, or any partner or family
member of any such Person, or any Affiliate of any of the foregoing Persons.
2.2. Designation of Voting Shareholders' Representative. The Voting
Shareholders shall designated one of the Voting Shareholders as their
representative (the "Representative") to act on behalf of all Voting
Shareholders pursuant to, and with respect to, the matters governed by this
Agreement. The Voting Shareholders initial representative is Jeno F. Paulucci.
The Voting Shareholders may replace the Representative upon a vote of holders of
75% of the outstanding voting equity securities of the Company.
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<PAGE>
ARTICLE III
TRANSFERS OF SHARES
3.1. Restrictions on Transfers . No Shareholder shall sell, assign,
pledge, encumber or otherwise transfer any Shares to any Person (regardless of
the manner in which such Shareholder initially acquired such Shares) nor shall
the Company transfer any Shares from any Shareholder to any Person (all Persons
acquiring Shares from a Shareholder or from the Company, regardless of the
method of transfer, shall be referred to collectively as "Transferees" and
individually as a "Transferee") unless (i) such Shares bear a legend as provided
in Section 3.2 and (ii) such Transferee shall have executed and delivered to the
Company, as a condition precedent to any acquisition of Shares, an instrument in
form and substance satisfactory to the Company confirming that such Transferee
takes such Shares subject to all the terms and conditions of this Agreement, and
agrees to be bound by the terms of this Agreement. The Company shall not
transfer upon its books any Shares purporting to be transferred by a Shareholder
to any Person except in accordance with this Agreement.
3.2. Legend on Certificates. Each outstanding certificate representing
Shares that are subject to this Agreement shall bear an endorsement reading
substantially as follows:
"The sale, assignment, pledge, encumbrance or other transfer of the
securities represented by this certificate is subject to the provisions
of a Shareholder Control Agreement, dated as of February 4, 1999, among
the Company and the Shareholders named on the signature pages thereto,
a copy of which is on file at the principal executive office of the
Company."
Each Shareholder agrees to promptly present to the Company the certificates
representing the Shares owned by such Shareholder so that such legend may be
placed thereon.
ARTICLE IV
MISCELLANEOUS
4.1. Survival of Agreement. This Agreement shall not be terminated
except by a writing signed by Shareholders holding Shares representing at least
90% of the voting Shares and 90% of the non-voting Shares then issued and
outstanding.
4.2. Binding Effect. This Agreement supersedes all prior negotiations,
statements and agreements of the parties hereto with respect to the subject
matter of this Agreement, and shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties hereto. If any Transferee
of any Shareholder shall acquire any Shares in any manner, whether by operation
of law or otherwise, such Shares shall be held subject to all of the terms of
this
-5-
<PAGE>
Agreement, and by taking and holding such Shares such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement.
4.3 Complete Agreement. This Agreement represents the entire agreement
among the Shareholders and the Company with respect to the matters set forth
herein.
4.4 Counterparts. This Agreement may be executed in counterparts, each
of which shall be signed by the Company and one or more Shareholders, and all of
which are deemed to be one and the same agreement binding upon the Company and
each of the Shareholders.
4.5 Governing Law; Consent to Jurisdiction and Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Minnesota, without regard to its conflicts of law doctrine. By
execution and delivery of this Agreement, each of the Shareholders accepts,
generally and unconditionally, the nonexclusive jurisdiction of the state or
federal courts in Minnesota in any action or proceeding concerning this
Agreement.
4.6 Injunctive Relief. It is hereby agreed and acknowledged that it
will be impossible to measure in money the damages that would be suffered if the
parties to this Agreement fail to comply with any of the obligations imposed on
them by this Agreement and that in the event of any such failure, an aggrieved
person will be irreparably damaged and will not have an adequate remedy at law.
Any such person shall, therefore, be entitled to injunctive relief, including
specific performance, to enforce such obligations, and if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law.
4.7 Recapitalization, etc. In the event that any capital stock or other
securities are issued in respect of, in exchange for, or in substitution of, any
equity securities of the Company by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
shareholders or combination of such equity securities or any other change in the
Company's capital structure, appropriate adjustments shall be made to the
provisions of this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
IN WITNESS WHEREOF, the undersigned, thereunto duly authorized, have
hereunto set their respective hands as of the day and year first above written.
THE COMPANY:
LUIGINO'S, INC.
By: /s/ Jeno F. Paulucci
---------------------------
Jeno F. Paulucci, Chief Executive
Officer
-6-
<PAGE>
SHAREHOLDERS:
/s/ Jeno F. Paulucci
---------------------------------
Jeno F. Paulucci, individually
/s/ Michael J. Paulucci
---------------------------------
Michael J. Paulucci, individually
/s/ Larry W. Nelson
---------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.
As trustees of the Michael J. Paulucci Trust under
Paragraph 4.01 of the Irrevocable Trust Agreement
of Jeno F. Paulucci dated August 31, 1996 (Jeno F.
Paulucci 1996 Two-Year Annuity Trust), and not
personally
/s/ Larry W. Nelson
---------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.
As trustees of the Cynthia J. Selton Trust under
Paragraph 4.01 of the Irrevocable Trust Agreement
of Jeno F. Paulucci dated August 31, 1996 (Jeno F.
Paulucci 1996 Two-Year Annuity Trust), and not
personally
-7-
<PAGE>
/s/ Larry W. Nelson
---------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.
As trustees of the Gina Jo Paulucci Trust
under Paragraph 4.01 of the Irrevocable
Trust Agreement of Jeno F. Paulucci dated
August 31, 1996 (Jeno F. Paulucci 1996
Two-Year Annuity Trust), and not personally
/s/ Larry W. Nelson
---------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.
As trustees of the Jeno F. Paulucci 1996
Three-Year Annuity Trust under Irrevocable
Trust Agreement dated August 31, 1996, and
not personally
/s/ Larry M. Scanlon
---------------------------------
Larry M. Scanlon
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.
As trustees of the Michael J. Paulucci 1996 Ten-
Year Annuity Trust under Irrevocable Trust
Agreement dated August 31, 1996
-8-
<PAGE>
/s/ Larry M. Scanlon
---------------------------------
Larry M. Scanlon
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.
As trustees of the Michael J. Paulucci 1996
Twelve-Year Annuity Trust under Irrevocable Trust
Agreement dated August 31, 1996
/s/ Larry W. Nelson
---------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.,
As trustees of the Cynthia J. Selton 1996 Ten-Year
Annuity Trust under Irrevocable Trust Agreement
dated August 30,
/s/ Larry W. Nelson
---------------------------------
Larry W. Nelson
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.,
As trustees of the Cynthia J. Selton 1996 Twelve-
Year Annuity Trust under Irrevocable Trust
Agreement dated August 30, 1996
-9-
<PAGE>
/s/ Larry W. Johnson
---------------------------------
Larry W. Johnson
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.
As trustees under the Irrevocable Trust
Agreement, dated December 27, 1989, creating
the Cynthia J. Selton Trust of 1989
/s/ Larry W. Johnson
---------------------------------
Larry W. Johnson
/s/ William H. Hippee, Jr.
---------------------------------
William H. Hippee, Jr.
As trustees under the Irrevocable Trust
Agreement, dated December 27, 1989, creating
the Gina Jo Paulucci Trust of 1989
-10-
<PAGE>
Exhibit 12.1
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------
January 1, December 31, December 29, January 4, January 3,
1995 1995 1996 1998 1999
------- ------- ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
DETERMINATION OF RATIO OF
EARNINGS TO FIXED CHARGES:
Net income (loss) before taxes $ 9,975 $(7,452) $ 4,039 $17,003 $12,835
Fixed charges
Interest expense 4,239 5,915 5,646 5,532 6,296
Amortization of deferred financing costs 218 302 360 944 213
Interest component of rent 1,641 3,555 3,730 3,004 1,332
------- ------- ------- ------- -------
Earnings before fixed charges 16,073 2,320 13,775 26,483 20,676
======= ======= ======= ======= =======
Fixed Charges
Interest expense 4,239 5,915 5,646 5,532 6,296
Amortization of deferred financing costs 218 305 360 944 213
Interest component of rent 1,641 3,555 3,730 3,004 1,332
------- ------- ------- ------- -------
Total fixed charges 6,098 9,772 9,736 9,480 7,841
======= ======= ======= ======= =======
Ratio of earnings to fixed charges(a) 2.6x 1.4x 2.8x 2.6x
======= ======= ======= ======= =======
</TABLE>
(a) For purposes of computing the ratio of earnings to fixed charges, "earnings"
are defined as net income before fixed charges. Fixed charges are defined as
interest expense, amortization of deferred financing costs, and the portion
of rent expense representing interest. Earnings were inadequate to cover
fixed charges by $7.5 million for the year ended December 31, 1995.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
April 15, 1999
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
Luigino's inc.
(Exact name of Registrant as specified in its charter)
Minnesota 59-3015985
(State of Incorporation) (I.R.S. Employer
Identification No.)
525 Lake Avenue South
Duluth, Minnesota 55802
(Address of Principal Executive Offices) (Zip Code)
$100,000,000 Senior Subordinated Notes due 2006
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority is incorporated by reference to Registration Number
333-70709.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 8th day of April, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------------------
Richard H. Prokosch
Assistant Vice President
/s/ J. Paulson
- -------------------------------------
J. Paulson
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U.S. BANK TRUST NATIONAL ASSOCITION hereby consents that
reports of examination of the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Dated: April 8, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------------------
Richard H. Prokosch
Assistant Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS FOR FISCAL 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> JAN-05-1998
<PERIOD-END> JAN-03-1999
<CASH> 1,193
<SECURITIES> 0
<RECEIVABLES> 28,668
<ALLOWANCES> (150)
<INVENTORY> 15,548
<CURRENT-ASSETS> 37,629
<PP&E> 99,873
<DEPRECIATION> (24,491)
<TOTAL-ASSETS> 124,521
<CURRENT-LIABILITIES> 38,122
<BONDS> 76,138
0
0
<COMMON> 1
<OTHER-SE> 10,262
<TOTAL-LIABILITY-AND-EQUITY> 124,521
<SALES> 214,975
<TOTAL-REVENUES> 214,975
<CGS> 118,334
<TOTAL-COSTS> 77,968
<OTHER-EXPENSES> (235)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,509
<INCOME-PRETAX> 12,835
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,835
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
